Image source: Getty Images
The Federal Reserve just did something it hasn’t done since 2023: it raised interest rates. At the end of its Sept. 16 meeting, it hiked its target federal funds rate by a quarter point, moving the range to 3.75% to 4.00%.
For savers like me, that’s genuinely good news. Higher rates mean more interest on cash deposits.
But for borrowers or anyone shopping for a new loan, the news isn’t as rosy.
This rate hike is a complete reversal from expectations heading into 2026, where most people expected the Fed to keep cutting rates. Here’s how it affects your money.
When the Fed raises rates, banks tend to increase the interest rates on savings accounts, money market accounts, and certificates of deposit (CDs).
So if you’ve got cash in savings, you’ll likely earn more interest on it. I have a big emergency fund sitting in a high-yield savings account, and if the interest rate rises, so will the money I earn.
The best high-yield accounts were already paying between 3.50% and 4.00% APY before this decision. Now they’ve got room to rise higher, and I’ll be watching closely.
A Fed rate hike makes borrowing money more expensive. Credit card APRs and rates on home equity lines of credit (HELOCs) go up almost immediately.
If you have a loan with a locked-in interest rate (e.g., a fixed mortgage or most auto loans), you don’t need to worry, because your interest rate won’t change during the loan term.
But anyone with variable-interest-rate debt (like credit card debt) will feel an immediate hit as issuers raise rates. If that’s you, then consider this a nudge to act before rates bite harder.
If you’re in credit card debt, a smart play is a balance transfer card that pauses interest charges for a set amount of time. Higher rates will make it even more important to get out of debt ASAP. You can compare the best balance transfer cards to find the longest interest-free runway.
The simplest move is to make sure your cash is sitting somewhere that earns you the most interest.
The national average savings account pays just 0.38% APY, according to Motley Fool Money research. Meanwhile, top savings accounts pay over 10X that, with the same protections and no monthly fees.
If you like the idea of locking in a high interest rate, an online CD can work well. Just look for shorter terms terms for now, since tying up cash makes less sense when rates could keep climbing.
This might not be the Fed’s last move this year, so staying flexible matters. Watching the savings field is literally my job, and I plan to practice what I preach. If a notably higher yield shows up after this hike, I’ll move my own money to grab it.
Start with the best high-yield savings accounts paying several times the national average.
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
