US Fed rate cut: Here's how it will impact credit cards, mortgage rates, savings accounts and more

US Fed rate cut impact: The US central bank's Federal Open Market Committee (FOMC) on Wednesday, 17 September, announced that it has decided to cut the benchmark interest rate to the 4-4.25% range amid moderate growth in the US economy.

This move by the US Federal Reserve will provide some respite from the high borrowing costs in the US economy that have loomed over consumers. The benchmark interest rate is the rate at which commercial banks borrow and lend to one another on an overnight basis.

Even though this is not the rate that consumers end up paying, the Fed's decision impacts the borrowing and savings rates in the US banking system.

A CNBC report showed how the Federal Reserve rate cuts could affect the people in the United States, with the focus ranging from credit cards to mortgage rates in the US economy in the upcoming months.

How will Fed rate cuts impact credit cards?

The Federal Reserve rate cuts will directly impact credit cards, which are financial instruments based mostly on variable interest rates. The recent rate cut, which lowers the benchmark interest rate, will likely also lower the interest rate on your credit card borrowings.

Ted Rossman, a senior industry analyst at Bankrate, told the news portal that the existing borrowers using credit cards are likely to see their interest rate go down by nearly “half a point”.

“Existing borrowers could see their rates go down by half a point or so — maybe a little more — by early 2026,” said Rossman.

The analyst also highlighted that the average credit card rate in the United States is currently more than 20%, close to an all-time high level, so the annual percentage rate (APR) is also expected to remain close to 20% into the year 2026.

What will happen to mortgage rates in US?

The mortgage rates in the United States do not directly replicate the US Federal Reserve's interest rate movement, but they are influenced by the treasury yields and the nation's overall economic growth.

The news portal's report highlighted that the average 30-year fixed-rate mortgage rate was 6.13% as of Tuesday, down from its more than 7% peak level in January 2025.

“The Federal Reserve rate cut this week has already been priced into mortgage rates, so the immediate impact will be minimal,” Selma Hepp, the chief economist at Cotality, told the news portal.

Hepp also underscored that a single interest rate cut is unlikely to make a significant contribution, but the series of rate cuts expected in 2025 and 2026 can put ‘gradual downward pressure’ on the US mortgage rates.

Student loans, savings accounts

In the case of student loans in the United States, the debt is based on a fixed interest rate and only revised once a year on 1 July 2025, so most borrowers who are planning to take a student loan will not be immediately affected due to the rate cuts.

If people take out a private loan, those loans can have either fixed or variable interest rates tied to the Treasury bill or other benchmarks. Education expert Mark Kantrowitz told the news portal that as the Fed cuts rates, borrowers with variable-rate private student loans may automatically get a lower interest rate.

In the case of a savings account, though the Federal Reserve's interest rate has no direct influence on banks' deposit rates, the rates are likely to move in the same direction, depending on how much of the cuts the banks pass on to consumers.

“Rate cuts are good for borrowers but tough on savers,” Matt Schulz, the chief credit analyst of LendingTree, told the news portal. As a result, “expect yields on high-interest savings accounts and CDs to drop,” said Schulz.

Impact on auto loans

Jessica Caldwell Edmunds, head of insights, highlighted that even though the interest rate on auto loans is fixed, potential car buyers are likely to benefit from the borrowing costs on new loans.

“A modest Fed rate cut won’t dramatically slash monthly payments for consumers,” Edmunds told the news portal, “but it does boost overall buyer sentiment.”

The average rate on a five-year new car loan is currently nearly 7%, according to the report.