The Federal Open Market Committee (FOMC) is expected to raise the federal funds rate for the first time since July 2023. When the FOMC raises rates to combat high inflation, it increases borrowing costs for consumers and businesses — but it can also mean more attractive returns on CDs and high-yield savings accounts.
When the Fed lowers the target range, borrowing costs tend to fall, making credit cards, auto loans and other kinds of financing more affordable.
With persistent inflation, a rate cut is increasingly unlikely in the near term. But that doesn't mean you should sit on your hands.
"I always try to help my clients build something that works no matter what the Fed does," Don Grant, a CFP at Sabre Wealth Management, told CNBC Select. "The bottom line is the importance of planning — having a financial life that isn't based on what the Fed might or might not do, but one that's designed to weather the storm."
See if a debt relief program is right for you
Tackle high-interest debt
Regardless of whether the Fed raises or lowers its benchmark rate, paying down high-interest debt is always a smart move. Credit card bills are a big culprit, and interest rates on cards are already so high that a small decrease in the target range won't make much difference.
One popular strategy for tackling credit card debt is a balance transfer card with an introductory 0% APR period. This effectively stops the clock, giving you months to pay your bill without accruing additional interest. It's only a wise gambit if you have a plan to pay the full balance by the end of the intro period, though. Otherwise, you'll just be hit with another hefty APR.
The Citi Simplicity® Card has one of the longest interest-free periods on the market, while Chase Freedom Unlimited® includes a welcome bonus and cash-back rewards on everyday spending.
The Citi Simplicity® Card has amazing intro-APR offers and is particularly valuable for balance transfers due to its lower introductory fee.
- Long intro APR offers for balance transfers
- Low intro-fee for balance transfers
- No annual fee
- No rewards
- No welcome bonus
The Chase Freedom Unlimited® is a no-annual-fee card that earns generous cash-back on everyday purchases and a lucrative welcome bonus. Plus, if you pair it with a premium Chase credit card that allows point transfers, you can convert your cash back into flexible travel rewards.
- Users get a high rewards rate and strong welcome bonus
- Purchases and balance transfers receive an intro APR
- No annual fee
- Has a foreign transaction fee
- Few rewarding ongoing benefits
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select's editorial staff.
- Earn a $200 Bonus after you spend $500 on purchases in your first 3 months from account opening
- Enjoy 5% cash back on travel purchased through Chase TravelSM, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more; 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and 1.5% on all other purchases.
- No minimum to redeem for cash back. You can use points to redeem for cash through an account statement credit or an electronic deposit into an eligible Chase account located in the United States!
- Enjoy 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 18.24% - 27.74%.
- No annual fee – You won't have to pay an annual fee for all the great features that come with your Freedom Unlimited® card
- Keep tabs on your credit health, Chase Credit Journey helps you monitor your credit with free access to your latest score, alerts, and more.
- Member FDIC
Balance transfer fee
Intro fee of either $5 or 3% of the amount of each transfer, whichever is greater, in the first 60 days. After that, either $5 or 5% of the amount of each transfer, whichever is greater.
Foreign transaction fee
3% of each transaction in U.S. dollars
If you have several high-interest balances or need more time to pay down your debt, a debt consolidation loan may be a smarter path. Instead of paying multiple creditors, you'll have one monthly payment, ideally with a fixed lower rate.
Achieve accepts borrowers with bad credit (a FICO Score of 620 or less) and approves loans ranging from $5,000 to $50,000 and terms from two to five years. The digital personal finance company offers a rate discount if you agree to send funds directly to your creditors. Achieve also has a debt relief program, with agents who will negotiate with creditors to accept less than the full balance.
If you don't have excellent credit, Achieve is a good option — it accepts borrowers with bad credit, as well as applicants with co-borrowers or co-signers, which can help improve the odds of approval and favorable rates. If you don't need a large loan, however, Achieve's $5,000 loan minimum may mean you need to look elsewhere.
- Works with borrowers with 560 FICO Score.
- Allows co-borrowers.
- Rate discount available for direct creditor pay-off.
- Charges an origination fee.
- Cannot use collateral
- Loans are not available in all states
Maximize your savings
When the Fed raises its benchmark rate, the return on savings accounts usually increases, too. If you have money in a high-yield savings account, you'll already earning more than ten times the national average on traditional savings accounts.
Now could be the time to compare rates and see if another bank has a more attractive annual percentage yield (APY). Look for an account with no monthly fees and no minimum deposit or balance requirement. And make sure there's an easy way to withdraw cash when you need it.
Lock in a fixed-rate loan
It's easier to budget if your monthly obligations are predictable. If you need to borrow or are looking to refinance, opt for a fixed-rate loan. No matter what happens with interest rates, your loan payment will stay the same.
Even if it means being stuck with a slightly higher rate, you'll have peace of mind. In a year, rates could go back up, and you'll be happy you shielded yourself from fluctuations.
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Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority, grounded in relevant training and/or experience. For this story, we interviewed Don Grant, a Certified Financial Planner at Sabre Wealth Management in Wichita, Kansas.
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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice to help them make informed financial decisions. Every personal finance article is based on rigorous reporting by our team of expert writers and editors. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties. We pride ourselves on our journalistic standards and ethics.
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