Personal Finance
What that means for your money
The Federal Reserve announced Wednesday it will leave interest rates unchanged as inflation continues to prove stickier than expected.
However, the move also dashes hopes that the Fed will be able to start cutting rates soon and relieve consumers from sky-high borrowing costs.
The market is now pricing in one rate cut later in the year, according to the CME’s FedWatch measure of futures market pricing. It started 2024 expecting at least six reductions, which was “completely fantasy land,” said Greg McBride, chief financial analyst at Bankrate.com.
That change in rate cut expectations leaves many households in a bind, he said. “Certainly from a budgetary standpoint, not only is inflation still high but that is on top of the cumulative increase in prices over the last three years.”
“Prioritizing debt repayment, especially of high-cost credit card debt, remains paramount as interest rates promise to remain high for some time,” McBride said.
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Inflation has been a persistent problem since the Covid-19 pandemic, when price increases soared to their highest levels since the early 1980s. The Fed responded with a series of interest rate hikes that took its benchmark rate to its highest level in more than 22 years.
The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.
The spike in interest rates caused most consumer borrowing costs to skyrocket, putting many households under pressure.
Increasing inflation has also been bad news for wage growth, as real average hourly earnings rose just 0.6% over the past year, according to the Labor Department’s Bureau of Labor Statistics.
Even with possible rate cuts on the horizon, consumers won’t see their borrowing costs come down significantly, according to Columbia Business School economics professor Brett House.
“Once the Fed does cut rates, that could cascade through reductions in other rates but there is nothing that necessarily guarantees that,” he said.
From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at where those rates could go in the second half of 2024.
Credit cards
Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. In the wake of the rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to nearly 21% today — an all-time high.
Annual percentage rates will start to come down when the Fed cuts rates, but even then they will only ease off extremely high levels. With only a few potential quarter-point cuts on deck, APRs aren’t likely to fall much, according to Matt Schulz, chief credit analyst at LendingTree.
“If Americans want lower interest rates, they’re going to have to do it themselves,” he said. Try calling your card issuer to ask for a lower rate, consolidating and paying off high-interest credit cards with a lower-interest personal loan or switching to an interest-free balance transfer credit card, Schulz advised.
Mortgage rates
Although 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.
The average rate for a 30-year, fixed-rate mortgage is just above 7.3%, up from 4.4% when the Fed started raising rates in March 2022 and 3.27% at the end of 2021, according to Bankrate.
“Going forward, mortgage rates will likely continue to fluctuate and it’s impossible to say for certain where they’ll end up,” noted Jacob Channel, senior economist at LendingTree. “That said, there’s a good chance that we’re going to need to get used to rates above 7% again, at least until we start getting better economic news.”
Auto loans
Even though auto loans are fixed, payments are getting bigger because car prices have been rising along with the interest rates on new loans, resulting in less affordable monthly payments.
The average rate on a five-year new car loan is now more than 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, competition between lenders and more incentives in the market have started to take some of the edge off the cost of buying a car lately, said Ivan Drury, Edmunds’ director of insights.
“Any reduction in rates will be especially welcome as there is an increasingly higher share of consumers with older trade-ins that have sat out the market madness waiting for an automotive landscape that looks more like the last time they bought a vehicle six or seven years ago,” Drury said.
Student loans
Federal student loan rates are also fixed, so most borrowers aren’t immediately affected. But undergraduate students who took out direct federal student loans for the 2023-24 academic year are now paying 5.50%, up from 4.99% in 2022-23 — and any loans disbursed after July 1 will likely be even higher. Interest rates for the upcoming school year will be based on an auction of 10-Year Treasury notes later this month.
Private student loans tend to have a variable rate tied to the prime, Treasury bill or another rate index, which means those borrowers are already paying more in interest. How much more, however, varies with the benchmark.
For those struggling with existing debt, there are ways federal borrowers can reduce their burden, including income-based plans with $0 monthly payments and economic hardship and unemployment deferments.
Private loan borrowers have fewer options for relief — although some could consider refinancing once rates start to come down, and those with better credit may already qualify for a lower rate.
Savings rates
While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.
As a result, top-yielding online savings account rates have made significant moves and are now paying more than 5.5% — above the rate of inflation, which is a rare win for anyone building up a cash cushion, McBride said.
“The mantra of ‘higher for longer’ interest rates is music to the ears of savers who will continue to enjoy inflation-beating returns on safe-haven savings accounts, money markets and CDs for the foreseeable future,” he said.
Currently, top-yielding certificates of deposit pay over 5.5%, as good as or better than a high-yield savings account.
Professionalstudioimages | E+ | Getty Images
President-elect Donald Trump has been vocal about potentially raising tariffs on imported goods, which experts say could bump up car prices.
Trump has talked about implementing an additional 10% tariff on Chinese imported goods, as well as adding tariffs of 25% on all products from Mexico and Canada. On Friday, Trump told the European Union it must reduce its trade gap with the U.S. by purchasing oil and gas, or it could face tariffs as well.
Tariffs are taxes on imported goods, paid by U.S. companies that import those goods.
Tariffs have the potential to disproportionately affect auto prices because materials used to assemble a vehicle come from different parts of the world. Some components even cross U.S. borders multiple times before they even get to the factory, according to Ivan Drury, director of insights at Edmunds.
“There’s no such thing as a 100% American vehicle,” said Drury. “There’s so much complexity, even though it’s a seemingly straightforward thing.”
Component tariffs could add $600 to $2,500 per vehicle on parts from Mexico, Canada and China, according to estimates in a Wells Fargo analyst note. Prices on vehicles assembled in Mexico and Canada — which account for about 23% of vehicles sold in the U.S. — could rise $1,750 to $10,000.
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If tariffs are enacted, the sticker price drivers pay at the dealership will eventually go up, experts say. But carmakers and sellers may have to bear some of the costs, too.
“The cost will spread across all stakeholders: automakers, dealers and consumers,” said Erin Keating, executive analyst at Cox Automotive. “No one company is going to dump all of that expense directly on their consumers.”
Here’s what to know.
Why cars may incur more tariffs than other goods
The automotive sector’s supply chain is unique because some pieces move back and forth across international borders while the part is built and assembled, experts say.
“People don’t really know where their vehicle is built and how it’s assembled from parts across the entire globe,” Drury said.
Take a steering wheel, for example. Electronic sensors or other parts that go into the steering wheel come to the United States for assembly from countries like Germany, Drury said. The steering wheel is then sent to Mexico for stitching, only for it to come back to the U.S. to be installed in the vehicle.
Vehicles could have “incrementally more tariffs applied” compared with other products, given the supply chain, said Keating.
If tariffs add to the manufacturing cost, automakers can’t risk passing on the entire tab to the shopper, experts say.
Carmakers and dealers may have to “bear some of the burden,” Drury said. “If you look at how expensive vehicles could get with those tariffs, there’s no way they’re going to be able to move as many [cars].”
There is, however, a silver lining — a lot of cars that will be on the lots in early 2025 have already been assembled or are currently being made, further adding to next year’s available supply, Keating said.
What car shoppers can expect in 2025
Car shoppers in 2025 are unlikely to see prices that factor in new tariffs, experts say. Baseline prices will be about the same, and dealers are likely to offer more incentives to pull in buyers next year.
The average transaction price for new cars is expected to hover between $47,000 and $48,000, according to Keating. As of November, the average price was $48,724, 1.5% higher from a year before, per Kelley Blue Book data.
While the average price is higher than pre-pandemic levels, “the good news is it’s relatively stable. We’re not vacillating all over the place,” Keating said.
As of December, average auto loan rates for new cars are at 9.01% while borrowing costs for used vehicles are at 13.76%, per Cox Automotive. The average rates for both types of loans are down about a full percentage point from a 24-year high earlier this year.
“We expect that consumers may see even lower rates by spring, which would create the most normal and favorable buying environment since 2019,” Jonathan Smoke, chief economist at Cox Automotive, wrote in the report.
For now, experts are optimistic for the auto market next year as inventory and deal opportunities grow.
“Tariffs or no tariffs, there will be more incentives,” Drury said.
Mariah Carey performs “All I Want for Christmas Is You” at the 2023 Billboard Music Awards.
Gilbert Flores | Penske Media | Getty Images
“I don’t want a lot for Christmas / There is just one thing I need / An answer to just one question / An estimate of Mariah Carey’s song royalties, please?”
No, my makeshift lyrics aren’t as catchy as the opening lines of Carey’s “All I Want for Christmas Is You,” the 1994 jingle that became practically ubiquitous over the airwaves around holiday season.
But they do pose a question that probes into the black box of music-industry economics: How much money does the song earn for Carey, the song’s performer and so-called “Queen of Christmas,” each year?
Revenue estimates by Billboard suggest she made perhaps $2.7 million to $3.3 million in 2022, for example, from song downloads and on-demand streaming. It excludes other potentially lucrative revenue streams like Christmas TV specials.
But it’s hard to know a precise sum, largely because contractual details between Carey, her music label and song publishers aren’t public, experts said. The pop star’s publicist, Chris Chambers, didn’t return a request for comment submitted to his firm, The Chamber Group, about her royalties.
“Whatever it is, it’s a lot of money,” said Natasha Chee, a music, entertainment and intellectual property attorney at law firm Donahue Fitzgerald.
The song may have earned $103 million since 1994
“All I Want for Christmas Is You” is a yuletide juggernaut.
Spotify announced this month that the anthem was the first-ever holiday song to surpass 2 billion global streams. It has been the No. 1 song globally on Christmas Day each year since 2016, Spotify said.
The tune’s popularity has only grown: Total U.S. audio streams rose to 249 million in 2023, up about 49% from 167 million in 2019, according to Luminate, which tracks music industry data.
(As of Dec. 12, total U.S. streams of the song this year were down 8% relative to 2023, Billboard estimated. That’s partly a function of the shorter holiday season from a late Thanksgiving, experts said.)
The song “is a money machine,” said George Howard, a professor at the Berklee College of Music and former president of Rykodisc, an independent record label. “It’s a real phenomenon,” he said.
Mariah Carey performs onstage during her “All I Want For Christmas Is You” tour at Madison Square Garden on Dec. 15, 2019 in New York City.
Kevin Mazur | Getty Images Entertainment | Getty Images
Howard, who also does consulting work to value music copyrights, estimates the chart-topper makes $2 million to $4 million in annual gross revenue.
Similarly, Manatt, Phelps & Phillips, which specializes in music industry law, estimates the hit generates $3.4 million a year.
Over its 30-year existence, the song has made about $103 million in earnings, the law firm estimates. The projections include global streaming and non-streaming revenue sources, according to Manatt, which created Billboard’s royalty calculator.
The song’s 2 billion global Spotify streams alone earned $9.8 million in royalties, according to the calculator.
But Carey only gets a portion of those earnings.
Why Carey is likely getting paid ‘six ways to Sunday’
Mariah Carey performs during the opening show of Mariah Carey: All I Want For Christmas Is You at Beacon Theatre on Dec. 5, 2016 in New York City.
Jeff Kravitz | Filmmagic, Inc | Getty Images
The ecosystem of music royalties is notoriously convoluted.
Money flows to many contributors, like writers, performers, producers, sound mixers and record labels. Payouts to each person can vary from song to song, depending on contractual terms, experts said.
The terms of Carey’s royalty deals aren’t public knowledge.
“Whatever it is, it’s a lot of money,” said , a music, entertainment and intellectual property attorney at law firm Donahue Fitzgerald.
Natasha Chee
senior counsel at Donahue Fitzgerald
The singer is likely getting a “bigger chunk” of revenue than most artists, Howard said. That’s because of Carey’s multiple credits on the song: She’s listed as the sole performer, as well as its co-writer and co-producer. (Walter Afanasieff is the other co-writer and co-producer.)
Such a multitude of credits is unusual to see, Howard said. And it’s an important factor in Carey’s ultimate take-home pay.
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Music royalties are different from those of other works like books or photography.
That’s because there are two distinct royalty streams — one for music composition and another for sound recording, said Jordan Bromley, partner and head of Manatt Entertainment. Think of the former like the sheet music sitting on your piano (the songwriting), and the latter as the recorded song that you hear, he said.
Each has its own royalty structure. The royalties for music composition are received by songwriters and publishers, while those for sound recording are paid to song performers and their labels, Howard said.
Carey “has both the copyright to the song and the sound recording, so she’s getting paid on both sides,” Howard said.
“She’s getting paid six ways to Sunday,” he said.
Svetikd | E+ | Getty Images
A song’s writers and publishers — and not its performers — get the royalties when a song plays in a public space, such as on TV and radio, or in restaurants and retail stores, experts said. The U.S. is one of the few countries to have such a rule, Howard said.
This means that Carey (and Afanasieff, her co-writer) gets royalties whenever a cover version of “All I Want for Christmas Is You” plays in the public domain. Over 150 performers have covered the song, according to ASCAP, a performing rights organization.
Carey and Afanasieff split their writing credits with publishers including Universal Music, Sony Music and Kobalt Songs Music Publishing, according to ASCAP.
However, song recording generally brings in four to five times the revenue of songwriting, Bromley said.
“If you’re a songwriter with no record revenue, it’s hard to make a living even if you’re making hits,” he said.
The artist’s take of the recording revenue relative to the label’s can swing widely, anywhere from 20% up to 90%, depending on the contract, Bromley said. “All I Want for Christmas Is You” was released by Columbia Records, which is owned by Sony Music.
Afanasieff, Sony Music and Kobalt Songs Music Publishing didn’t return requests for comment. Universal Music Publishing Group declined comment.
Why Carey may have made over $2.7 million in 2022
Santa Claus and Mariah Carey during a pre-tape performance for NBC’s Christmas tree lighting at Rockefeller Center on Nov. 27, 2012 in New York City.
James Devaney | Wireimage | Getty Images
Experts note that earnings from record sales and licensing can vary greatly from year to year, while revenue from streaming and performance is more predictable.
Of the aforementioned estimated $8.5 million in global revenue and publishing royalties that “All I Want for Christmas Is You” earned in 2022, the Carey master recording brought in $5.3 million and publishing royalties accounted for the remaining $3.2 million, Billboard said.
What was Carey’s cut?
She made about $1.9 million of the master recording revenue, Billboard estimated, while her label, Sony, kept the other $3.4 million.
She’s getting paid six ways to Sunday.
George Howard
professor at the Berklee College of Music
Carey also earned an estimated $1.6 million of the publishing, assuming she and Afanasieff split the writing 50-50. But her take-home pay would have been less, depending on her publishing deal — perhaps ranging from about $795,000 to $1.4 million, Billboard said.
All told, these estimates suggest Carey may have made about $2.7 million to $3.3 million from recording and publishing in 2022.
This excludes revenue from any financial arrangements for soundtracks from Christmas TV specials, which are likely lucrative, according to Billboard. It also excludes cover versions of the song.
“There’s a ton of revenue that opens up” for a pop star who is almost “co-branded” with Christmas, including deals for brand endorsements, live performances, cosmetics, home goods and apparel, Manatt Entertainment’s Bromley said.
The gift that keeps giving
Picture Alliance | Picture Alliance | Getty Images
The song is the gift that will keep keep on giving for years, experts said.
The copyright for works published after Jan. 1, 1978, generally remains intact for the author’s lifetime, plus 70 years after the author’s death, according to Chee of Donahue Fitzgerald.
In the case of a joint work with two or more authors, such as “All I Want for Christmas Is You,” the rule applies to the last surviving author.
That means Carey’s estate will likely rake in royalties for decades, until the song eventually passes into the public domain, she said. When that happens, the song would join the ranks of Christmas classics like “Jingle Bells” and “We Wish You a Merry Christmas,” which can generally be freely shared and adapted.
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