palm coast bank

What Does the Federal Reserve’s Recent Rate Reduction Mean to You?

The recent interest rate reduction, from 2.5 percent to 2.25 percent, by the Federal Reserve doesn’t directly touch any of the everyday interest rates that affect Americans. This quarter-point cut, the first cut in a decade, reduced the federal funds rate, the rate banks and other financial institutions charge one another for very short-term borrowing.

Even though most Americans don’t participate in this type of
borrowing, the Fed’s move will still have consequences on the borrowing and
saving rates you encounter every day.

Interest rates on car loans, credit card balances,
mortgages, etc., and earned interest on the money you save won’t necessarily be
directly or immediately impacted. But, consumers could, likely, over time, experience
the following trickle-down effects.

Savings Account Rates

Savers have only recently benefited from higher deposit
rates – the annual percentage yield banks pay consumers on their money – with
several online banks offering over 2.5 percent. However, the recent rate cut
will most likely cause these rates to come down.  Now is the time for consumers to shop around
for short-term rates or lock in rates with a 1-, 3- or 5-year certificate of
deposit with money that doesn’t need to be readily accessible.

Mortgage Rates

According to Bankrate, the current 30-year fixed mortgage
rate is about 3.93 percent, the lowest it’s been since November 2016. Because
mortgage rates are tied to long-term rates, which move well in advance of any
rate changes by the Fed, the current low rate came on the heels of the
expectation that the Fed was going to cut rates.  Consequently, unless the Fed hints that more
rate cuts are on the horizon, mortgage rates are not expected to fall much
more.

With that said, if you borrowed money to purchase a home
late last year, when the average 30-year mortgage rate was nearly 5 percent, it
may be time to consider refinancing.

Credit Card Interest
Rates

The Fed’s recent rate reduction is good news for Americans
who carry balances on their credit cards. Because most credit cards have
variable interest rates, there is a direct correlation to the Fed’s benchmark
rate.

With the rate cut, the prime rate lowers too, and credit
card rates will likely follow. For credit cardholders, this means you should
see a reduction in your annual percentage yield or APR (the current rates on
average are as high as 17.85 percent) within a couple of billing cycles.

With almost half of all credit cardholders in the U.S.
holding balances every month, averaging approximately $1,150 in interest
yearly, this quarter-point reduction will create some savings.

Auto Loan Rates

For those of you who are planning to purchase a new vehicle,
the Fed’s rate reduction will most likely have little impact on your car
payment. However, this rate cut lowers the financing costs for car manufacturers
and dealers, which can offer a better negotiating position for the would-be car
buyer.

Student Loan Rates

While most student loans are fixed-rate federal loans,
approximately 1.4 million students in the U.S. today use private student loans.
Private loans can be fixed or have a variable rate tied to the Libor, prime or T-bill
rates. Consequently, the Fed’s rate cut means borrowers with variable rate loans
will likely pay less interest. If you have private, variable rate loans, you
should look into refinancing to possibly lock in a lower fixed rate.

However, as borrowers begin to celebrate this recent rate
cut, retirees have begun to worry. This type of rate reduction doesn’t bode
well for returns on investments preferred by those who’ve left or have
immediate plans to leave the workforce.

Typically, yields on fixed annuities, CDs, savings accounts
and bonds go down with a Fed rate cut. Long-term care premiums and pensions
will also be pinched. The impact will likely not be felt immediately. Retirees’
portfolios may not feel a hit for more than a year.

Investment professionals warn retirees not to chase returns
in the market, possibly placing more emphasis in their portfolio on investments
like equities and real estate, which might not be safe for those who have a lot
more to lose and generally can’t afford to take on much risk. With any rate
fluctuation, it’s important to work with your financial advisor or planner to
develop a portfolio that’s right for your situation.

Although the Federal Reserve’s recent rate cut can be viewed
as both a good thing and a bad thing, the same as any rate increase, the
guiding force behind the reduction is heading off a recession. With this move,
the Fed hopes to prevent the economy from weakening and forestall layoffs and
other economic damages that could adversely affect everyone.

The Hot Bank Technology Trends – Creating the Perfect Blend for Our Customers

As we move into the second quarter of 2012, we see the U. S. community banking industry stepping up their technology budgets.  This movement is a result of the industry trying to capture their future market; the Generation Y (Gen Y) customers (Yurcan, Brian, “8 Bank Technology Trends That Will Shape the Industry in 2012,” www.banktech.com, January 3, 2012).

The Gen Y market, comprising people born between approximately 1979 and 1999, is enormous.  The immensity of this demographic is only outsized by its future earning potential.  This group, made up of approximately 80 million adolescents and young adults, earn approximately $214 billion annually and are expected to earn $3.4 trillion, compared to the estimated $2.8 trillion earnings of the baby boomers by 2018 (Constantine, Greg, “Tapping Into Generation Y: Nine Ways Community Financial Institutions Can Use Technology to Capture Young Customers,” www.firstdata.com, April 2010).

In an effort to meet the growing technological demands of a technologically savvy market and to make banking easier and more convenient for our customers, Intracoastal Bank is initiating several exciting new services in 2012.  Some of these new services include:

  1. A newly installed ATM which will eventually be an automated banking center, allowing transactions to be done 24/7.  Business and Personal customers will be able to make deposits using image technology; no deposit slips or envelopes are needed.  This ATM will allow bulk cash and checks to be deposited.  The machine will add up the checks and cash to be deposited and confirm that this number matches what the customer enters.  The customer will receive a receipt of their transaction with images of all checks deposited for their records.  This machine is so smart that it can even detect counterfeit bills and will reject them.
  1. A new and improved Mobiliti Banking. We currently offer mobile banking, but we are taking it to a whole new level.  There will be 3 ways to access the mobile banking feature: text messages, website or by downloading an app to your phone. Besides checking account balances, making transfers and looking at account history, customers will be able to pay bills with their smart phones.
  1. The addition of Account Create to our website.  This allows new and existing customers the opportunity to open accounts 24/7. This new service alleviates having to come into the bank during designated hours to set up an account.
  1. The addition of LinkLive to our website.  This gives our customers the opportunity to have online chats with our Personal Bankers when they have questions.  This program also allows our Personal Bankers to view a customer’s desktop in order to assist them with their online banking issues.

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