Fed up with 'higher for longer' interest rates? Take rate cuts into your own hands with these 3 smart money moves

The proper term in economics for this kind of analysis is: Huh?

Thus the dreaded “higher for longer” interest rate reality prevails. And alas, the three rate cuts the Fed projected for 2024 as recently as March may be history. But if you’ve had enough ire and anger with higher and longer, the good news is that you can sidestep the likes of Powell and the pessimists, and largely control the interest rates you pay to borrow and spend.

How higher for longer foils consumers

In two key areas that most impact consumers, higher for longer might as well translate to higher financial stress and longer-term anxiety.

The housing market may offer the most bracing example of eroded consumer optimism. Those who landed historically low mortgage rates in 2020 and 2021 around 3% truly hit the jackpot and don’t want to sell their homes. Thirty-year mortgages are now hovering close to 7%. This has exacerbated the housing crisis, leaving many would-be buyers on the sidelines.

Food prices have also persisted since the rises during the pandemic, something that has caught the attention of the federal government. During a speech in January, President Joe Biden blasted corporations for practices such as price gouging and “greedflation.”

Three smart money moves

Consumers may not set prices, but they do have control over where their money goes. Here are three smart money moves you can make to tackle elevated rates.

1. Get a grip on your credit cards

If you think interest rates are bad, then look at the typical credit card bill. According to the Consumer Financial Protection Bureau, the average APR on a credit card was 22.8% in late 2023 — almost double the percentage in 2013. Again: That’s not the high but the average.

The good news is that credit card companies want your business, especially if you have a high credit score. Many offer balance transfers, some at 0%, that last a year or more. Typically, you’ll pay a small percentage fee upfront based on your total balance, but, even so, you might have the opportunity to pay off your balance much faster on a new card.

2. Invest

Inflation currently clocks in at an annual rate of 3.3%. But the average annual return of the S&P 500 since 1957 has been 10.41%, according to the Official Data Foundation. Assuming you put in $100 into an S&P 500 index fund a decade ago, which would have had an average annual return of 12.74%, you’d have over $330 today, assuming you reinvested all dividends. In this case, higher for longer would be very good indeed.

3. Shop around on everything

If you’re used to shopping for everything at a place like Whole Foods, now’s the time to consider working in a discount store run — or as the late billionaire Charlie Munger suggested, clipping coupons.

For example, if you think you’re paying too much for car insurance — especially with rates up about 20% year over year, according to the Bureau of Labor Statistics — then take some time to gather quotes and calculate the best cost savings for equivalent coverage.

Personal loans are not created equal, either. Be sure to compare rates and pick a term that cuts those rates even further.