Sorry, cardholders, your interest rate cut comes tomorrow

You might be waking up to the news today that the Fed made a surprise interest rate cut last night. Usually when holders of variable rate credit cards hear that headline, it's potentially good news for them. 

Sorry, credit cardholders, last night's rate cut was a bailout for investment bankers. Your cut comes tomorrow.

The Fed, in an unscheduled weekend session, decided to do three things.

1. It OK'd the takeover of troubled investment bank Bear Stearns, which had been in danger of going belly up. J.P. Morgan took it over at the fire-sale price of $2 per share.
2. It opened its "discount window" wider. That's the term for direct borrowing from the Fed. Until now, only commercial banks had been allowed access to that money. For the next six months, that window is open to securities dealers on the same terms as banks. The Wall Street Journal called this "one of the broadest expansions of its lending authority since the 1930s."
3. Finally, it cut the rate for borrowing through that window by a quarter point to 3.25 percent. That rate is called the "discount rate."

What cardholders are waiting for is tomorrow, when the Fed considers whether to lower the fed funds rate. That's the rate to which most variable credit cards are indirectly tied. If you dig out your cardholder agreement, and find that your card's rate is tied to the prime rate, a fed funds rate cut may be good news for you.

Banks peg their prime rates at 3 percentage points over the fed funds rate. When the fed fund rate falls, banks cut their prime rates, within one billing cycle, or perhaps quarterly. Again, consult your cardholder agreement.

The Federal Reserve's Open Market Committee meets Tuesday, and a cut in the fed funds rate is almost universally expected, but its size is the matter of speculation, with most observers expecting it to fall a half-point to a full point.