5 things that get cheaper when the Fed cuts interest rates

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The Federal Reserve’s lowering of the federal funds rate will lead to an interest rate decrease for borrowers.
Borrowers may see interest rates decrease on credit cards, variable rate student loans, auto loans, small business loans, and home equity lines of credit, making those products cheaper in the long term.
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On Wednesday, the Federal Reserve lowered the federal funds rate by 0.25%, meaning Americans are likely to see interest rates fall on everything from loans to credit cards.

Greg McBride, chief analyst at Bankrate, says that some interest rates are more closely tied to the Fed’s fund rate than others. "When interest rates go down, consumers will typically see a similar decrease in credit card rates, home equity lines of credit, variable rate student loans, and small business loans," he says. Mortgages, however, won’t see much of an effect, as they tend to move independently of the Fed’s rate changes.

Here are five things that should get cheaper with an interest rate cut from the Fed.

5. Starting or growing a small business

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Those who are looking to take out small business loans will see lower rates thanks to the Fed’s decision to cut rates. Business loans generally follow the federal funds rate and the prime rate, which Business Insider’s Bob Bryan reports describes as "the interest rate used as a starting point for non-mortgage loans."

If your small business needs a little extra cash to get to the next level, lower interest rates will help make getting a small business loan more affordable.

4. Paying off credit card debt (or consolidating it)

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Interest rates on credit cards are closely tied to the prime rate, so you’ll likely see decreases near .25% on interest rates.

Americans now owe about $870 billion in credit card debt, as Business Insider’s Gina Heeb reports, and Value Penguin estimates that the average American household has about $5,700 worth of credit card debt. With interest rates low, now is a good time to start dealing with it.

With this decrease, there’s an opportunity to pay off credit card debts at a lower interest rate, or consolidate debt and lock in that lower interest rate.

3. Paying off variable rate student loans

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For those with variable rate, private student loans, they just got cheaper. Variable rate loans are closely tied to the Libor or prime rate, and with that decreasing, you’ll likely pay less in interest.

That said, it might also be a good time to refinance, and lock in a lower fixed rate on student loans. However, those who already have fixed rate student loans won’t see any effects.

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