How to Maximize Savings and Minimize Debt After Fed Holds Rates Steady

The Federal Reserve has once again decided to hold its benchmark interest rate steady — the fourth meeting in a row without a change. While this may frustrate borrowers hoping for lower rates, it presents a golden opportunity for savers to earn more on their money.

With inflation hovering at 2.4% in May, you can still outpace it with smart choices. High-yield savings accounts at online banks are currently offering between 3.6% and 4.3%, far above the national average of 0.38%. Money market funds are also delivering solid yields, with an average of 4.10% — though they’re not FDIC insured.

Certificates of deposit (CDs) and U.S. Treasuries are also worth considering. Brokered CDs through firms like Schwab offer returns between 4.35% and 4.5%, while Treasuries with similar durations yield up to 4.36%. For those focused on long-term inflation protection, Treasury Inflation-Protected Securities (TIPS) adjust in value alongside consumer prices, helping preserve purchasing power.

Municipal bonds (especially AAA-rated ones) are another option, offering federal tax-exempt interest — and potentially state and local tax breaks, too.

However, for borrowers, the news is less encouraging. Average credit card interest rates remain above 20%, mortgage rates are near 6.81%, and home equity lines of credit (HELOCs) hover above 8%. Car loans, too, are costly — with new car loan APRs around 7.3% and used car rates around 11%.

Experts advise borrowers to shop around aggressively, improve credit scores, and keep loan amounts as low as possible. Zero-interest balance transfer cards and trading in your car could provide financial breathing room.

While investors may be eager for rate cuts later this year, analysts warn that such a move could signal economic trouble rather than progress on inflation. Until then, taking advantage of today’s high-yield, low-risk savings options may be the best strategy for financial stability.

Credit: CNN Newsource
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