Fed leaves rates unchanged. But here are changes you can make to earn more on savings or pay less on debt

By CNN

Published March 19, 2025 2:39 PM

CNN

By Jeanne Sahadi, CNN

(CNN) — The Federal Reserve on Wednesday decided yet again to stand pat on interest rates. Despite the Fed’s inaction, there are still opportunities to maximize the interest you earn on your savings or reduce what you pay on your debts.

Given the Trump administration’s whipsaw tariff policies and its smiting of the United States’ closest allies, many analysts have now reduced their US growth forecasts. So did the Fed, noting in its policy statement Wednesday that it expects weaker growth and higher inflation than previously assumed. However, it also noted “high uncertainty” surrounding the effects of the White House’s actions on the economy. It is continuing to pencil in the likelihood of making two quarter-point cuts this year.

“While the idea of interest rates coming down is appealing to many consumers and businesses, the reason for lower interest rates is very important. We want interest rates to decline because inflation declines, not because of economic weakness,” said Greg McBride, chief financial analyst at Bankrate, in an email. “So be careful what you wish for.”

Either way, you can take steps now to protect your bottom line in the current rate environment.

Your savings

Even though interest rates have been coming down slowly in recent months, you can still get inflation-beating returns for your cash savings, in very easy, low-risk ways.

Online high-yield savings accounts: You will earn virtually nothing on your cash for upcoming expenses and emergencies if you park that money in traditional brick-and-mortar bank savings accounts. The average interest rate on those is just 0.6%, according to Bankrate.

But you can earn north of 4% by depositing that money in an online high-yield savings account at FDIC-insured banks. The average rate this week is 4.14%, per Bankrate, but you can find rates as high as 4.40% or 4.50%. Inflation, by contrast, came in at 2.8% in February.

Certificates of deposit: If you feel comfortable locking up your money for a relatively short period — for example, anywhere from three months to a few years — you might benefit from a bank CD or a CD ladder. Among the variety on offer at Schwab.com this week, the average rates were between 4.15% and 4.45%. Note, though, if you take the money out before the CD term ends, you may pay a penalty.

Interest you earn on CDs is treated as taxable income at the federal, state and local levels.

US Treasuries: A very low-risk way to earn competitive returns in the short run is to invest in short-term Treasury bills, with varying maturities between 4 weeks and 1 year; and in intermediate term Treasury notes, with maturities between two and 10 years.

These are investments backed by the full faith and credit of the United States.

As of Wednesday afternoon, rates on Treasurys with maturities ranging from 3 months to five years were between 4.01% and 4.29%, according to Schwab.com.

Interest earned on Treasuries is exempt from state and local taxes, so may be a good option if you live in a high-tax area. Taxation gets a bit more complicated if you sell a Treasury before it matures, which can trigger a capital gain or loss, on top of any interest income you make.

Money market funds: For Christine Benz, director of personal finance and retirement planning at Morningstar, a federal money market fund with a low-cost provider offers an easy, low-stress way to get the best cash yields on offer.

Money market funds typically invest in short-term, highly liquid assets like Treasuries and bank CDs. The average variable rate on such funds was 4.14% as of Tuesday, according to the Crane 100 Money Fund Index.

Keep in mind, money market funds are not FDIC-insured. But if you purchase one through a registered broker-dealer that is insured through the Securities Investor Protection Corporation, you will be covered for up to $500,000 should your brokerage fail and you can’t recover all your assets when the firm liquidates.

AAA-rated municipal bonds: Another tax-advantaged investment that offers inflation-beating returns are high-quality municipal bonds issued by state and local governments. Rates this week averaged between 2.65% and 3.36% on AAA-rated munis with maturities between three months and five years, according to Schwab.com.

Interest from munis is typically exempt from federal income tax. And it also may be exempt from state income taxes too if you buy one issued by the state where you live.

Your debts

Even if the Fed cuts rates later this year, as many expect, how much of a difference that will make depends on the type of debt you have and the amount you owe.

Credit cards: The average rate on credit cards was 20.09% as of March 12, according to Bankrate. That is less than the 20.35% registered in mid-December, even farther below the record high of 20.79% set in August of 2024. But it is still in nose-bleed territory.

That’s why Matt Schulz, chief consumer finance analyst at Lending Tree, recommends transferring your debt to a 0% balance transfer card if you can. That will buy you up to 18 months of no interest payments, during which time you can make big strides in paying down your principal. If that isn’t an option, try for a lower-rate personal loan.

Or simpler still: Call your credit card issuer and ask for a lower rate. A Lending Tree survey found that strategy works for three-quarters of those who try. And they got their rates knocked down by an average of 6 percentage points. “That’s a really big deal and a far bigger decrease than you’ll ever see from the Fed,” Schulz said in an email.

Home loans: The fixed-rate 30-year mortgage averaged 6.65% for the week ending March 13, according to Freddie Mac. That is down a little from the 6.74% registered in the same period a year ago.

Mortgage rates are tied directly to movement in the 10-year Treasury yield. Should the Fed projections anticipate a weaker economy later this year, that could mean more rate cuts, said Melissa Cohn, regional vice president of William Raveis Mortgage.

If you’re planning to borrow against your home, variable rate home equity lines of credit or fixed-rate home equity loans have average interest rates north of 8%, according to Bankrate.

While that’s not cheap, it is considerably less expensive than incurring credit card debt for a home-related expense, or using an unsecured personal loan, with an average rate north of 12% as of March 12.

But there are a lot of ifs between now and the second half of the year. So your best bet is to shop for the best loan rate.

“Negotiating probably won’t get your rates down to where they were a few years ago, but the savings can still be significant — even tens of thousands of dollars on a mortgage,” Schulz said. “That money you save can then go toward other goals like building an emergency fund, saving for retirement or college or even starting a small business. It is absolutely worth your time.”

If you want to use a HELOC as an emergency lifeline — which you may never tap — the rate may be less of a concern. But ask what costs are associated with it, such as closing costs, minimum withdrawal requirements, annual fees or inactivity fees.

Car loans: Auto loan rates have actually increased a little this year, with the average climbing to 11.3% for used cars in February; and to 7.2% for new cars, according to car site Edmunds.com.

The interest rate you get on a car loan will depend on your credit score and the length of your loan. Typically, the higher your score and the shorter your term, the lower the rate you can secure, per Bankrate.

But given the Trump administration’s intention to impose tariffs on cars and car parts imported to the United States as soon as April — not to mention tariffs on steel and aluminum — getting a car loan may be a harder decision than usual.

If tariffs do go through, expect to pay (and borrow) even more for a car. As it is, the average amount being financed today for a new car is already $41,585, said Jessica Caldwell, head of insights at Edmunds.com. As for the loan rate, automakers will be less likely to offer you lower-rate financial incentives to buy their car because they might not be able to afford it anymore. And, she added, used car prices will rise, too, because demand for them will go up as people seek to avoid prohibitively higher prices on new cars.

If you have an existing loan at a very high rate (think 15% or more, Caldwell said) and your credit score is now much better than when you got the loan, it may be worth it to refinance. But do the math first. That’s because a full percentage point drop in your rate might only save you less than $20 a month on a $35,000 loan, according to Bankrate. And you will have to pay fees to refinance.