On Tuesday, the Federal Reserve moved the short-term interest rate down to 0%. This allows banks to borrow from one another at no cost. This is the first time in the history of the Fed that they took the rate to zero percent. So what does this mean for consumers? How does it hurt or help the average person in America?

1) Mortgages: Mortgages will be unaffected by the Fed’s move because the interest rate drop only relates to short term products. Mortgage rates move in response to bond prices and in all probability will not move much with this rate. However, if they do move, it should be slightly to the south. (Tom Selleck, the genius behind the miracle of Clintsays.com just refinanced at 5.00% APR!!!) The prime interest rate drop may prove beneficial to homeowners.

2) Credit Cards: Credit card rates are tied to the prime interest rate and credit card rates will drop for prime customers. Customers with poor credit will not see a benefit from the rate reduction.

3) Savings Accounts: As the prime lending rate drops, so does the interest rate that your bank or financial institutions pays on savings and money market accounts (MMA). If a person has money parked in a savings account, the bank will be paying less for you to keep it there. Concerned depositors looking for decent interest rates should look to online banks such as INGDirect, Zions Bank, or Emmigrant Direct. As of the time of this writing, these banks are paying 2.5 to 3.5% on Internet Savings Accounts. The best place to look for interest rates is here. Not bad when you consider most banks will be paying next to nothing.

4) Home Equity Lines of Credit (HELOC): These loans normally have an adjustable interest rate associated with its issuance, so homeowners with these loans will see a reduction in their monthly payment within the next six months. It may be a good time to abandon this ship and get on a fixed rate loan. Especially when interest rates move up again.

5) Other short-term loans: Payday loans, cash advance loans, and payday advance products are not tided to the federal rate and will not be affected by the latest rate cut.

6) Car Loans: The interest rate reduction will best serve auto lenders and auto dealers. Consumers should prepare themselves to see 0.9 and zero percent interest deals from their auto dealers in the coming weeks. The only problem is that those with fair to poor credit histories will not qualify for these auto loans.

In light of the interest rate reduction many consumers will benefit from the Federal Reserves rate cut. However, the cut will stir inflation and lead to bigger issues down the road. Consumers should continue to be careful as they select what credit products they need during this latest economic downturn.