Following a halt in interest rate hikes in June, all signs are pointing to a resumption in increases when the Federal Reserve meets again next week. While the benchmark rate currently falls between 5% and 5.25%, most experts are predicting at least a slight increase on top of that. Higher rates make everything from mortgage purchasing to mortgage refinancing to credit card use more expensive, leaving many Americans with difficult choices and limited options.
That said, there are some ways to make higher interest rates work for you. And with a potential decrease in rates unlikely any time soon, now may be the best time to act. Start by exploring today’s top high-yield savings accounts to see how much more interest you could be earning.
3 ways to make high interest rates work for you
Here are three easy ways Americans can take advantage of today’s elevated rates.
Open a high-yield savings account
If you have your money in a regular savings account currently, then you’re losing money — or making very little of it. That’s because interest rates on regular accounts are 0.42%, according to the FDIC. Compare that to the interest you could be earning with a high-yield savings account.
These types of accounts come with rates exponentially higher than what’s available with a regular savings account. You can easily find accounts with 4.5% APY or higher. Some are offering 11 times the national rate. So do your research, shop around and move your money into a high-yield savings account now to start earning more money.
Open a CD
If the interest rate accompanying a high-yield savings account is attractive to you now, then you’ll also want to explore your certificate of deposit (CD) options. These accounts often come with higher rates than high-yield savings accounts, although you’ll need to leave your money in the account for the full term (or risk being penalized).
CD rates are also in the 4% to 5% range and they’re likely to go up a bit further following the Fed’s next rate bump. It pays, however, to shop around and compare rates and terms, as many short-term CDs are actually offering higher rates currently than long-term CDs are (a direct reversal from years past).
Get started with a CD here now.
Consider a home equity loan
Current mortgage rates have discouraged buyers from making a purchase and current owners from refinancing. Fortunately, home values have increased in many parts of the country, leaving many owners with significant sums of equity to use as they see fit. By using a home equity loan or home equity line of credit (HELOC), owners can renovate and repair their existing home, often at much lower interest rates than if they had used alternative funding options, like credit cards and personal loans.
Lower interest rates and improved surroundings aren’t the only benefits of using a home equity loan, however. If used for eligible improvements, borrowers may also be able to deduct the interest they paid on the loan from their taxes at the end of the year. While your options for moving and refinancing may be limited, a home equity loan could be a great way to circumvent the high interest rate climate.
Explore your home equity loan options here to learn more.
The bottom line
Higher interest rates don’t have to be all bad. In fact, there are ways savers can make more by simply moving their money into different sorts of accounts. They can also skip buying a new home or refinancing their existing one and instead use their accumulated home equity to renovate, repair and improve their house or apartment. With rates expected to rise within days, now could be a great time to make these three moves.