American Airlines is in talks to make Citigroup its exclusive credit card partner, dropping rival issuer Barclays from a partnership that dates back to the airline’s 2013 takeover of US Airways, said people with knowledge of the negotiations.

American has been working with banks and card networks on a new long-term deal for months with the aim of consolidating its business with a single issuer to boost the revenue haul from its loyalty program, according to the people.

Talks are ongoing, and the timing of an agreement, which would be subject to regulatory approval, is unknown, said the people, who declined to be identified speaking about a confidential process.

Banks’ co-brand deals with airlines, retailers and hotel chains are some of the most hotly contested negotiations in the industry. While they give the issuing bank a captive audience of millions of loyal customers who spend billions of dollars a year, the details of the arrangements can make a huge difference in how profitable it is for either party.

Big brands have been driving harder bargains in recent years, demanding a bigger slice of revenue from interest and fees, for example. Meanwhile, banks have been pushing back or exiting the space entirely, saying that rising card losses, scrutiny from the Consumer Financial Protection Bureau and higher capital costs make for tight margins.

Airlines rely on card programs to help them stay afloat, earning billions of dollars a year from banks in exchange for miles that customers earn when they use their cards. Those partnerships were crucial during the pandemic, when travel demand dried up but consumers kept spending and earning miles on their cards. Carriers have said growth in card spending has far exceeded that of passenger revenue in recent years.

While it says it has the largest loyalty program, American was out-earned by Delta there, which made nearly $7 billion in payments from its American Express card partnership last year, compared with $5.2 billion for American.

“We continue to work with all of our partners, including our co-branded credit card partners, to explore opportunities to improve the products and services we provide our mutual customers and bring even more value to the AAdvantage program,” American said in a statement.

It’s still possible that objections from U.S. regulators, including the Department of Transportation, could further delay or even scuttle a contract between American Airlines and Citigroup, leaving the current arrangement that includes Barclays intact, according to one of the people familiar with the process.

If the deal between American and Citigroup is consummated, it would end an unusual partnership in the credit card world.

Most brands settle with a single issuer, but when American merged with US Airways in 2013, it kept longtime issuer Citigroup on board and added US Airways’ card partner Barclays.

American renewed both relationships in 2016, giving each bank specific channels to market their cards. Citi was allowed to pitch its cards online, via direct mail and airport lounges, while Barclays was relegated to on-flight solicitations.

When the relationship came up for renewal again in the past year, Citigroup had good footing to prevail over the smaller Barclays.

Run by CEO Jane Fraser since 2021, Citigroup has the more profitable side of the AA business; their customers tend to spend far more and have lower default rates than Barclays customers, one of the people said.

Any renewal contract is likely to be seven to 10 years in length, which would give Citigroup time to recoup the costs of porting over Barclays customers and other investments it would need to make, this person said. Banks tend to earn most of the money from these arrangements in the back half of the deals.

With this and other large partnerships, Fraser has been pushing Citigroup to aim bigger in a bid to improve the profitability of the card business, said the people familiar.  

“We are always actively working with our partners, including American Airlines, to look for ways to jointly enhance customer products and drive shared value and growth,” a Citigroup spokesperson told CNBC.

Meanwhile, Barclays executives told investors earlier this year that they aimed to diversify their co-branded card portfolio away from airlines, for instance, through added partnerships with retailers and tech companies.

Barclays declined to comment for this article.

The Federal Reserve announced Wednesday it will lower its benchmark rate by a half percentage point, or 50 basis points, paving the way for relief from the high borrowing costs that have hit consumers particularly hard. 

The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

Wednesday’s cut sets the federal funds rate at a range of 4.75%-5%.

A series of interest rate hikes starting in March 2022 took the central bank’s benchmark to its highest in more than 22 years, which caused most consumer borrowing costs to skyrocket — and put many households under pressure.

Now, with inflation backing down, “there are reasons to be optimistic,” said Greg McBride, chief financial analyst at Bankrate.com.

However, “one rate cut isn’t a panacea for borrowers grappling with high financing costs and has a minimal impact on the overall household budget,” he said. “What will be more significant is the cumulative effect of a series of interest rate cuts over time.”

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“There are always winners and losers when there is a change in interest rates,” said Stephen Foerster, professor of finance at Ivey Business School in London, Ontario. “In general, lower rates favor borrowers and hurt lenders and savers.”

“It really depends on whether you are a borrower or saver or whether you currently have locked-in borrowing or savings rates,” he said.

From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at how a Fed rate cut could affect your finances in the months ahead.

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — near an all-time high.

Going forward, annual percentage rates will start to come down, but even then, they will only ease off extremely high levels. With only a few cuts on deck for 2024, APRs would still be around 19% in the months ahead, according to McBride.

“Interest rates took the elevator going up, but they’ll be taking the stairs coming down,” he said.

That makes paying down high-cost credit card debt a top priority since “interest rates won’t fall fast enough to bail you out of a tight situation,” McBride said. “Zero percent balance transfer offers remain a great way to turbocharge your credit card debt repayment efforts.”

Although 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power in the last two years, partly because of inflation and the Fed’s policy moves.

But rates are already significantly lower than where they were just a few months ago. Now, the average rate for a 30-year, fixed-rate mortgage is around 6.3%, according to Bankrate.

Jacob Channel, senior economist at LendingTree, expects mortgage rates will stay somewhere in the 6% to 6.5% range over the coming weeks, with a chance that they’ll even dip below 6%. But it’s unlikely they will return to their pandemic-era lows, he said.

“Though they are falling, mortgage rates nonetheless remain relatively high compared to where they stood through most of the last decade,” he said. “What’s more, home prices remain at or near record highs in many areas.” Despite the Fed’s move, “there are a lot of people who won’t be able to buy until the market becomes cheaper,” Channel said.

Even though auto loans are fixed, higher vehicle prices and high borrowing costs have stretched car buyers “to their financial limits,” according to Jessica Caldwell, Edmunds’ head of insights.

The average rate on a five-year new car loan is now more than 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, rate cuts from the Fed will take some of the edge off the rising cost of financing a car — likely bringing rates below 7% — helped in part by competition between lenders and more incentives in the market.

“Many Americans have been holding off on making vehicle purchases in the hopes that prices and interest rates would come down, or that incentives would make a return,” Caldwell said. “A Fed rate cut wouldn’t necessarily drive all those consumers back into showrooms right away, but it would certainly help nudge holdout car buyers back into more of a spending mood.”

Federal student loan rates are also fixed, so most borrowers won’t be immediately affected by a rate cut. However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Treasury bill or other rates, which means once the Fed starts cutting interest rates, the rates on those private student loans will come down over a one- or three-month period, depending on the benchmark, according to higher education expert Mark Kantrowitz. 

Eventually, borrowers with existing variable-rate private student loans may be able to refinance into a less expensive fixed-rate loan, he said. But refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.

Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.

As a result of Fed rate hikes, top-yielding online savings account rates have made significant moves and are now paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.

If you haven’t opened a high-yield savings account or locked in a certificate of deposit yet, you’ve likely already missed the rate peak, according to Matt Schulz, LendingTree’s credit analyst. However, “yields aren’t going to fall off a cliff immediately after the Fed cuts rates,” he said.

Although those rates have likely maxed out, it is still worth your time to make either of those moves now before rates fall even further, he advised.

One-year CDs are now averaging 1.78% but top-yielding CD rates pay more than 5%, according to Bankrate, as good as or better than a high-yield savings account.

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