The Fed is likely to raise interest rates as inflation persists. What that means for consumers

The Federal Reserve is likely to raise interest rates for the first time since 2023 during its September 16 meeting, according to a 90% likelihood estimate. This could potentially result in higher borrowing costs, negatively impacting those planning to buy homes, refinance mortgages, take out personal loans, or use credit cards.

On the flip side, savers may benefit from a rising interest rate environment. However, traditional savings accounts may not be the best option for earning money, as they currently offer low interest rates of around 0.38%, which are not keeping up with inflation. In light of the upcoming Fed rate hike, savers should consider moving their money into more lucrative account types.

Options include certificate of deposit (CD) accounts, high-yield savings accounts, and money market accounts. CD rates can be as high as 4.50%, offering a significant return compared to traditional savings accounts. High-yield savings accounts may also provide competitive rates, with variable rates that can adjust to market conditions and Fed changes.

Money market accounts, while offering the lowest interest rates among these options, allow for check-writing capabilities which can streamline banking needs. To maximize returns, it is important to shop around for the best rates and consider depositing only the amount you can comfortably keep invested until the account matures, to avoid costly early withdrawal penalties.