Now does this effect the credit card some.
How much does it goes down.
A little confusing but try to see where this is all going.

The Federal Reserve has reduced a key interest rate three-quarters of 1 percent to 2.25 percent.

The Federal Open Market Committee, which decides the cuts, voted 8-2 to make the move. Richard Fisher and Charles Plosser reportedly wanted a smaller cut.

"Recent information indicates that the outlook for economic activity has weakened further," the Federal Reserve said in a statement on its Web site. "Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters."


"Today's policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity," the statement said.

The reduction of the Fed funds rate could help people who owe money by easing interest on variable-rate credit cards and adjustable-rate mortgages. Anyone facing an ARM reset still should expect higher payments, but not quite as high as they might have been otherwise.

The prime interest rate, which variable-rate credit cards are tied to, is generally 3 percent higher than the Fed funds rate. The prime rate increases and decreases the same amount as the Fed funds rate does.

Longer-term, fixed-rate loans such as mortgages or student loans track treasury bonds, so these won't shift in response to short-term rate adjustments. Car loans also are typically fixed rate and would not be affected by the Fed rate cut.

The downside of an interest rate cut is that if you're trying to save your money, returns may fall. The Fed cut will reduce the rates you've been earning on your money that sits in high-yield, interest rate-bearing accounts.

When the results of the cuts will be seen is another question.

"The full effects of Federal Reserve rate cuts are felt with a lag, and the sixth rate cut will, just as with moves four and five during January, represent significant juice to economic growth in the fourth quarter of 2008 and for 2009," Greg McBride wrote on bankrate.com.

Rate cuts have been continuing since September. The Fed's fund rate has dipped from 5.25 percent to 3 percent over that time. In January alone, the Fed cut the rate by 1.25 percentage points. It was the biggest one-month reduction in a quarter-century.

The rate cut in January came in two separate cuts, the first of which was a cut of three-quarters of a percent at an unscheduled meeting.

The Fed on Sunday lowered its discount rate -- the rate it charges banks directly -- by a quarter-point. It also is allowing more types of financial firms to borrow from the central bank, and is accepting more various types of collateral.

Stocks Rallying

Worries about more financial meltdowns have eased with word of better-than-expected earnings reports from Lehman Brothers and Goldman Sachs.

The Dow Jones industrial average wass up about 265 points at the 12,237 level minutes after the Fed's 2:15 p.m. Eastern time announcement. The blue chips were up close to 290 points shortly before the Fed's decision was released. They pulled back to a gain of about 160 points.

Both Lehman Brothers and Goldman Sachs posted results that were below year-ago levels, but exceeding expectations.

Given the seemingly quick downward spiral that engulfed Bear Stearns, the latest results are calming investors' nerves.

In other news, the Commerce Department said housing starts fell six-tenths of a percent in February, while building permits fell 7.8 percent.

The Labor Department said the Producer Price Index surged three-tenths of a percent last month. The core, which excludes food and energy, rose half a percent.