Cost of Consumer Borrowing Could Rise

For consumers, last week's Federal Reserve announcement is a mixed bag.

Chairman Ben Bernanke said the Fed would leave the federal funds rate untouched at 0.25 percent. The committee will also continue its program of purchasing $85 billion in Treasury bonds and mortgage-backed securities each month, although Bernanke said it could taper off that purchase later this year.

Much of the banking and borrowing consumers do is tied to that federal funds rate, which means rates aren't rising anytime soon.

"The Fed would actually have to boost short-term rates, which they're unlikely to do until 2015," said Greg McBride, senior analyst for Bankrate.com.

The notable exception: Mortgage rates, which are tied to 10-year Treasury yields, have risen over the past month as those yields have, on the hints of Fed tapering. According to Freddie Mac, rates on a 30-year-fixed mortgage were 3.98 percent in early June, up from 3.35 percent a month earlier.
Still, even as the Fed maintains the status quo, consumers are seeing some shifts in offers that could affect their rates:

Credit Cards - Competition for customers with good or excellent credit has actually pushed rates on new credit cards down in recent. The average rate for borrowers with excellent credit was 12.79 percent during the first quarter of 2013, down from 13.01 percent in the last quarter of 2012, according to the site. Rates also dropped slightly for business credit cards and student credit cards.

Continued economic improvement, combined with low rates, also makes lenders more willing to dangle zero-percent introductory offers. The average terms for no-interest balance transfer and purchase offers are both slightly more generous than a few months ago, with most cardholders getting a little more than 10 months' reprieve.

And if you're paying down a balance? Most cards do have variable rates, but they aren't going anywhere until that prime rate rises, he said. Federal law prohibits issuers from raising rates on existing balances unless the cardholder is more than 60 days delinquent.

Mortgages - House hunters and would-be refinancers may have missed their window of opportunity. Rates are likely to keep trending higher. Borrowers could see the rate for a 30-year fixed-rate mortgage hit 4.25 percent by next week.

Consumers who are partway through the process have some ability to halt hikes. If you've got a deal that works at 4, 4.25 percent, lock it in. Ask about so-called float-down options, which, if rates drop, allows for that locked in rate to fall too. That can add several hundred dollars to the cost of the loan, but may work in borrowers' favor, he said.

Checking and Savings Accounts - Sorry, savers—no good news here. Rates on CDs, savings accounts and checking accounts aren't likely to move until the Fed raises interest. A one-year CD yields 0.62 percent, while an interest checking account yields 0.50 percent.

But there are still opportunities to eke out a slightly higher return for emergency funds and other liquid savings. A recent Bankrate.com report found 56 high-yield accounts across the country offering an average 1.64 percent.

Source: Kelli B. Grant, CNBC

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