I’m sure that most of you have heard about the Federal Reserve cutting the prime rate by 3/4 of 1 percent. This means that the prime rate is down to 3.5%.

What is the prime rate anyways? It is actually the rates that the banks are being charged if they want to borrow money from another bank.

How does it affect us?
This rate cuts affects us in many ways such as:

Low interest rates on the savings.
The first impact is the interest rates on our savings will go down. Thus, affecting a lot of savers. For those retirees who are depending on the interest of their savings, their income would be substantially reduce.

Rates on Loans will be Lower.
The reason why cutting the Fed rates stimulates the economy is that it allows businesses to borrow money and expand their operations at a cheaper rate. It is also good for the consumer since they would be able to borrow money as well at the same low rates. Car loans, student loans, variable credit card rates and most home equity loans rates will go down making it an attractive way to start thinking about a major purchase such as a car, or furnitures using a credit card. Most homeowners can also tap their home equity and pay a cheaper rate on those loans.