Federal Reserve cuts interest rates, lower interest rates on credit cards coming soon
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The novel coronavirus outbreak has sent ripples through every corner of the global economy, with the U.S. stock market experiencing its biggest losses since the financial crisis in 2008. Now, the Federal Reserve is stepping in to do what it can to protect the domestic economy — and the action it is taking could soon be reflected in your credit card statement.
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On Tuesday morning, the U.S. Federal Reserve cut interest rates by half a percentage point, lowering the federal-funds rate to a range between 1% and 1.25%. This was the first unscheduled, emergency rate cut since 2008, and also the biggest one-time cut since then.
Each Fed rate cut eventually affects all lending products tied to the prime rate, including many credit cards. While we don’t ever recommend carrying a balance on a credit card, there are times when a large purchase or emergency situation arises and that simply isn’t feasible. With this change, you should expect to see a decrease soon in your credit card’s Annual Percentage Rate (“APR”), which may take effect as soon as your next billing statement.
While a lower APR is good news for consumers, keep in mind that a number of credit cards — such as the Citi Simplicity® Card, Chase Freedom (No longer open to new applicants) and Chase Freedom Unlimited — already offer 0% APR for an introductory period. Many of those cards often also apply the 0% rate to balance transfers.
The Citi Simplicity offers 0% intro APR on purchases for 12 months from account opening; then a variable APR of 14.74% to 24.74% applies and 0% intro APR on balance transfers for 21 months from date of first transfer (transfers must be completed in the first four months); then a variable APR of 14.74% – 24.74% applies. The Chase Freedom and Freedom Unlimited both offer 0% intro APR on purchases for the first 15 months from account opening; then a variable APR of 14.99% to 23.74% applies.
If you take advantage of one of these offers and pay off the balance in full before the end of your introductory period, you won’t be affected by any interest rate cuts or increases.
The rate cut is just one way the novel coronavirus outbreak has had far-reaching effects. There have been quarantines of entire cities; businesses telling employees to work from home; hundreds of flights canceled and suspended; and cruise ships rerouted. Read our complete coverage of the outbreak here.
Further reading: The top credit cards with 0% intro APR
Featured image by primeimages/Getty Images.
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