In response to the global pandemic, the Federal Reserve cut its rates twice in the month of March. Currently, the rate sits at 0.00% to 0.25% and the Fed has said that it doesn’t expect rates to change until at least 2021.

The Fed rate cuts have had a downward impact on the annual percentage yield (APY) that many banks are able (or willing) to offer on their savings accounts. If your savings account wasn’t already paying you next to nothing, there’s a strong chance that it is now.

If you’ve worked hard to put money aside, it’s only reasonable to want to earn a decent return. But what can you do with your money when interest rates are low?

In podcast episode 336, Rob discusses where you should put your emergency fund, savings account and bond fund and talks about what on earth is happening with interest rates.

And below, you’ll find five ideas to help you maximize your return.

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1. Refinance Your Mortgage or Student Loans

In addition to the Fed rate changes, the financial uncertainty surrounding the coronavirus pandemic has also caused rates and yields to drop on both the 10-Year Treasury Note and the LIBOR rate. That’s a big deal because mortgage and private student loan rates are heavily influenced by these two benchmarks.

As a result, it’s never been a better time to consider refinancing either of these two major loans. For example, in May 2019, the average rate for 30-year mortgages was near 4.2%, according to the Federal Reserve. However, as of writing, the rate now sits over a full percentage point lower at 2.93%.

Even if you have to pay some closing costs to refinance your mortgage, you could see a far better return on that money by securing a lower interest rate on your mortgage than your money is earning in a low-yield savings account.

Many student loan refinancing companies are also offering low rates right now. Fixed rates currently start at around 3% for borrowers with strong credit scores.

While refinancing private student loans to a lower rate is a bit of a no-brainer decision, federal student loan refinancing will cause you to lose eligibility for various benefits like income-based repayment or federal forgiveness programs. So you’ll want to carefully weigh the pros and cons before refinancing your federal student loans.

2. Consolidate Your High-Interest Debt

As already highlighted above, while low-interest-rate environments can hurt savers, they can present a great opportunity for borrowers to reduce their interest costs. For example, if you have high-interest credit card debt, this might be a great time to consolidate it to a 0% APR card or a low-interest unsecured personal loan.

Currently, the average credit card interest rate is 14.52% while the average personal loan comes with an interest rate of 9.50%. So if you have a good credit score and you need more time to pay down your debt than a 0% APR promo period provides (typically 18 months or less), an unsecured personal installment loan could be a strong option. These are the best personal loan rates.

It’s important to understand, however, that consolidating unsecured debt (like credit card debt) into a secured form of debt (like a home equity loan or HELOC) can be dangerous.

While credit card debt can feel overwhelming, your card issuer generally won’t be able to take away your home. But by moving that credit card debt over to a loan secured by your home, you also put your home at risk should you miss a payment or default.

3. Open a High-Yield Savings Account

The fact that the yield on average savings accounts has recently gone from bad to worse should really only make an even stronger case for opening a high-yield account.

While high-yield savings accounts have been negatively affected by Fed rate cuts as well, many of them are still offering rates well above the average. The national average savings account interest rate is 0.06% basically nil. However, many of the best high-yield savings accounts today are still offering annual APYs at around 1%.

4. Build a CD ladder

With a CD, you’ll typically be required to keep the money in the account until its maturity date (which can be months or years down the road) to avoid any early withdrawal penalties (EWPs). In exchange, banks offer fixed rates on their CDs that are often higher than their savings accounts.

With interest rates currently near all-time lows, locking yourself into a long-term CD might seem like a dangerous move. But by building a CD ladder, you can reduce some of that risk. With a CD ladder, you split up your overall deposit into multiple CDs with different maturity dates. As each short-term CD matures, you can choose to withdraw the money or renew with a long-term CD.

If interest rates go up, you’ll have the option to take advantage each time one of your short-term CDs matures. But if rates move in the other direction, a portion of your money will still be locked into long-term CDs paying higher rates.

While CD ladders provide more flexibility than individual CDs, they’re still less liquid than savings accounts. For this reason, you should avoid using a CD ladder for your emergency fund. But it could be a great place to stash money that you’re saving for future large purchases like a home or car.

See the best CD rates available today!

5. Invest in Dividend-Paying Stocks Or Funds

In another article, we go into detail discussing dividend investing as an alternative to savings accounts. The core idea is that by investing in stocks or funds that pay a dividend, you’ll have a consistent income to rely on regardless of whether its stock price goes up or down.

For example, 3M currently pays a dividend of $1.47 per share per quarter. Based on its current stock price, that translates to a dividend yield of 3.68%.

If 3M’s stock price increases and its dividend stays the same, its yield would decrease. But the great news is that 3M has raised its dividend for 62 years in a row! As long as that continues, investors can enjoy both capital appreciation and dividend growth over time. Plus, if the stock price goes down, you can reinvest your dividends at a lower price.

If you’re thinking about moving some of your savings into dividend-paying investments, you’ll want to make sure that you pick reliable stocks or funds. Looking for dividend-paying companies that have been raising their dividends for at least 25 years called Dividend Aristocrats would be a great start.

To Get Started With Dividend Investing, Choose Your Stock Broker

  • You Invest by J.P. Morgan: Best for free trades and cash bonuses.
  • Ally Invest: Best for new investors and those looking for a very easy website to navigate.
  • TD Ameritrade: Ideal for more experienced traders looking for a rich set of tools and resources.
  • E*Trade: Offers trading platforms and tools for any investment style.

The Bottom Line

When interest rates are low, you have to be more creative with finding ways to earn a return on your extra money. For some people, that might mean moving into a debt paydown mode for the foreseeable future.

For others, that will mean getting their money out of a basic savings account and moving it somewhere that pays better, like a high-yield savings account, CD ladder, or dividend-paying investments.

Want to know more? Here’s a link to the Feds chart of the average 30-year fixed mortgage rates in the U.S. — you’ll see we are in historically low territory.


  • Clint Proctor

    Clint Proctor is a freelance writer and founder of [], where he writes about how students and millennials can win with money. When he's away from his keyboard, he enjoys drinking coffee, traveling, obsessing over the Green Bay Packers, and spending time with his wife and two boys.