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Top money moves ahead of a Fed rate cut, according to experts

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Fed Chair Powell indicates interest rate cuts ahead: 'The time has come for policy to adjust'

Last week, Federal Reserve Chair Jerome Powell all but confirmed that an interest rate cut is coming soon.

“The time has come for policy to adjust,” the central bank leader said in his keynote address at the Fed’s annual retreat in Jackson Hole, Wyoming.

For Americans struggling to keep up with sky-high interest charges, a likely quarter-point cut in September may bring some welcome relief — especially with the right preparation. (A more aggressive half-point move has a roughly a 1-in-3 chance of happening, according to the CME’s FedWatch measure of futures market pricing.)

“If you are a consumer, now is the time to say: ‘What does my spending look like? Where would my money grow the most and what options do I have?'” said Leslie Tayne, an attorney specializing in debt relief at Tayne Law in New York and author of “Life & Debt.”

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Currently, the federal funds rate is at the highest level in two decades, in a range of 5.25% to 5.50%.

If the Fed cuts rates in September, as expected, it would mark the first time officials lowered its benchmark in more than four years, when they slashed them to near zero at the beginning of the Covid-19 pandemic.

“From a consumer perspective, it’s important to note that lower interest rates will be a gradual process,” said Ted Rossman, senior industry analyst at Bankrate.com. “The trip down is likely to be much slower than the series of interest rate hikes which quickly pushed the federal funds rate higher by 5.25 percentage points in 2022 and 2023.”

Here are five ways to prepare for this policy shift:

1. Strategize paying down credit card debt

People shop at a store in Brooklyn on August 14, 2024 in New York City. 

Spencer Platt | Getty Images

With a rate cut, the prime rate lowers, too, and the interest rates on variable-rate debt — most notably credit cards — are likely to follow, reducing your monthly payments. But even then, APRs will only ease off extremely high levels.

For example, the average interest rate on a new credit card today is nearly 25%, according to LendingTree data. At that rate, if you pay $250 per month on a card with a $5,000 balance, it will cost you more than $1,500 in interest and take 27 months to pay off.

If the central bank cuts rates by a quarter point, you’ll save $21 altogether and be able to pay off the balance one month faster. “That’s not nothing, but it is far less than what you could save with a 0% balance transfer credit card,” said Matt Schulz, chief credit analyst at LendingTree.

Rather than wait for a small adjustment in the months ahead, borrowers could switch now to a zero-interest balance transfer credit card or consolidate and pay off high-interest credit cards with a lower-rate personal loan, Tayne said.

2. Lock in a high-yield savings rate

Since rates on online savings accounts, money market accounts and certificates of deposit are all poised to go down, experts say this is the time to lock in some of the highest returns in decades.

For now, top-yielding online savings accounts are paying more than 5% — well above the rate of inflation.

Although those rates will fall once the central bank lowers its benchmark, a typical saver with about $8,000 in a checking or savings account could earn an additional $200 a year by moving that money into a high-yield account that earns an interest rate of 2.5% or more, according to a recent survey by Santander Bank in June. The majority of Americans keep their savings in traditional accounts, Santander found, which FDIC data shows are currently paying 0.46%, on average.

Alternatively, “now is a great time to lock in the most competitive CD yields at a level that is well ahead of targeted inflation,” said Greg McBride, Bankrate’s chief financial analyst. “There is no sense in holding out for better returns later.”

Currently, a top-yielding one-year CD pays more than 5.3%, according to Bankrate, as good as a high-yield savings account.

3. Consider the right time to finance a big purchase

If you’re planning a major purchase, like a home or car, then it may pay to wait, since lower interest rates could reduce the cost of financing down the road.

“Timing your purchase to coincide with lower rates can save money over the life of the loan,” Tayne said.

Although mortgage rates are fixed and tied to Treasury yields and the economy, they’ve already started to come down from recent highs, largely due to the prospect of a Fed-induced economic slowdown. The average rate for a 30-year, fixed-rate mortgage is now just under 6.5%, according to Freddie Mac.

Compared with a recent high of 7.22% in May, today’s lower rate on a $350,000 loan would result in a savings of $171 a month, or $2,052 a year and $61,560 over the lifetime of the loan, according to calculations by Jacob Channel, senior economic analyst at LendingTree.

However, going forward, lower mortgage rates could also boost homebuying demand, which would push prices higher, McBride said. “If lower mortgage rates lead to a surge in prices, that’s going to offset the affordability benefit for would-be buyers.”

What exactly will happen in the housing market “is up in the air” depending on how much mortgage rates decline in the latter half of the year and the level of supply, according to Channel.

“Timing the market is virtually impossible,” he said. 

4. Assess the right time to refinance

For those struggling with existing debt, there may be more options for refinancing once rates drop.

Private student loans, for example, tend to have a variable rate tied to the prime, Treasury bill or another rate index, which means once the Fed starts cutting interest rates, the rates on those private student loans will come down as well.

Eventually, borrowers with existing variable-rate private student loans may also be able to refinance into a less-expensive fixed-rate loan, according to higher education expert Mark Kantrowitz. 

Currently, the fixed rates on a private refinance are as low as 5% and as high as 11%, he said.

However, refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, he added, “such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.” Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

Be mindful of potential loan-term extensions, cautioned David Peters, founder of Peters Professional Education in Richmond, Virginia. “Consider maintaining your original payment after refinancing to shave as much principal off as possible without changing your out-of-pocket cash flow,” he said.

Similar considerations may also apply for home and auto loan refinancing opportunities, depending in part on your existing rate.

5. Perfect your credit score

Those with better credit could already qualify for a lower interest rate.

When it comes to auto loans, for instance, there’s no question inflation has hit financing costs — and vehicle prices — hard. The average rate on a five-year new car loan is now nearly 8%, according to Bankrate.

But in this case, “the financing is one variable, and it’s frankly one of the smaller variables,” McBride said. For example, a reduction of a quarter percentage point in rates on a $35,000, five-year loan is $4 a month, he calculated.

Here, and in many other situations, as well, consumers would benefit more from paying down revolving debt and improving their credit scores, which could pave the way to even better loan terms, McBride said.

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The U.S. government is phasing out paper checks. What that means for you

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Checks are printed at the U.S. Treasury Philadelphia Finance Center in Philadelphia, Pennsylvania.

Dennis Brack | Bloomberg | Getty Images

Paper checks were already dying a slow death.

President Donald Trump on March 25 signed an executive order mandating that all federal departments and agencies end their use of paper checks and switch to electronic payments by Sept. 30.

The U.S. Treasury now has about six months to phase out the paper checks it uses for various purposes, including tax refunds and the roughly 456,000 Social Security checks that are mailed monthly.

The executive order will “modernize how the government handles money, switching from old-fashioned paper-based payments to fast, secure electronic payments,” the administration said in a fact sheet on the order.

“Paper-based payments, such as checks and money orders, impose unnecessary costs, delays, and risks of fraud, lost payments, theft, and inefficiencies,” the White House said.

Under the order, all government departments and agencies will have to issue disbursements via electronic transfer methods, like direct deposit, debit or credit card payments, digital wallets and real-time transfers.

Consumers will have until then to set up an online bank account or some form of digital payment option, with limited exceptions for those who do not have access to banking services or electronic payment systems.

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Banking groups applauded the move.

“We welcome President Trump’s executive order mandating that the federal government cease issuing paper checks for all disbursements, including government benefits and tax refunds,” Rob Nichols, president and CEO of the American Bankers Association said in a statement. “Despite a continued decline in business and consumer use of checks, check fraud has continued to rise.”

Check fraud, mail theft and identity scams have exploded in recent years, according to Haywood Talcove, CEO of LexisNexis Risk Solutions’ government group. A 2024 report from the U.S. Government Accountability Office estimated that the federal government could lose between $233 billion and $521 billion a year to fraud.

“Checks aren’t safe anymore,” Talcove said. “It’s where the criminal groups are feasting.”

As part of the executive order, payments made to the federal government — such as fees, fines, loans and tax refunds — must also be made electronically.

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With significant advancements in security — thanks to authentication, monitoring and data encryption — retailers’ and consumers’ shift to contactless and digital payment methods will only continue to grow, accelerating the move toward a “check zero” world, according to Scott Anchin, vice president of operational risk and payments policy for the Independent Community Bankers of America. 

However, there are still certain groups that rely on paper checks, including some of the nation’s most vulnerable populations such as social security beneficiaries and those who receive rental assistance, or Temporary Assistance for Needy Families.

Check writers generally skew older and are likely at the margins of the banking community, according to Anchin. Americans over the age of 55 were most likely to write checks every month, the survey from GoBankingRates found.

But these groups are also most at risk of being targeted by scammers, Talcove said. “The elderly are significantly disadvantaged by the antiquated systems and you have to get them into digital payments.”

The death of checks

Although checks, as we know them today, first originated in the 11th century, they didn’t become mainstream until the early 20th century following the Federal Reserve Act of 1913, according to a historical survey by the Federal Reserve Bank of Atlanta.

But back then, “everyday people didn’t have checking accounts, that was for rich people,” Stephen Quinn, professor of economics at Texas Christian University and co-author of the Atlanta Fed’s report, previously told CNBC. “It wasn’t until after World War II that checking accounts were a common thing.”

Postwar prosperity greatly expanded the use of checking accounts to middle-class households, making checks the most widely used noncash payment method in the U.S., according to the Atlanta Fed.

Personal checks continued to gain steam until the mid-1990s, when credit and debit cards largely took over. Since 2000, check-writing has plummeted by nearly 75%, according to the U.S. Federal Reserve Board of Governors.

Despite the rapid decline, “a form of payment with a thousand-year history is unlikely to vanish overnight,” the Atlanta Fed report said.

And yet, today’s young adults are increasingly eschewing the traditional banking and credit infrastructure altogether in favor of peer-to-peer payment apps.

Quinn said his students rely almost exclusively on digital wallet payments such as Apple Pay, Venmo and Zelle — hardly anyone carries cash, and it’s likely that few even know how to write a check.

Mobile payment apps have become de facto bank accounts even though, unlike banks or credit unions, these financial services are not FDIC-insured.

Still, there remains a place for personal checks, Quinn said.

“The paper check might linger where it began, at the high end — for large one-off payments,” he said, such as charitable donations or real estate transactions. “In this way, checks might hold on for some time.”

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Social Security changes may impact customer service, benefit payments

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A Social Security Administration (SSA) office in Washington, DC, March 26, 2025. 

Saul Loeb | Afp | Getty Images

Fast-moving changes at the Social Security Administration by the Trump administration’s so-called Department of Government Efficiency have prompted concerns that it may be more difficult for beneficiaries to access the agency’s services.

Some experts are raising concerns that efforts to update the agency’s systems could impact the continuity of benefits.

“Now I’m concerned that benefits could get disrupted,” said Jason Fichtner, a former deputy commissioner at the Social Security Administration who was appointed by President George W. Bush.

Recent changes that have been announced by the agency are cause for concern, experts including Fichtner say.

President Donald Trump has repeatedly vowed not to touch Social Security benefits. Yet recent changes could make it more difficult for eligible Americans to access benefits.

The SSA under the Trump administration has moved to eliminate 7,000 Social Security employees and close six regional offices, Fichtner and Kathleen Romig, a former Social Security Administration senior official, wrote in a recent op-ed. Romig is the director of Social Security and disability policy at the Center on Budget and Policy Priorities.

The cuts will affect the service Americans receive when they either visit Social Security’s website, which has experienced glitches; call its 800 number, which has long wait times; or visit a field office, which can be crowded, they wrote.

That may make it more difficult for eligible Americans to claim benefits, particularly those with disabilities, who may run the risk of dying before receiving the money for which they are eligible.

The Social Security Administration is in crisis, and people’s benefits are at risk,” Fichtner and Romig wrote.

‘You have to understand the complexity of the programs’

Fichtner said his worries are elevated following reports that the Social Security Administration under DOGE plans to move “tens of millions of lines of code” written in a programming language known as COBOL within an accelerated time frame of a few months.

“If you start messing with the system’s code, that could impact those who are currently getting benefits now, and that’s a new front-and-center concern,” said Fichtner, who is a senior fellow at the National Academy of Social Insurance and executive director at the Retirement Income Institute at the Alliance for Lifetime Income.

While the Social Security’s systems could use an upgrade, projects of this size are typically handled over a period of years, not months, Fichtner said. Moreover, they typically start out with smaller tests, such as with one state, to identify bugs or other issues, before expanding regionally and then nationally, he said.

“You can’t just flip a switch one night and expect to be able to upgrade,” Fichtner said. “It takes due diligence, and you have to understand the complexity of the programs.”

Before the COBOL transition reports, Fichtner said he had not been worried about benefit interruptions, though he had been concerned that changes at the agency may impact customer service and that applicants for benefits may see delays.

“There is no validity to these reports,” a Social Security Administration spokesperson told CNBC via email.

In an email statement, the White House also said, “There is no validity to these reports.”

Bigger reforms should be focus, experts say

As DOGE seeks to eliminate fraud at the Social Security Administration, some experts say the focus is misplaced.

To that point, focusing on the agency’s administrative side takes away from the bigger issue the program faces of the looming depletion of the trust funds it uses to help pay benefits, experts say.

DOGE may have good intentions to make the Social Security Administration more efficient, but its actions may not “meaningfully change the financial trajectory of the program,” said Romina Boccia, director of budget and entitlement policy at the Cato Institute, a libertarian think tank.

If DOGE makes changes that have to be reversed, that could get in the way of the benefit reforms that Congress must also consider before a projected 2033 trust fund depletion date, she said.

“Current erratic actions have the potential to undermine those much more important, bigger reforms in a misguided attempt to root out very small levels of fraud,” Boccia said.

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The Social Security’s trustees in 2024 projected the program’s combined retirement and disability trust funds may last until 2035, at which point just 83% of benefits will be payable unless Congress finds a way to fix the situation sooner.

Those 2024 projections also found the retirement trust fund on its own faces a sooner depletion date of 2033, when 79% of benefits may be payable. A new law that provides more generous benefits for certain public pensioners is expected to move the projected depletion dates closer.

Because the Social Security Administration’s administrative budget is less than 1% of outlays, it’s not the best area to focus on to make the program more cost-effective and efficient, said Charles Blahous, a former public trustee for Social Security and Medicare and deputy director of President George W. Bush’s National Economic Council.

“There’s just not enough money there to make serious headway,” said Blahous, a senior research strategist at George Mason University’s Mercatus Center.

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How entrepreneurial military spouses build retirement security

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fstop123 | E+ | Getty Images

It’s scary enough for individuals to take a chance on themselves and start their own business, but the spouses of military servicemembers are often grappling with a unique set of hurdles on the journey toward entrepreneurship.

Certified financial planner Adrienne Ross can speak to that personally. She and her now-retired Marine Corps husband were constantly on the move during his military career, and that made the complicated process of earning her bachelor’s degree a yearslong process.

“We would move, and it would be like going through the process all over again,” recalled Ross, a partner at Clear Insight Wealth Management in Spokane, Wash. “I went to multiple colleges to complete a degree, and we were never in one place long enough.”

She ultimately completed her education at the University of Illinois Springfield through an online program while she and her family were living outside the U.S., but the ordeal informed her decision to become a financial planner, hang out her own shingle and work with military families toward financial stability.

“The client base I focused on serving is military families because I understand what it’s like to move all the time and have so many disruptions to your work life and personal life – and how it impacts your financial journey as well,” she said.

Unique advantages and disadvantages

The itinerant lifestyle that Ross grappled with as she worked on her degree can be a handicap for military spouses who are trying to build out a business.

“The number one additional hurdle would be things like business licensing,” said Bill Sweet, CFP and CFO at Ritholtz Wealth Management and U.S. Army combat veteran. “Each state and municipality will have its own licensing requirements, and there isn’t always reciprocity.” That’s often the case for teachers and nurses, for example.

“If you’re moving around every two to three years to follow your spouse, it becomes difficult to redo your nursing license on a business income,” he said. “But when it comes to things like retirement savings, I think there are a lot of neat things you can do.”

Servicemembers can enroll in the federal government’s Thrift Savings Plan, for instance, which offers benefits and savings like the 401(k) plans available to private-sector employees.

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A spousal individual retirement account might be a good starting point for military spouses, even if they themselves aren’t yet employed. The servicemember can sock away up to $7,000 in 2025 ($8,000 for those age 50 and older) into the spouse’s IRA. To make this work, the married couple must be filing jointly.

“Most families today live on two incomes, so they should plan on retiring on two incomes,” said John Power, CFP at Power Plans in Walpole, Mass. “Every military spouse should have a spousal IRA. The IRS allows you to deduct from your income to contribute to your spouse’s IRA – and if you can do that, you should do that.”

While the spousal IRA is enough to start stashing money away for retirement, entrepreneurs can take other steps to beef up their savings as their business grows.

In Ross’s case, she started out with a Roth IRA – a retirement account where contributions are made on an after-tax basis but grow tax free and, most importantly, are free of tax upon withdrawal. “I love Roth IRAs,” she said. “They are super flexible, available to many people and very attainable, especially if you’re getting started with a small business.”

Roth IRA contribution limits are capped at $7,000 for those under 50 ($8,000 for those 50 and over). Be aware that if you have both a traditional IRA and a Roth IRA, the contribution limit of $7,000 is an aggregate amount. The upshot of Roth IRAs? You don’t need a whole lot of money to start saving in the first place.

“You can start with as little as $50 a month, and in most places fees are very reasonable,” Ross said.

Graduating to more complex savings options

When Ross’s business grew, she shifted into using a simplified employee pension plan, or SEP IRA, for retirement savings. These plans are specifically for small businesses, and they don’t come with the hefty start-up costs you might see in conventional retirement plans.

The upshot for young businesses is that the annual contributions to SEP IRAs are flexible, which can be handy in the early years when cash flow is inconsistent. Generally, these accounts allow for a contribution of up to 25% of an employee’s pay (or up to $70,000 in 2025). It should be noted that participant loans are not allowed under these arrangements, however.

“In terms of planning your own retirement, treat the business like a job and treat yourself as an employee of that business,” said Sean Gillespie, president of Redeployment Wealth Strategies in Virginia Beach, Va. “Take the proceeds and feed your retirement the way you would if you were [a W-2 employee] working for someone else.”

Eventually, Ross and Gillespie partnered with another advisor to form a registered investment advisory firm called Apforia. Because of this arrangement, they had the assets and the economy of scale needed to start a 401(k) plan.

In 2025, individuals can put away up to $23,500 in a 401(k) plan, plus $7,500 if they’re 50 and over (or up to an additional $11,250 for employees aged 60 to 63).

It’s OK to seek help

Military spouses seeking to make the leap into entrepreneurship should leverage their connections to peers.

“Having that connection to other military spouses who have their own businesses was really important,” said Ross. “They have that same understanding of what it’s like to be living a nomadic life and trying to build a business or career for yourself despite all of that.”

They should also invest in themselves by calling in a financial planner or an accountant who can help them build a resilient and healthy business.

“Ultimately, I think working with a professional will pay off, and being proactive,” said Sweet. “Pay a little out of pocket and talk to a CPA or CFP about setting up a business.”

JOIN the CNBC CFP® Circle for Mission: Money Management on April 1. This exclusive virtual roundtable, held in partnership with The Association of Military Spouse Entrepreneurs, will focus on how to best manage money effectively. Get your free ticket today!

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