MIAMI—Credit card users will save roughly $1.87 billion in interest over the next 12 months if the Fed cuts its target rate by 25 basis points today, according to analysis from WalletHub.
With the Federal Reserve expected to cut rates again today--many expecting 25 BPs--WalletHub projected how much credit cards, mortgages auto loans and other financial products will be affected.
Credit Cards
“The vast majority of credit card rates are variable, tied to the Prime Rate. As a result, we expect to see credit card rates decrease the same amount as the Fed’s target, which is exactly what we observed with the September rate cut,” WalletHub said.
Due to the 525 basis points in Federal Reserve rate hikes from March 2022 to July 2023, credit card users were set to pay roughly $40 billion more in interest during 2024 than they would have otherwise, WalletHub noted.
Mortgages
“We don’t expect much of a change in mortgage rates following a November rate cut, as the mortgage markets have already accounted for the move,” WalletHub said.
WalletHub’s analysts estimate that the expected November rate cut has already decreased the cost of new mortgages by around 11 basis points, which translates to roughly $10,440 over the life of a 30-year loan, assuming the average home loan of $402,658.
Auto Loans
WalletHub said it expects the average APR on a 48-month new car loan to drop by around 12 basis points in the months following the Fed’s 25 basis point rate cut.
“For historical context, the average APR on a 48-month new car loan rose from 4.87% in February 2022 to 8.65% in May 2024 (the most recent data available). That’s a 378-basis-point increase in a period characterized by 525 basis points in Fed rate hikes,” WalletHub said.
Deposit Accounts
WalletHub said it expects little, if any, change in the APYs available from most deposit accounts following the Fed’s expected November rate cut.
“Yields did not rise much following rate hikes, and they’re already at quite low levels historically,” WalletHub said.
Online savings accounts did react to previous Fed rate hikes, with yields increasing by an average of 329 basis points from January 2022 to August 2024 (525 basis points in Fed hikes during that period), the company noted.
“Following the 50-basis-point rate cut in September, yields remain mostly unchanged. This is due to the expectation that these cuts may not last and banks finding themselves in a more competitive deposit environment,” WalletHub said.