3 financial moves to make with interest rates still paused

When it comes to making smart financial decisions, timing plays a big role. For much of 2023 and even some of 2022, the timing hasn't been great for borrowers. Inflation and the higher interest rates designed to combat it have exponentially raised the costs of everything from mortgages to personal loans and credit cards. At the same time, savers have benefited from substantial returns on high-yield savings and certificates of deposit (CD) accounts. 

But the economic headwinds are now shifting once again as inflation cooled in November and the Federal Reserve elected to keep the benchmark interest rate unchanged this week. Against this backdrop, there are some timely financial moves that many Americans should consider making now. Below, we'll break down three big financial moves to make with interest rates on pause — and explain why the timing is so important to get right now.

Start by exploring your CD account options here to see how much more you could be earning.

3 financial moves to make with interest rates still paused

Open a CD

Interest rates on CDs in 2020 and 2021 were negligible at barely 1%. However, due to a series of rate hikes over the last two years, the returns on these account types have skyrocketed. It's not difficult to find a CD online now with a rate of 5.5%. Select savers can even open one with a rare 7% rate. 

Those rates will result in big returns for savers, with a $5,000 12-month CD earning $275 (at that 5.5% rate). Obviously, the more you deposit, the more you'll make, and that rate will be locked, allowing your account to grow undisturbed regardless of what goes on in the larger rate climate.

Why you should open a CD now

An interest rate pause — which the Fed has elected to do numerous times now since hiking it to a 22-year high in July — is typically a precursor to an interest rate drop. So the rates you can get on a CD now will likely not be as high as what you could secure if you wait until later in 2024. Many are forecasting a drop in CD rates, especially if the Fed cuts its benchmark interest rate. So don't wait for that happen.

Get started with a high-interest-earning CD here now.

Open a high-yield savings account

High-yield savings accounts operate just like regular savings accounts do, albeit with higher interest rates. While not quite as high as CDs, high-yield savings accounts (particularly those offered by online lenders) come with rates of 4.5% or higher right now. Compared to the meager 0.46% that regular savings accounts are averaging now, you're likely losing money by not transferring some or all of your funds into one of these high-earning accounts.

Why you should open a high-yield savings account now

Similar to CDs, you should open a high-yield savings account now in advance of any potential rate cuts to come. The timing around high-yield savings accounts is particularly critical now, however, because the rates on these accounts are variable and subject to change quickly. So you'll do better by opening an account while rates are still consistently high, as they currently are.

Learn more about your high-yield savings account options.

Pay down your debt

There are multiple ways to pay down your debt, from debt consolidation loans to debt relief programs to popular strategies like debt avalanche, in which you pay off the loan with the highest interest rate first and proceed from there. The key, of course, is to simply get started — and to avoid getting further into debt.

Why you should pay down your debt now

There's never a bad time to pay down your debt, but as interest rates are on hold, you have some breathing room. With interest rates on credit cards around 20% this year you may have dug yourself into a substantial hole, but with rate hikes on hold, you won't dig yourself deeper. That is, of course, if you act now and don't wait to get started.

Learn more about your debt relief options here.

The bottom line

The move the Federal Reserve made this week, or, some would say, lack of move, could be good news for millions of Americans. To take advantage of the rate pause, they should look into locking a CD rate while they're still high and take a similar approach to high-yield savings accounts. Finally, they should take the opportunity to get their debt under control with rates temporarily pegged to where they've been. One thing you shouldn't do is just wait. By doing so you could lose out on some high-interest-earning savings accounts and allow your debt to grow uncontrolled. Instead, take action today and reap the benefits for months and years to come.