What the Fed Decision Means for You

Sept. 18, 2007 — -- Wall Street has been eagerly awaiting today's interest rate decision by the Federal Reserve, but what does it mean for you?

The so-called Fed Funds rate is the interest rate banks charge each other for overnight loans. That rate trickles down to consumers in a number of ways.

Credit Cards

Variable-rate credit cards are set using a formula tied to the prime rate, but most variable-rate cards don't "float." They shift at various, fixed times throughout the year, so it's unlikely there would be a substantial impact immediately after the Fed's decision is announced.

Also, fixed-rate cards make up the majority of the credit card market so there's not as much of an effect as one might expect.

Mortgages

Mortgages are not tied to the Fed Funds rate, but they tend to track various U.S. treasuries. However, treasuries can be influenced by today's Federal Reserve action.

Home Equity Lines of Credit

Most home equity loans are tied to the prime rate, so they would be directly impacted.

Car Loans and Leases

Car loans are typically fixed-rate instruments that are generally tied to the three- and five-year treasuries. If you have a loan, the price won't increase. But any future new-car purchases would likely be affected.

Student Loans

These loans are not affected. The federal government prices student loans once a year — in June — based on the rates on the 91-day T-Bill rates.