Last week, the Federal Reserve cut interest rates by 25 basis points (or 0.25%) for a new target range of 4.5% to 4.75%. That marks the second consecutive rate cut for the Fed, following a 50-point cut in September.

Most consumers understand that falling interest rates indicate inflation is coming under control, and their purchasing power is slated to increase. But what changes actually appear in their daily lives? To what degree will they be affected? And are there ways to get the same kind of boost to purchasing power that aren’t reliant on the Fed’s meeting schedule?

Dive into the impact that rate cuts have on your wallet here.

What does this rate cut mean for your wallet?

When the Federal Reserve cuts interest rates, it lowers the cost of borrowing money. 

This comes into play when a consumer takes out a loan for a large purchase like a home or a car. When they borrow — usually from a bank — they agree to pay interest on the money they borrowed. When rates are lower, interest accrues more slowly, and in the end, borrowers owe less as they pay off the loan. Credit card balances, too, accrue interest when they’re not paid off in full.

The Fed generally adjusts interest rates in response to inflation, increasing rates when inflation is high and decreasing them when it’s under control. With inflation significantly cooled from its 2022 highs, the Fed has now pursued two consecutive rate cuts in September and November, reducing interest rates by 75 basis points in total. Many analysts consider another 25-point cut likely at the Fed’s final meeting of 2024 in December.

And though a 0.25% rate cut might sound small, it can have downstream impacts — especially when you think about how consecutive rate cuts compound over time. Several months into 2025, we could see larger purchases like appliances, vehicles, and homes start to tick up.

But first, let’s visualize the impact of this rate cut on its own with a sketch of an average American consumer. This individual has a home, a car, and a credit card bill that they pay monthly. 

Curious where those average monthly figures came from? The monthly mortgage payment of $2,131 assumes a 20% down payment on the average home price, courtesy of the National Association of Realtors, and the average credit card debt of $7,236 comes from LendingTree. The figure for average car payment was compiled with help from a few different sources: average principal came from CNBC, and the average interest rate on a five-year loan came courtesy of NerdWallet.

Though these changes might not be enough to move into a new tax bracket, they’re tangible signs of an improving economy. Plus, an increase in purchasing power for consumers is always a welcome sight.  

Multiply your money with Upside

Relying on interest rate cuts isn’t the only way to boost purchasing power, though — Upside has been helping millions of users get there faster for nearly a decade. 

Upside is a digital marketplace that provides its app users with real cash back on the purchases they make every day — at gas stations, grocery stores, restaurants, and more. It’s free to use, and it’s easy to earn at over 100,000 retailers across America.

Let’s compare the savings from an interest rate cut to the cash back that a consumer can earn by making their purchases with Upside.

Here, we calculated the average monthly spend for gasoline, groceries, restaurant meals, and convenience store items based on survey results from Upside’s Consumer Spend Report.

The best part about these methods of saving is that they’re not mutually exclusive — consumers can stack their Upside earnings on top of the relief provided by the Fed. Earning cash back on Upside makes every dollar go farther, and you’re not subject to the Fed’s meeting schedule. 

Why wait on the Fed to boost your purchasing power? 

You can get more out of every dollar every time you shop. Download the Upside app.