The Fed keeps rates close to zero – this is how you can take advantage of it

People walk past the Federal Reserve building on March 19, 2021 in Washington, DC.

Olivier Douliery | AFP | Getty Images

But with millions of people still unemployed and financially troubled, the Fed said it would stick to its policies for the time being.

“Economic growth is in full swing, but with 6% unemployment, uneven household recovery and more than 2 million fewer employed Americans than before the outbreak, the Fed is keeping the throttle wide open,” said Greg McBride. Chief Financial Analyst at

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Although the federal funds rate that banks charge each other for short-term borrowing isn’t the rate consumers pay, the Fed’s actions are still affecting the credit and savings rates they see every day.

The Fed’s historically low lending rates have made it easier to borrow – while also making it less desirable to hoard cash.

Here’s how consumers can take advantage of the Fed’s zero interest rate policy while it lasts.

Refinance a mortgage

The economy, the Fed, and inflation all have some impact on long-term fixed mortgage rates, which are generally tied to US Treasury note yields.

Currently, the average 30-year fixed-rate home mortgage is 3.21%, slightly above the record low, according to Bankrate.

“The Fed cut mortgage rates in 2020,” said Tendayi Kapfidze, chief economist at LendingTree, an online credit market. Although interest rates are now rising, they are still low enough to support the housing market, he added.

“If you haven’t refinanced yet, there is still time to do it,” said McBride.

Consumers can save money by refinancing existing debts at a lower interest rate. In fact, this may be the best way to free up cash, McBride said.

to pay off a debt

Most credit cards have a floating rate, which means they have a direct link to the Fed’s benchmark interest rate.

Since the central bank cut its key interest rate to close to zero last year, credit card rates have hit an average of almost 16%, according to

Still, other short-term lending rates are even lower now. “Consider moving to a more affordable loan such as using a personal loan to consolidate and repay high-yielding credit cards,” advised Kapfidze.

“You can significantly reduce your total debt costs.”

For those struggling with college debt, this is a great time to keep track of payments, despite the fact that the CARES law paused federal student loan repayments until September, McBride said.

While interest is suspended, “every dollar will help lower the balance.”

Increase the emergency savings

However, low interest rates are not good for everyone, especially savers. However, the government’s Covid aid payments offer a rare opportunity to boost your financial standing.

“Between stimulus payments and tax refunds, this is a great opportunity to significantly upgrade your emergency pillow,” said McBride.

“One of the best things Americans can do right now is build their savings while reducing their debt at the same time,” said Matt Schulz, chief credit analyst at LendingTree.

“These savings are the best way to ensure that you don’t get back into debt right after paying off your credit card.”

While the Fed has no direct control over deposit rates, they tend to correlate with changes in federal policy rates and, as a result, savers make next to nothing on their cash.

One of the best things Americans can do right now is build their savings while reducing their debt.

Matt Schulz

Chief Credit Analyst for LendingTree

According to the Federal Deposit Insurance Corp. the average savings account rate at some of the largest retail banks is just 0.06% or less.

However, thanks in part to lower overheads, the average online savings account rate is at least three times higher than the average rate at a traditional brick and mortar bank.

“Online savings accounts remain a solid option for short-term savings and emergency funds,” said Ken Tumin, founder of

In fact, the pandemic has even given digital banks a boost, which has led to more competition for better interest rates.

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