This answer is one of those good-and-bad type of answers, so let's tackle this by going through each question!

It is true that interest rates aren't as high as they were a few years ago, and that's a good thing. No, wait, that's a bad thing. Um, no . . . hang on a second. Okay, so it's both! Click here for a full blown explanation on what makes interest rates tick!

As far as being a good or bad thing goes, that depends on whether you're paying the interest (as in a loan) or earning the interest (as in a savings account). Low interest rates rock if you've got a loan because you're paying a lot less for the money that you've borrowed. Low interest rates aren't so cool if you have a savings account earning that teensy amount of interest, you're not making much money at all!

So why are interest rates so low? Well, remember this thing we've been though called a recession? To get out of a recession, the government will do a few things to kick start the economy back to health, including lowering interest rates. Lower rates means that the cost of borrowing money goes down, and that means that people and businesses will be more likely to run out and buy stuff. People buying stuff means that businesses sell more stuff and end up hiring more people to help build more and more stuff to sell. It's that great "circle of life" thing all over again, isn't it? So, interest rates are low to help get the economy back on track, it's really that simple. When the economy is humming along in a few months, look for interest rates to start creeping up a bit.

So who makes the decisions about interest rates? It involves a few groups of people. Remember Alan Greenspan? He's the guy that sets the big interest rate, the one that the banks use to borrow money from the government. That big interest rate sets the rules for all of the banks as to how much interest they can charge and still make money.

Next, a group of folks in suits at the bank meet and figure out how much they can charge for an interest rate at that time. It's a fine balancing act: charge too much and nobody will come to the bank for a loan, charge too little and the bank will be out of business quick.

The banks will also sniff around and see what the other banks are charging for their loans, then they'll try and have an interest rate a little lower than what everyone else is charging.

Here's a stumper: why are interest rates for savings accounts always so much lower than interest rates for things like loans? Aha, here's a glimpse into how banks make their money. Banks primarily make their dough by loaning money out to people for things like buying a house or a car. But where do they get the money to loan out. Do they just print up as much as they want? No, silly, they have to have money in order to loan money! And where does that money come from? The money that you and everyone else put in the bank, called deposits. The bank has to have a certain amount of money in deposits to be able to loan out a certain amount of money in loans.

So how do they get people to deposit their money? By offering to pay people money for parking their money at the bank! That's interest! So, here's the kicker: the banks can't pay out the same amount of interest as they take in or otherwise they wouldn't make any money. Banks have buildings and employees to pay you know! So, the interest rate paid out for deposits (savings accounts) will always be lower than the interest rates charged for loans. That enables the banks to stay in business!

Did You Know?

Some savings accounts don't pay any interest at all, so make sure you get one that pays you interest!