by Maurie Backman | July 28, 2021
Many or all of the products here are from our partners. We may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
Interest rates won't stay where they are forever. Here's what to know.
The Federal Reserve has kept interest rates near zero to help spur an economic recovery in the wake of the pandemic. In March, the Fed affirmed its plan to stick to near-zero interest rates. But this week, it changed course and said it expects to raise interest rates in 2023. And that could impact people in a number of ways.
Tips and tricks from the experts delivered straight to your inbox that could help you save thousands of dollars. Sign up now for free access to our Personal Finance Boot Camp.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
To be clear, the Fed doesn't set consumer interest rates. Rather, it establishes the federal funds rate -- the rate banks charge one another for short-term borrowing. But the Fed's policies can impact consumer rates, too.
Right now, for example, savings account interest rates are abysmally low, and people are earning little money on the cash they have socked away. At the same time, personal loan interest rates are lower, which means it's cheaper to borrow affordably. Mortgage rates have also been lower, making it less expensive for buyers to finance home purchases.
Though the Fed isn't planning to raise interest rates for a couple of years, it could pay to make certain moves sooner rather than later, given where consumer interest rates are today.
First, if you have money in a certificate of deposit that's about to mature, consider stashing that money in savings -- right now, savings account rates and CD rates are comparable. But by 2023, CD rates could climb, making a CD a smarter choice. If you prefer keeping the money in a CD instead of savings, choose a six-month or one-year CD. Don't tie up your money in a new five-year CD -- if rates rise, you'll be stuck with the rate you lock in today.
Similarly, if you own a home, you may want to refinance your mortgage. Refinance rates, like purchase mortgage rates, are attractive right now, and if you swap your existing home loan for a new one, you might lower your monthly payments substantially and pay less interest over your repayment period.
Along these lines, you may want to do a cash-out refinance (borrowing more than your existing mortgage balance) to pay off other debt, like a credit card balance. Or, you might look into a personal loan, since rates are lower now. If you use a personal loan to pay off credit card debt, you could save yourself a lot on interest.
We don't know exactly how consumer interest rates will fluctuate over the next few years, but it's fair to expect them to rise. Make sure you capitalize on low interest rates for borrowing while you can. At the same time, don't lock yourself into a CD, so you're ready to benefit if bank account rates improve.
If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.