The Federal Reserve announced its second rate cut of the year on Wednesday. If Wall Street’s forecast of three rate cuts by the end of the year holds true, that means two rate cuts and one to go.
Here’s how the new cycle of lower interest rates will affect deposits, credit and debt.
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2025 was a year of modest income from the deposit account. Another rate cut won’t help.
Your checking account earns only a fraction more than the money under the mattress. The convenience of liquidity limits your earning power.
The national average of interest paid on checking accounts has remained largely unchanged this year at 0.07%. Imagine moving even lower. Is this possible? Yes.
Interest rates on savings accounts are only marginally better, remaining at 0.40%. But savings accounts are for short-term money.
High-yield savings accounts were more efficient for interest payers. Interest is still barely around 4%, with some finance providers slightly above or below.
This is one category where price shopping really pays off. Especially when interest rates are falling.
If you have $10,000 or more to keep aside but are willing to gamble, money market accounts have been convenient but low-paying. Average national payouts remain at 0.59 percent.
A better choice might be a high-yield money market account where interest rates are still close to or slightly above 4%.
In the last month or so, CD prices have increased slightly. A 12-month CD averages 1.68%, but you can find better deals if you’re willing to take the time to hunt them down and move your money online.
The minimum deposit and term will affect your rate.
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And then there are mortgage rates. Let’s throw this question out there: “When will mortgage rates drop to 3%? Quick answer: probably not soon.”
However, mortgage rates have fallen substantially since the end of May and are now at their lowest point in more than a year.
But the Fed’s tapering may not be enough to push them down significantly. Mortgage interest rates are more influenced by the bond market, especially the 10-year Treasury bond. Its yield has bubbled a little more over the past month to just under 4%. This is the bond market’s pricing at the time of the next expected rate cut.
Housing industry analysts with the Mortgage Bankers Association and Fannie Mae predict that mortgage rates will rise by 2026. about 6% will remain.
Interest rates on personal loans have remained close to 12% for almost two years. Advertised interest rates on personal loans now range from 6% to more than 9%, and the Fed’s rate cut could reduce those costs a bit more.
Credit card interest rates affect everyone except those who pay off their balance each month.
Credit card rates have risen from around 15% in 2021. to more than 21% in 2025
Credit card companies stick to high interest, which apparently consumers are still willing to pay. It is possible that two or three rate cuts before the end of the year will lower the prime rate and lower the cost of credit cards.
Tip from Yahoo Finance: The best way to earn lower credit card interest rates right away is to ask. If you’ve been paying regularly and you’ve noticed your credit score is improving, it’s time to call your credit card provider and ask for a lower interest rate.
Stock prices often respond to the Fed’s interest rate actions, but they are only one of many factors that affect the investment climate and stock prices.
If you’re going to manage your investments to match the current environment, keep an eye on broader economic and corporate earnings trends along with interest rates. If you want to stay conservative, fill your portfolio with high-quality stocks that have proven themselves through all economic cycles.
Then wait patiently for long-term growth.