Following encouraging signs that inflation was cooling earlier this year, it actually ticked up again inand again in . With the battle to tame it still fierce, the Federal Reserve raised the benchmark interest rate to a range between 5.25% and 5.50%, the highest it's been in . And that elevated rate is unlikely to drop anytime soon after the Fed elected to keep in their September meeting.
While an elevated interest rate isn't good news for borrowers, there are still some things Americans can do now to shore up their finances. Similarly, there are some steps they should avoid taking while rates are paused in order to limit the financial pain.
3 things to do while interest rates are paused
Here are three smart things to do before the Fed meets again.
Open a CD
are currently approaching 6%, with many to be found in the 5% to . So, you should strongly consider depositing some of your money into one of these accounts now. Whether it's , or more, now is a great time to start earning more interest with a .
Plus, due to the structure of Get started here today., you'll be able to earn that elevated rate until your CD expires, even if rates drop during your term. So don't miss the opportunity to make more interest on your money.
Open a high-yield savings account
also come with elevated interest rates currently, although not as high as the best CDs. Still, they could be a great resource for you now, especially since they come with all of your regular account offers. But rates on these accounts are and subject to change without notice so, if you want to take this route, it makes sense to act promptly to start earning interest at today's high rates.
Lock in a mortgage rate
, which hover around 7%, are no borrower's idea of a bargain. But with interest rates all but guaranteed to rise at least one more time this year, before they lose their window of opportunity. They could always to a much lower rate in years to come. But if they wait too long they could see today's "high" 7% rate become tomorrow's "low" alternative — and they'll need to pay to get it back.
3 things to avoid while interest rates are paused
And, here are three things to avoid while rates are on hold:
Refinancing your mortgage
traditionally offers homeowners a great opportunity to secure a lower interest rate, pay a smaller mortgage payment and condense the lifespan of their mortgage. But today isn't that time.
Mortgage refinance rates are elevated as well — and likely to be significantly higher than the current rate you have. Unless you can somehow secure a lower rate than what you're currently paying — or unless you really want to pay your loan off quicker — you should avoid refinancing your mortgage now.
Using your credit card
of 20.92% earlier this year and have stayed around that mark ever since. So you should be doing all you can to pay cash and avoid using your credit card now. With double-digit interest, this is not a reliable backup funding choice at the moment. Consider everything from to instead.
Keeping your money in a regular savings account
As mentioned above, interest rates on CDs and high-yield savings accounts are the highest they've been in years. Rates for regular savings accounts, however? Not really.
With the average rate on a regular account just 0.45%, you're likely by keeping your money in this type of account. Move some over into a CD or high-yield savings account instead (or ).
The bottom line
It's always a good idea to be judicious about how you spend and save your money, but particularly in today's inflationary environment. Accordingly, you should take advantage of higher interest rates by opening a CD or high-yield savings account and, if you're in the market for a home, lock in a mortgage rate now before they rise higher. On the other hand, you should avoid refinancing your existing mortgage and steer clear of using your credit cards. And, finally, stop keeping your money in a regular savings account, as the rates these come with won't even.
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