What the Fed's Decision Means for Your Credit Card Bills
While the goings-on in the Federal Reserve may seem like distant political maneuvering and noise to the average American, the average American is who the Fed’s decisions can hit the hardest. The Fed's decisions can raise, lower or maintain interest rates, which determines how much you pay for everyday loans, mortgages and your monthly credit card bill.
The Fed issued a decision this week that will once again impact all of the above.
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How the Fed Influences Your Credit Cards
While the Fed doesn’t directly adjust interest rates, it does adjust the federal funds rate, which then impacts borrowing costs across America (which in turn impacts interest rates). Since most credit cards have variable annual percentage rates (APRs), their interest rates often follow the Fed’s adjustments to the federal funds rate.
In short: If the Fed raises rates, your credit card interest rates go up. If the Fed lowers rates, your credit card rates lower as well.
What Does Decision Mean for Your Credit Card Bill?
On April 29, the Fed announced that it would hold rates steady for the time being, in a range between 3.5% and 3.75%. The board was divided 8-4 over the decision (the last time such a sharp 8-4 split occurred was in October 1992).
The divide highlights just how intensely the debate is growing in America as to how to handle the persistence of inflation that has defined American economics throughout the 2020s.
The average credit card interest rate is around 23.79% -- the lowest level in almost three years, due to the three rate cuts in 2025, per CNBC. Matt Schulz, chief credit analyst at LendingTree, told CNBC that APRs “are likely to continue their slow, downward trend for at least a little while longer.”
If that is the case, you might continue to see a little relief if you carry a credit card balance. But rates are still near all-time highs and credit card users who carry balances still have less room in the budget for other expenses.
How To Use Fed Decision to Your Advantage
With rates remaining steady, it gives you time to put together a plan to pay off your balance. Experts suggest you pay off any balance as soon as possible to avoid the extra interest. Here are ways to do that, per credit experts:
Start with paying more than the minimum balance.
Stop using credit cards to pay for things.
Stop thinking of a credit card as free extra money or another paycheck.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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