In an effort to calm investors and stop the country from moving further into a Recession, the Federal Reserve made an agressive .75 point cut in the prime interest rate yesterday. The stock market welcomed the news by surging up 420.21 points.
While this all sounds positive, how will it effect you? Here are a few speculations on that:
1. Credit card companies may lower your rates, but there could be up to a 3 month delay (it seems that reductions get passed on to you much slower than increases).
2. If you have an adjustable rate mortgage (ARM) you may see a slight reduction as the rate reduces. I wouldn't expect more than $25 - $50 in savings but it is something.
This is all assuming that the rate will stay low. It is now the lowest prime rate since 2004. I am pretty convinced that the rate will continue to go lower in an effort to "smoke and mirror" the economy into restarting.
The bottom line is that the Federal Reserve wants YOU to start feeling positive and euphoric again and to start spending again.
The best lesson that could be learned from all of this (in my opinion, anyway) is to spend less money and save more. The racing economy of the past 5 years just can't continue. Personal debt is out of control and that is what has lead to people being way over-extended. When this is all balanced out hopefully everyone will be a bit wiser about budgeting ther money. Until then, just be cautious. The economy will come back, it always does.
What are your thoughs?
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