3 Money Moves You Need To Make Before Interest Rates Change Again

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The Federal Reserve left interest rates unchanged at its most recent meeting in June. However, policymakers expect two cuts in 2025 and the Fed’s governor has indicated a probable July reduction, provided inflation remains manageable and other economic conditions are met.

If that happens, the dynamic will shift toward lower interest rates, but also lower yields, which will benefit borrowers and impede savers.

You can’t control the Fed’s actions or your bank’s and brokerage’s response. However, you can make the following moves now to benefit from the increasing likelihood of a rate cut instead of falling victim to it after the fact.

Whip Your Credit Into Shape

Nearly all money moves you’re considering will be easier and cheaper to make with good credit. No matter your plans, now is the time to:

• Check your credit reports and score through AnnualCreditReport.com, your bank’s app or platforms like Credit Karma.
• Pay every bill on time. Payment history accounts for 35% of your FICO score, the most important factor. 
• Pay down existing debt to lower your credit utilization ratio. Amounts owed is the No. 2 most consequential factor, accounting for 30% of your score.

Plan and Prepare To Borrow

Over the last few years, millions of Americans put off financing big-ticket purchases like homes, cars and renovations because the Fed’s rate hikes made borrowing expensive, which was precisely the economy-cooling outcome its anti-inflationary actions were designed to produce.

If rates fall, competition to borrow is sure to rise.

Assuming your credit is already in good shape, authorities like Ameris Bank recommend getting ahead of potential rate changes now so you’ll be ready to apply for loans if you plan to finance a major purchase or expense.

• Reevaluate your finances, income, expenses, savings and budget.
• Create a savings plan for down payments, closing costs, sales tax, registration or title fees and any other upfront expenses.  
• Research the full cost of the purchase, including long-term ownership expenses, finance charges and maintenance.
• Determine the best way to borrow, e.g., variable-rate versus fixed-rate loans and secured versus unsecured loans.

Lock In High Yields Before They Fall

If your cash has been compounding quickly with strong APYs in a high-yield savings account, you should prepare for the good times to stop rolling if the Fed cuts interest rates. However, you can extend your run by locking in today’s more favorable yields with: 

• Certificates of deposit (CDs) — and if you don’t want to tie up too much of your savings for an extended period at once, consider CD laddering, a tiered-term strategy that provides greater flexibility and liquidity. 
• Fixed-rate municipal or corporate bonds
• Fixed-rate Treasuries
• Guaranteed investment contracts (GICs)
• Multi-year guaranteed annuities (MYGA)

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