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Fed interest rate cuts won’t help your credit card debt

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Wall Street and Main Street are ready to usher in the fall season with the first interest rate cut since March of 2020, the start of the COVID-19 pandemic, and with this comes the hope of lower borrowing costs. 

While it may lower rates for mortgages, auto and personal loans, those carrying credit card debt are likely to be out of luck. 

“That’s where the real advice is. Don’t expect the Fed to ride to your rescue”, Ted Rossman, Senior Industry Analyst at Bankrate, told FOX Business. “The change is not going to be that significant. My other big point is that a quarter point, half point, even if credit card rates fell a couple of points, it’s not that much of a difference. Just because rates are so high,” he warned. 

Person inserting or removing Visa Credit Card using touch screen credit card payment at a Five Guys restaurant, Queens, New York. (Photo by: Lindsey Nicholson/UCG/Universal Images Group via Getty Images)

CREDIT COUNSELING DEMAND SURGES IN THESE STATES

The average annual percentage rate on standard credit cards is about 20.76%, according to Bankrate, with some in-store retail cards, such as Bloomingdale’s, as high as 31.99%.

Federal Reserve Chairman Jerome Powell, in August at the Kansas City Federal Reserve’s Jackson Hole Economic Symposium, set the stage for a September rate cut. 

Federal Reserve Chairman Jerome Powell

Jerome Powell, chairman of the US Federal Reserve, second right, arrives for dinner during the Jackson Hole economic symposium in Moran, Wyoming, US, on Thursday, Aug. 24, 2023. (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)

FED CHAIR POWELL REVEALS RATE CUT PLANS

“The time has come for policy to adjust,” Powell said. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” he added. 

Nearly 70% of market participants are expecting a 25-basis point cut at the September 18 meeting, with a smaller 30.5% forecasting double that, as tracked by CME’s FedWatch Tool, which measures the probability of future rate moves. 

Ticker Security Last Change Change %
M MACY’S INC. 15.57 -0.00 -0.01%
V VISA INC. 276.19 +1.85 +0.67%
JPM JPMORGAN CHASE & CO. 224.80 +2.59 +1.17%
DFS DISCOVER FINANCIAL SERVICES 138.73 +1.13 +0.82%
COF CAPITAL ONE FINANCIAL CORP. 146.93 +1.56 +1.07%

As an example, for those carrying a $1,000 balance on a credit card, a 25-basis point rate cut may lower your APR to 20.51% vs. 20.76%, according to Bankrate estimates. The drop in the monthly finance charge would be a paltry $0.21 less. Your minimum payment would like remain unchanged, as outlined by Greg McBride, chief financial analyst, Bankrate. 

Even if policymakers stick to an easing cycle, it will still take a few rounds to make a meaningful difference.

401(K) MILLIONAIRES HIT NEW RECORD HIGH: FIDELITY

“The Fed’s going to be much slower, we think, on the way down than they were on the way up,” cautions Rossman. 

Rather than wait for the Fed, Rossman suggests exploring other options. 

“Maybe get a 0% balance transfer card or take out a side hustle. Cut your expenses. I mean, there’s other stuff you can do, but fed rate cuts, in and of themselves, aren’t going to make a big difference in the credit card world.”

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The Fed will also meet in November and December to round out the 2024 year.

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More Americans buy groceries with buy now, pay later loans

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People shop for produce at a Walmart in Rosemead, California, on April 11, 2025. 

Frederic J. Brown | Afp | Getty Images

A growing number of Americans are using buy now, pay later loans to buy groceries, and more people are paying those bills late, according to new Lending Tree data released Friday

The figures are the latest indicator that some consumers are cracking under the pressure of an uncertain economy and are having trouble affording essentials such as groceries as they contend with persistent inflation, high interest rates and concerns around tariffs

In a survey conducted April 2-3 of 2,000 U.S. consumers ages 18 to 79, around half reported having used buy now, pay later services. Of those consumers, 25% of respondents said they were using BNPL loans to buy groceries, up from 14% in 2024 and 21% in 2023, the firm said.

Meanwhile, 41% of respondents said they made a late payment on a BNPL loan in the past year, up from 34% in the year prior, the survey found.

Lending Tree’s chief consumer finance analyst, Matt Schulz, said that of those respondents who said they paid a BNPL bill late, most said it was by no more than a week or so.

“A lot of people are struggling and looking for ways to extend their budget,” Schulz said. “Inflation is still a problem. Interest rates are still really high. There’s a lot of uncertainty around tariffs and other economic issues, and it’s all going to add up to a lot of people looking for ways to extend their budget however they can.”

“For an awful lot of people, that’s going to mean leaning on buy now, pay later loans, for better or for worse,” he said. 

He stopped short of calling the results a recession indicator but said conditions are expected to decline further before they get better.  

“I do think it’s going to get worse, at least in the short term,” said Schulz. “I don’t know that there’s a whole lot of reason to expect these numbers to get better in the near term.”

The loans, which allow consumers to split up purchases into several smaller payments, are a popular alternative to credit cards because they often don’t charge interest. But consumers can see high fees if they pay late, and they can run into problems if they stack up multiple loans. In Lending Tree’s survey, 60% of BNPL users said they’ve had multiple loans at once, with nearly a fourth saying they have held three or more at once. 

“It’s just really important for people to be cautious when they use these things, because even though they can be a really good interest-free tool to help you kind of make it from one paycheck to the next, there’s also a lot of risk in mismanaging it,” said Schulz. “So people should tread lightly.” 

Lending Tree’s findings come after Billboard revealed that about 60% of general admission Coachella attendees funded their concert tickets with buy now, pay later loans, sparking a debate on the state of the economy and how consumers are using debt to keep up their lifestyles. A recent announcement from DoorDash that it would begin accepting BNPL financing from Klarna for food deliveries led to widespread mockery and jokes that Americans were struggling so much that they were now being forced to finance cheeseburgers and burritos.

Over the last few years, consumers have held up relatively well, even in the face of persistent inflation and high interest rates, because the job market was strong and wage growth had kept up with inflation — at least for some workers. 

Earlier this year, however, large companies including Walmart and Delta Airlines began warning that the dynamic had begun to shift and they were seeing cracks in demand, which was leading to worse-than-expected sales forecasts. 

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