What a Fed rate cut means for your credit cards, auto loans

As the Federal Reserve gears up to make its first interest rate cut in four years at its meeting tomorrow, LendingTree chief credit analyst Matt Schulz joins Wealth! to discuss how easing rates can impact everything from your credit card to auto loan.

Schulz notes that the Fed lowering rates is "not really going to have much of an impact right off the bat." However, consumers can negotiate for a lower credit card rate, explaining that three out of every four people who call their credit card issuer and do receive one. He adds that the average reduction is about 6 percentage points, which is "way more than the Fed is ever going to do even fully at the end of this."

When it comes to auto loans, Schulz encourages consumers to shop around to get lower rates: "Wherever you look, chances are outside of the dealership you're going to get a better rate than you would at the dealer, again, independent of what the Fed does."

While interest rates remain high, he explains that Americans can still take advantage of high-yield savings account, noting that they will get a significantly better rate than a traditional savings account at a traditional bank.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Melanie Riehl

Transcripción del vídeo

The Fed is on the verge of cutting rates, and this is huge because it directly affects you and your money.

Today we're tackling how rate cuts will influence, say, different kinds of loans like car loans.

The monthly payment on your next car might get a little cheaper as rates start to come down.

And what about your credit card interest rate?

Oh, yeah, that might tick lower, but eventually those tend to follow suit as rate cuts compound over time and for the money you have stashed away in a savings account, well, yes, rate cuts could actually impact its growth.

Banks and other financial institutions will offer a smaller savings rate to hold your cash after interest rates get cut.

We're breaking down all you need to know on the effective rate cuts and more in this episode.

But first we gotta dig into how your money will be affected by rate cuts here with the breakdown of what you can expect, we've got Matt Schultz, who is the chief credit analyst at LendingTree.

I mean such an important topic, such an important time that Matt is no longer virtual.

He's here in studio with us.

So great to see you here.

Your author.

You're also the author Matt of the new book.

Ask questions.

Save money.

Make more.

So, Matt, Everyone is concerned about their credit cards.

Rates are high.

LendingTree has the average rate for new card offers at nearly 25%.

So how will rate cuts impact credit card rates?

Honestly, it's not really gonna have much of an impact right off the bat whether we're talking about a quarter point or a half point reduction, what you're talking about is really about a about a dollar or two a month when you're talking about the the savings for somebody who may have $5000 in debt, Um, and in a 25% interest rate on a card.

So it's It's a good thing, unequivocally, but it's really not going to make too much of a difference just yet.

And so, Matt, can consumers negotiate for a lower credit card rate?

Oh yeah, they they absolutely can.

And people are always surprised to hear that about three out of every four people who call and ask for a lower interest rate on one of their credit cards from their issuers get it.

We've done that report at LendingTree for for several years, and I talk about it in my book and how to do it.

And the average reduction is about 6% points.

And that's way more than the Fed is ever going to do, even fully at the end of this right?

So it's there's there's no question that you have a lot more power than you think you do.

And that power that you have can be much more influential than anything the Fed is going to do in the next little while.

You know, as we're thinking about this, what about other big ticket purchases, say, autos and auto loans?

Specifically, what should the expectation be there?

And how can people make sure that they're still asking the right questions in those processes?

Yeah, with that again, it's it's really good.

And if you're shopping for a car, lower rates are always better.

But it doesn't change kind of the basic blocking and tackling of it, which is that before you walk into the dealership, you need to go to say, like LendingTree or go to credit unions or other banks shopping around to get pre approved for a loan.

Because wherever you look, chances are outside of the dealership, you're gonna get a better rate than you would, um, at the dealer again.

Independent of what the Fed does so with, With rates coming down, have consumers missed out on the best savings rates right now?

Yeah, they they may have missed it.

Let's go.

Yeah, yeah, cash it in, right?

No, um, we've people have missed out on peak rates, but it doesn't mean that there's a need to panic or to give up, because it's not going to go from really amazing to worthless tomorrow.

These things are gonna take a little bit of time.

And even when these high yield savings accounts go from 5% or a little higher to to lower even if they are lower, it's still going to end up being better significantly than what you would get at a traditional savings account with one of the big banks.

So it's still worth your time to make the move.

And with that in mind, I mean, what what is the question that you should be asking, especially as you're getting in front of all these different institutions, people who are determining what rates they're comfortable offering.

What what does the effect of questions sound like in in health care?

We've we've heard, Hey, just ask the question of Can I get an invoice itemised for what I'm paying for?

What is it like when you're having a rate conversation, though?

Well, I ideally you treat it like a price match.

So if you have gotten, um, if you've gotten stuff in your snail mail or in your email, or you see through an app or even on sites like LendingTree, you've seen offers that you qualify for.

And you can use that as kind of ammunition, Um, in that conversation and say, Hey, I've been a good customer for a long time and, uh and I pay my bills, all that sort of stuff and my interest rate with y'all is 25%.

But I've been offered 19 or 20 from these other folks.

Can you match it?

That's when that's kind of when the magic happens.

Matt.

Always a pleasure to speak with you.

Great to have you here in studio with us.

Matt Holtz, who is the lending tree chief credit analyst.

Good to see you.

Thank you.