Fed discount window cut...what does it mean for you? ATM fees....can you still get free money?

FED DISCOUNT WINDOW CUT...WHAT DOES IT MEAN FOR YOU?

The Federal Reserve has taken significant action lately due to the credit crunch. And now they've made an unexpected move by cutting the discount window rate, which is great news. We'll get to that in a minute, but first let's look at recent events and understand what they mean.
Market movement
To date, over 120 mortgage companies have closed their doors due to reduced liquidity. The result: borrowers who want to take out non-conforming loans have fewer, more expensive options.
Many media outlets have incorrectly added fuel to the fire by stating mortgage lending has stopped altogether and borrowers can't get a loan without a 20% down-payment. This is not true.
Conforming interest rates and loan programs, those backed by Fannie Mae and Freddie Mac, have not been significantly impacted by recent events. Even better, interest rates have come down from recent highs. While this is good news, the market is experiencing unprecedented volatility and changes could come at any time. Borrowers need to act swiftly and decisively in today's climate.
What did the Fed do?
Now back to the discount rate. This is the interest rate charged to commercial banks and other depository institutions on the loans they receive from their regional Federal Reserve Bank's lending facility. The Fed's decision to cut this rate provides stability in the financial markets and this can be good for all of us.
How exactly does this provide stability? Here's an example: imagine you just wrecked your car and it requires $5,000 worth of repairs. You have a short-term need for cash to pay your mechanic. Even though you’ll eventually be reimbursed by your insurance company, you still need the cash now. So, do you sell off stocks to get the cash, or tap into an equity line of credit? Most likely, you draw from that line of credit rather than liquidating a long-term investment.
This is what the banks are facing in today's liquidity crisis. And Bernanke's move helps them avoid long-term damage by supplying access to short-term cash.
It's important to note the discount rate is different than the Fed Funds Rate, which directly impacts interest rates you pay for Home Equity Lines of Credit, credit cards, and automobile loans. Most importantly, the discount window rate cut does not directly impact home loan rates.
What should you do now?
Information, knowledge, and expertise are the building blocks of sound financial decision making. If you are considering financing or are in the process of financing a home, you should tap into the knowledge and resources of a skilled mortgage professional. I would welcome the chance to help you navigate these choppy financial waters.
And even if you are not presently planning on any home financing--it still pays to make sure your credit score is as high as possible, in case a credit or lending need does come up before you expect it.
Again, please feel free to contact us--W are ready to help on all fronts.



THERE IS A $3 FEE FOR USING THIS ATM MACHINE--DO YOU WANT TO CONTINUE AND PAY THE FEE, OR CANCEL?





Aggravating...yet you quickly think to yourself, "What do you think, pal? I've got my kids standing here pulling at my leg to hurry up so we can move on with our day. Do you really think I'm going to run all over town to find a free cash machine? Get it over with, take your darn fee and just give me my cash!"
It's a typical scenario repeated countless thousands of times per day, all over the world, as consumers pay the price for convenience. How big of a price is being paid? ATM income to banks is estimated to be around $4.2 billion per year...that's a hefty load of cash. And although banks have made literally billions of dollars on ATM fees over the years, faced with cut throat competition and growing consumer discontent over rising ATM fees, some banks are trying a new strategy...not charging the fees at all.
So with interest rates on the rise, making profit margins slim for banks--how can they afford to do such a thing? The answer is that owners of the free networks will be charging your bank, instead of charging you...and hoping that the increased use of their machines will help to offset the loss of fee income from the consumer themselves. Smaller banks and credit unions in particular are willing to pay some fees to large free network operators, because the cost of building, maintaining and servicing ATM machines themselves would be so great. Even keeping the machines constantly loaded with cash has become increasingly expensive, factoring in the climbing cost of gasoline needed to power the vehicles that courier the cash out to the machines on a regular basis. This plan very well could be a win-win for everyone, but most importantly, could help keep those extra bucks in your own wallet...where they belong.
To find free machines near you--and start saving on costly ATM fees--check these two free locator links: MoneyPass and Allpoint.