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Interest rates are expected to stay near zero for years—here's why that's good and bad news

With interest rates expected to stay near zero for years, here's how consumers are affected — from their mortgages to their savings accounts.

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Editor's Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. CNBC will update as changes are made public.

The Federal Reserve's emergency rate cut back in March, which dropped the benchmark interest rate to zero, is likely here to stay. Just last week, the Fed publicly stated that even if inflation starts to pick up again amid the economic recovery from the coronavirus pandemic, it doesn't expect to raise interest rates any time soon as the labor market rebounds.

Wall Street economists predict that these rock-bottom rates may be around for the next several years. In fact, after the 2008 Global Financial Crisis, the Fed kept benchmark rates low for seven years. While this means that borrowing becomes cheaper for those who can get approved for loans, it's not such good news for savers.

Here's how the Fed's efforts to keep interest rates low could impact consumers.

1. Home mortgages and personal loans

Low interest rates can certainly help when it comes to financing a home. But it depends on the type of mortgage you have, whether it is a fixed-rate mortgage (interest rate remains the same over the life of the loan) or an adjustable-rate mortgage (interest rate varies).

Because fixed-rate mortgages have the interest rate locked in, anyone looking to buy or refinance will benefit from the sustained lower rates. This is true for all fixed-rate financial products, including personal loans and car loans. Unfortunately, if you're already locked into a loan and you're not looking (or able) to refinance, you won't really benefit from lower interest rates right now.

On the other hand, homeowners with an adjustable-rate mortgage should have already seen their monthly payments decrease after the rate cut. This could also be a good time to consider refinancing to a fixed-rate loan if possible, so you can lock in a low interest rate and not worry about your mortgage payments going up later.

2. Credit card debt

Credit card issuers base their variable interest rates off of the prime rate. Since this rate is directly influenced by the Fed's benchmark, a rate cut means that credit card APRs also drop.

For example, the Fed's second rate adjustment back in March resulted in a 1% APR reduction. Therefore, a credit card with a 15.24% variable APR saw a decrease to 14.24%.

As the Fed maintains a low benchmark rate, your credit card's APR likely won't change much more from the March reduction.

Unfortunately, a 1% drop won't make that big of a dent in your outstanding credit card balances. You're better off trying to pay them off or transferring your debt to a balance transfer credit card, such as the U.S. Bank Visa® Platinum Card. With a balance transfer card, you have more time to pay off your debt at 0% interest.

U.S. Bank Visa® Platinum Card

U.S. Bank Visa® Platinum Card
Information about the U.S. Bank Visa® Platinum Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.
  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% for the first 20 billing cycles on balance transfers and purchases

  • Regular APR

    13.99% to 23.99% variable

  • Balance transfer fee

    3%, minimum $5

  • Foreign transaction fee

    2% to 3%

  • Credit needed

    Excellent/Good

See our methodology, terms apply.

Pros

  • 20 months of no interest on balance transfers and purchases
  • No annual fee
  • Cell phone protection plan

Cons

  • No rewards program
  • 2% to 3% foreign transaction fee
  • Balances must be transferred within 60 days from account opening
  • Transfer timeline: Balances must be transferred within 60 days from account opening
  • Estimated total fees and interest on debt repayment: $388

Just be aware that, due to the pandemic, balance transfer offers have been harder to find and qualify for as card issuers are trying to minimize risk. For those with fair credit, consider applying for the Aspire Platinum Mastercard® for better approval chances.

Aspire Platinum Mastercard®

Aspire Platinum Mastercard®
Information about the Aspire Platinum Mastercard® has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.
  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% for the first 6 billing cycles on purchases and balance transfers

  • Regular APR

    8.15% to 18.00% variable

  • Balance transfer fee

    2%, $5 minimum

  • Foreign transaction fee

    1%

  • Credit needed

    Good/Fair

See our methodology, terms apply.

Pros

  • No annual fee
  • Applicants with fair to good credit may qualify, which is more lenient than most balance transfer cards

Cons

  • Short intro 0% APR period
  • Credit union membership is required, though it’s free
  • 1% foreign transaction fee
  • No rewards program
  • Transfer timeline: No time limit on when balances can be transferred
  • Estimated total fees and interest on debt repayment: $1,300

3. Savings accounts

If you're hoping to see a hike in the rate you're earning on your high-yield savings account, last week's Fed announcement means you'll be waiting awhile.

Because annual percentage yields, or APYs, often fluctuate in accordance with the Fed rate, they likely won't go back up until the Fed decides to raise the benchmark rate. A lower rate means that savers will earn less on their money. Since March, interest rates on high-yield savings accounts have dropped to nearly half of what they were a year ago. 

On the bright side, interest rates do — and will — eventually go back up. When the economy is booming again, the Fed will raise interest rates to stabilize borrowing and spending, which gives savings accounts an added edge as banks increase their savings yields.

Although consumers are earning less on their savings these days, they're still earning some interest and that can add up over time. For this reason, high-yield savings accounts make smart financial sense. High-yield rates currently hover around 1%, but that's still 16 times more than the national average savings account rate.

The best high-yield savings accounts, like the Varo Savings Account, come with zero monthly fees and no minimum balance or deposit requirements. Varo also currently offers a higher APY than a lot others at 1.21%, with the option to earn up to 2.80% if you meet certain monthly requirements.

Varo Savings Account

Varo Savings Account
Information about the Varo Savings Account has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication. Bank Account Services are provided by The Bancorp Bank, Member FDIC.
  • Annual Percentage Yield (APY)

    0.81% (with option to earn up to 2.80% if meet requirements)

  • Minimum balance

    None

  • Monthly fee

    None

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle

  • Excessive transactions fee

    None

  • Overdraft fees

    None up to $50; anything greater, Varo would decline the transaction

  • Offer checking account?

    Yes

  • Offer ATM card?

    Yes, if have a Varo checking account

See our methodology, terms apply.

Pros

  • High APY and option to earn even higher
  • No minimum balance
  • No monthly fees
  • Up to 6 free withdrawals or transfers per statement cycle
  • No penalty for overdrafts up to $50 (anything greater, Varo declines the transaction)
  • Option to add a checking account
  • ATM access if you have a checking account
  • Offers 2 programs to help automate your savings

Cons

  • Overdrafts over $50 will cause transactions to be declined
  • Cash deposits are only available through third-party services, which may charge a fee

Information about the U.S. Bank Visa® Platinum Card, Aspire Platinum Mastercard®, and Varo Savings Account has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.