Markus Andrews

The Federal Reserve kept rates unchanged at the end of its June meeting.
The central bank’s interest rate decision has far-reaching implications for almost all types of borrowing and for savings rates.
From credit cards and mortgage rates to auto loans and savings accounts, here’s how the Fed’s moves influence your wallet.

The Federal Reserve announced Wednesday it will leave interest rates unchanged.
The Fed decision came amid demands from President Donald Trump to lower the key borrowing rate benchmark, and escalating attacks on Fed Chair Jerome Powell even hours before the announcement.

Trump has been pressuring Powell for a rate cut, arguing that maintaining a fed funds rate that is too high makes it harder for businesses and consumers to access cash, adding more strain to the U.S. economy. But Powell has said that the federal funds rate is likely to stay higher as the economy changes and policy is in flux. 
That’s enough to keep the central bank on the sidelines, for now, according to Greg McBride, Bankrate’s chief financial analyst. “With the uncertainty around tariffs and how that could impact inflation readings in the month ahead, there’s an ongoing sense of another shoe about to drop,” McBride said.
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The federal funds rate sets what banks charge each other for overnight lending, but it also has a domino effect on almost all of the borrowing and savings rates Americans see every day.  
When the Fed hiked rates in 2022 and 2023, the interest rates on most consumer loans — including credit cards, auto loans and home equity lines of credit — quickly followed suit. Even though the central bank lowered its benchmark rate three times in 2024, those consumer rates are still elevated, and are mostly staying high, for now.

“Borrowing rates are high, with mortgage rates near 7%, many home equity lines of credit in double-digit interest rate territory, and the average credit card rate still above 20%,” McBride said. “But savers continue to be rewarded with inflation-beating returns on the top-yielding savings accounts, money market accounts, and certificates of deposit. Retirees, in particular, are earning good income on their hard-earned savings.”

Five ways the Fed affects your wallet

1. Credit cards
Many credit cards have a variable rate, so there’s a direct connection to the Fed’s benchmark.
With a rate cut likely postponed until at least September, the average credit card annual percentage rate is currently just over 20%, according to Bankrate — not far from last year’s all-time high. In 2024, banks raised credit card interest rates to record levels and some issuers said they are keeping those higher rates in place.
“Interest rates on credit cards are painful because they are so high,” said Charlie Wise, senior vice president and head of global research and consulting at TransUnion.
“The reality is you could drop the fed funds rate by two full basis points and all you are doing is lowering your interest rate from say 22% to 20%,” he said.
Borrowers are better off switching to a zero-interest balance transfer credit card, or consolidating and paying off high-interest credit cards with a lower-rate personal loan, experts say.
2. Auto loans
Auto loan rates are tied to several factors, but the Fed is one of the most significant.
With the Fed’s benchmark holding steady, the average rate on a five-year new car loan was 7.3% in May, near a record high, while the average auto loan rate for used cars was 11%, according to Edmunds.

But car prices are also rising — in part due to pressure from Trump’s tariffs on imported vehicles — leaving car buyers with bigger monthly payments and a growing affordability problem. Of those households with a monthly car payment, 20% pay more than $1,000 a month, according to separate data from Bank of America.
“Every way you slice it, car buyers are struggling to find a deal in today’s car market, and financing a new vehicle is becoming cost-prohibitive for more shoppers,” said Ivan Drury, Edmunds’ director of insights.
3. Mortgages
Mortgage rates don’t directly track the Fed, but are largely tied to Treasury yields and the economy. As a result, concerns over tariffs and ongoing uncertainty about future costs have kept those rates within the same narrow range for months.
The average rate for a 30-year, fixed-rate mortgage was 6.91% as of June 17, while the 15-year, fixed-rate was 6.17%, according to Mortgage News Daily. 
“I don’t see any major changes coming in the immediate future, meaning that those shopping for a home this summer should expect rates to remain relatively high,” said Matt Schulz, chief credit analyst at LendingTree. 
Adjustable-rate mortgages, or ARMs, and home equity lines of credit, or HELOCs, are pegged to the prime rate, and those rates are also higher.
4. Student loans

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Federal student loan rates are set once a year, based in part on the last 10-year Treasury note auction in May and fixed for the life of the loan, so most borrowers are somewhat shielded from Fed moves and recent economic turmoil.
Current interest rates on undergraduate federal student loans made through June 30 are 6.53%. Starting July 1, the interest rates will be 6.39%.
Although borrowers with existing federal student debt balances won’t see their rates change, many are now facing other headwinds and fewer federal loan forgiveness options.
5. Savings
While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.
“Yields for CDs and high-yield savings accounts aren’t at the sky-high levels they were a year ago, but they’re still really strong,” said LendingTree’s Schulz. Top-yielding online savings accounts currently pay more than 4%, on average, according to Bankrate — well above the annual rate of inflation.
“Shopping around for high-yield savings accounts, if you haven’t done it already, is one of the best financial moves you can make to take advantage of rates being high,” Schulz said.
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The Senate Finance Committee unveiled text for a multitrillion-dollar tax bill, part of a broader Republican domestic policy package.
The legislation would let taxpayers deduct up to $10,000 of car loan interest per year from their taxable income.
The Senate GOP bill, unlike its counterpart in the House “One Big Beautiful Bill Act,” seems to include new cars but exclude used cars from the tax deduction, tax experts said.
The average driver paid $1,332 of annual loan interest charges on new cars bought in 2024, according to AAA.

Senate Majority Leader John Thune (R-SD) speaks during a news conference following the weekly Senate Republican policy luncheon at the U.S. Capitol on June 17, 2025.
Anna Moneymaker | Getty Images News | Getty Images

A multitrillion-dollar tax package issued Monday by the Senate Finance Committee would offer a tax break for drivers on auto loan interest, but it doesn’t seem to be available for used cars, tax experts said.
The Senate GOP tax plan is part of a broader domestic policy bill that Republicans are trying to get to President Trump’s desk by the Fourth of July, and aims to partially fund tax cuts by slashing spending on health programs like Medicaid and the Affordable Care Act. The House passed its version — the “One Big Beautiful Bill Act” — in May.

One of the legislation’s many provisions would let taxpayers deduct up to $10,000 of auto loan interest from their taxable income in any given year. The average driver paid $1,332 of annual loan interest charges on new cars bought in 2024, according to AAA.
The tax break — which President Trump proposed when campaigning for president last year — would be available from 2025 through 2028.

Which vehicles may qualify for the tax break

Qualifying vehicles must be U.S.-assembled cars, minivans, vans, sport utility vehicles, pickup trucks, or motorcycles for personal use.
The Senate legislation excludes all-terrain vehicles, trailers and campers, which the House bill had included.
The deduction would only be available for loans secured after after December 31, 2024, according to the Senate legislation. It must also be the first loan on the vehicle.

Unlike a tax plan passed by the House in May, Senate Republicans appear to limit the tax deduction to new — and not used — passenger cars, tax experts said.
The Senate limits the tax break to vehicles for which “the original use … commences with the taxpayer,” according to the legislative text.
That phrasing is “pretty clear” in its meaning that only loans on new cars are eligible for the tax deduction, said Matt Gardner, senior fellow at the Institute on Taxation and Economic Policy.
“They don’t say the word ‘new cars’ but I don’t see another way of interpreting that language,” Gardner said.

Which car owners may benefit

That would limit the usefulness of the tax break for low- and middle-income taxpayers, who more often buy used cars, Gardner said.
A survey of low- and middle-earning households published in 2023 by researchers at the University of California, Los Angeles, showed 61% had bought a used vehicle, while 39% bought a new one.
Average household income was $115,000 for new-vehicle buyers in 2023, compared to $96,000 for a used-car buyer, according to Cox Automotive.
Cox estimates more than 20 million households will buy a used car in 2025. In March, it forecast about 16 million new-vehicle sales this year, though said tariffs levied by the Trump administration cloud the sales outlook.

Higher earners tend to get more value from tax deductions than low and middle earners, Gardner said. Deductions reduce the amount of taxable income that households pay, and high earners generally pay a higher federal tax rate than lower-earning households.
“The more you earn, the higher the tax rate you pay, meaning the more benefit you get from this thing,” Gardner said.
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However, the auto loan interest deduction starts to lose value when a taxpayer’s annual income exceeds $100,000. The threshold is $200,000 in the case of a joint tax return filed by married couples.
The deduction’s value falls by $200 for each $1,000 of income over those thresholds.
Meanwhile, the Trump administration put 25% tariffs on imported cars and car parts. Those tariffs are expected to push up car prices, and in turn erode the deduction’s value for households, Gardner said.
“Tariffs will completely eat up the value of this deduction for a lot of people,” he said.
William McBride, chief economist at the Tax Foundation, said he thinks the “biggest change” from the House version of the legislation is “to prevent loans against used cars.” More

The Senate has unveiled its version of the One Big Beautiful Bill Act that includes a temporary enhanced deduction for seniors ages 65 and up.
The chamber’s version of the proposal brings the deduction to $6,000 per qualifying individual, up from $4,000 per person proposed by the House.
Here’s who experts say would benefit most.

The Senate has begun deliberations over President Donald Trump’s massive “Big Beautiful Bill” that narrowly passed the House on May 22.
Bloomberg | Bloomberg | Getty Images

The Senate version of the One Big Beautiful Bill Act includes a temporary enhanced deduction for seniors ages 65 and up. The House of Representatives also proposed such a tax break in its text, calling it a “bonus.”
Notably, the Senate is calling for a deduction of up to $6,000 per qualifying individual. The House included a $4,000 deduction.

The senior “bonus” is in lieu of the elimination of taxes on Social Security benefits that President Donald Trump pitched on the campaign trail. The Republicans’ tax bill is being done through reconciliation, a process that generally prohibits changes to Social Security.
The White House has said the proposed deduction is a “historic tax break” for seniors.

How the senior ‘bonus’ deduction would work

The full deduction amount would be available to individuals with up to $75,000 in modified adjusted gross income, and $150,000 if married and filing jointly.
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Notably, the Senate version calls for a faster 6% phase-out rate for incomes above those thresholds, compared to the House version’s 4% phase-out rate, according to Alex Durante, senior economist at the Tax Foundation.

The faster phase-out means the full $6,000 benefit is lost more quickly, said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center. For people who would be eligible for the full proposed senior deduction, the Senate’s $6,000 version is more generous, he said.
“It really depends on where you are on the income distribution,” Gleckman said, with middle-income taxpayers poised to benefit most.
In the House version, the proposed senior deduction would be available to taxpayers whether they take the standard deduction or itemize their tax returns. There are not many taxpayers in the income ranges for the deduction who itemize their returns, Gleckman said.

To qualify for the break, all individual taxpayers and spouses, if filing jointly, would need to have Social Security numbers.
The temporary senior deduction would be in place for tax years 2025 through 2028.

No tax on Social Security vs. senior ‘bonus”

The House of Representatives passed its version of the One Big Beautiful Bill Act on May 22. Both chambers will have to agree on the changes before it is sent to Trump’s to sign.
“I think it’s pretty clear, since this was in both bills, that there’s going to be a version of a senior deduction,” Durante said.
Eliminating taxes on Social Security benefits would have been a more expensive provision, he said.

Tax-free Social Security benefits would have benefited higher-income people most, according to Gleckman.
Currently, Social Security benefits are taxed based on a formula known as combined income — the sum of adjusted gross income, nontaxable interest and half of Social Security benefits.
Up to 85% of Social Security benefits are taxed for single taxpayers with combined income above $34,000 and joint filers with more than $44,000. Meanwhile, up to 50% of benefits are taxed for individuals with $25,000 to $34,000 in combined income and for couples with between $32,000 and $44,000.
In contrast, the proposed senior “bonus” would not benefit high-income taxpayers and instead focuses on middle-income taxpayers with incomes less than $75,000 if single or $150,000 if married.
“It’s better because it helps the people who need the help more,” Gleckman said. More

Under current law, the maximum child tax credit is $2,000, which will revert to $1,000 after 2025 without action from Congress.
Both House and Senate proposals would increase the top credit, but phase-ins would mirror the current tax break.
Without design changes, the higher child tax credit wouldn’t benefit the lowest-earning households, policy experts say.

Oscar Wong | Moment | Getty Images

As Senate Republicans race to pass President Donald Trump’s “big beautiful” spending bill, key provisions, including the child tax credit, could change amid Senate-House negotiations.
The Tax Cuts and Jobs Act, or TCJA, of 2017, temporarily boosted the maximum child tax credit to $2,000 from $1,000, which will expire after 2025 without action from Congress.  

If enacted, the Senate bill would permanently increase the biggest credit to $2,200 starting in 2025, according to a draft of the text released on Monday. The measure would also index this figure for inflation after 2025.
By comparison, the House-approved bill would boost the top child tax credit to $2,500 from 2025 through 2028. After that, the credit’s highest value would drop to $2,000 and be indexed for inflation.
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It’s unclear how the final provision may change before Trump signs the package into law. However, in either version, the changes wouldn’t benefit the lowest-earning families, some policy experts say.
“It’s extremely disappointing,” said Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities’ federal fiscal policy division. “The [child tax credit] increase will go to families with middle and upper incomes.”

Here’s how the tax break works and who could benefit if Congress enacts the updates.

How the child tax credit works

For 2025, the tax break is worth up to $2,000 per qualifying child under age 17 with a valid Social Security number. Up to $1,700 is “refundable” for 2025, which provides a maximum of $1,700 once the credit exceeds taxes owed.  
“If you have very low income, you can’t access the full $2,000 credit,” and the tax break phases out for “very high-income families,” said Elaine Maag, senior fellow in the Urban-Brookings Tax Policy Center.
After your first $2,500 of earnings, the child tax credit value is 15% of adjusted gross income, or AGI, until the tax break reaches that peak of $2,000 per child. The tax break starts to phase out once AGI exceeds $400,000 for married couples filing together or $200,000 for all other taxpayers.   

The ‘central problem’ with the child tax credit

Under current law, 17 million children don’t receive the full child tax credit, according to Cox from the Center on Budget and Policy Priorities. The reason is many families earn too little and they don’t owe taxes.  
The Senate and House proposals don’t change that “central problem,” she said. 
In 2024, the House passed a bipartisan bill to address this issue by boosting the refundable portion of the credit, but the legislation later failed in the Senate.
The proposed higher child tax credit comes as the U.S. fertility rate hovers near historic lows, which has troubled lawmakers, including the Trump administration.
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A new savings account for children that comes with a $1,000 deposit from the federal government remained in the U.S. Senate’s version of President Donald Trump’s budget bill.
Funds in the so-called “Trump accounts” can be used for education expenses or credentials, the down payment on a first home or as capital to start a small business. 
Qualified withdrawals are taxed at the long-term capital-gains rate, while distributions for any other purposes are taxed as ordinary income.

How Trump accounts work

Not unlike a 529 college savings plan, Trump accounts come with a tax incentive. Earnings grow tax-deferred, and qualified withdrawals are taxed as long-term capital gains.
Under both the House and Senate versions of the bill, withdrawals could begin at age 18, at which point account holders can tap up to half of the funds for education expenses or credentials, the down payment on a first home or as capital to start a small business.
At 25, account holders can use the full balance for expenses that fall under those same guidelines and at 30, they can use the money for any reason. Distributions taken for qualified purposes are taxed at the long-term capital-gains rate, while distributions for any other purpose are taxed as ordinary income.

$1,000 baby bonus: Who is eligible

Pekic | E+ | Getty Images

For children born between January 1, 2024, and December 31, 2028, the federal government will deposit $1,000 into the Trump account, funded by the Department of the Treasury, as part of a “newborn pilot program,” according to the Senate Finance Committee’s proposed text released on Monday.
To be eligible to receive the initial seed money, a child must be a U.S. citizen at birth and both parents must have Social Security numbers.
If a parent or guardian does not open an account, the Secretary of Treasury will establish an account on the child’s behalf. Parents may also opt out.

Trump account pros and cons

The White House and Republican lawmakers have said these accounts will introduce more Americans to wealth-building opportunities and the benefits of compound growth. But some experts say the Trump accounts are also overly complicated, making it harder to reach lower-income families.
Universal savings accounts, with fewer strings attached, would be a simpler alternative proposal at a lower price tag, according to Adam Michel, director of tax policy studies at the Cato Institute, a public policy think tank.
“I’m disappointed the Senate did not take the opportunity to improve these accounts,” Michel said. Still, “provisions that remain in both the House and Senate text, we should expect them to become law, and this provision fits that criteria.” 

Mark Higgins, senior vice president at Index Fund Advisors and author of “Investing in U.S. Financial History: Understanding the Past to Forecast the Future,” said the key is “if the benefits comfortably exceed the cost.”
According to the Committee for a Responsible Federal Budget, Trump accounts would add $17 billion to the deficit over the next decade.
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The Senate Finance Committee proposed a “no tax on tips” measure as part of a multitrillion-dollar package of tax cuts.
Senate Republicans would cap the tax deduction on tips at $25,000 a year. The House version of the One Big Beautiful Bill Act didn’t have a cap.
The tax break wouldn’t be available to many people, experts said.

Senate Majority Leader John Thune (R-SD), left, listens to Sen. Mike Crapo (R-ID), center, chair of the Senate Finance Committee, speak to reporters outside of the West Wing of the White House on June 4, 2025.
Anna Moneymaker | Getty Images News | Getty Images

Republicans proposed offering a tax break to tipped workers, as part of a package of tax cuts the Senate Finance Committee unveiled Monday. GOP lawmakers are trying to pass their multitrillion-dollar megabill in coming weeks.
The Senate measure — which aims to fulfill a “no tax on tips” campaign pledge by President Donald Trump — is broadly similar to a provision that House GOP lawmakers passed in May as part of a domestic policy bill.

In both versions, the tax break is structured as a deduction available on qualified tips. The Senate legislation defines such tips as ones that are paid in cash, charged or received as part of a tip-sharing arrangement.
Taxpayers — both employees and independent contractors — would be able to claim it from 2025 through 2028. Filers could take advantage whether they itemize deductions on their tax returns or claim the standard deduction.

Key differences in ‘no tax on tips’ proposals

However, the Senate proposal is different from the House version in two key ways, Matt Gardner, senior fellow at the Institute on Taxation and Economic Policy, wrote in an e-mail.
First, the Senate legislation would cap the tax deduction at $25,000 per year, while it is uncapped in the House bill, Gardner wrote.

Also, the income limits work differently in the Senate legislation, he wrote.

The House bill makes the tax deduction completely unavailable once an individual’s income hits $160,000 per year.
By comparison, the Senate bill would gradually reduce the value of the tax deduction once an individual’s income exceeds $150,000, or $300,000 for married couples. The Senate would dilute the tax break’s value by $100 for every $1,000 of income over those thresholds.
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Senate Republicans, like those in the House, would limit the tax break to tipped workers in occupations that “customarily and regularly” had received tips on or before December 31, 2024.
The bill text directs the U.S. Treasury Secretary to publish a list of those occupations within 90 days of the legislation’s enactment.

Few workers would benefit from ‘no tax on tips’

A “no tax on tips” proposal seems to have bipartisan appeal in the Senate, which unanimously passed a similar standalone measure last month. Former Vice President Kamala Harris also supported a tax break on tips during her 2024 presidential campaign.
However, the tax break wouldn’t benefit many workers, tax experts said.
There were roughly 4 million workers in tipped occupations in 2023, about 2.5% percent of all employment, according to an analysis last year by Ernie Tedeschi, director of economics at the Budget Lab at Yale and former chief economist at the White House Council of Economic Advisers during the Biden administration.

Additionally, a “meaningful share” of tipped workers already pay zero federal income tax, Tedeschi wrote. In other words, a proposal to exempt tips from federal tax wouldn’t help these individuals, who already don’t owe federal taxes.
“More than a third — 37 percent — of tipped workers had incomes low enough that they faced no federal income tax in 2022, even before accounting for tax credits,” Tedeschi wrote. “For non-tipped occupations, the equivalent share was only 16 percent.”
Tax deductions reduce the amount of income subject to tax (or, taxable income) and are generally more valuable for high-income taxpayers relative to tax credits.
The Economic Policy Institute, a left-leaning think tank, said it believed a better way to help workers would be to raise the federal minimum wage.
A “no tax on tips” provision “gives the illusion of helping lower-income workers — while the rest of the legislation hands huge giveaways to the rich at the expense of the working class,” EPI economic analysts wrote Thursday. More

GOP lawmakers are moving in their “big, beautiful bill” to nix payment pauses for student loan borrowers who’ve lost their job or experienced other financial hardship.
“I’m concerned this is going to lead more people to default on their student loans when they encounter a job loss, surprise medical expense, or other economic hardship,” said Abby Shafroth, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project.

Vitranc | E+ | Getty Images

One provision in Republicans’ “big beautiful” bill would narrow the relief options for struggling student loan borrowers. House and Senate Republicans both call for the elimination of the economic hardship and unemployment deferment.
Those deferments allow federal student loan borrowers to pause their monthly bills during periods of joblessness or other financial setbacks, often without interest accruing on their debt.

Less attention has been paid to the GOP plan to do away with the deferments than its proposals to eliminate several student loan repayment plans and to establish a minimum monthly payment for borrowers.
The House advanced its version of the One Big Beautiful Bill Act in May. The Senate Committee on Health, Education, Labor and Pensions released its budget bill recommendations related to student loans on June 10. Senate lawmakers are preparing to debate the massive tax and spending package.
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Nixing the deferments could have major consequences, said Abby Shafroth, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project.
“I’m concerned this is going to lead more people to default on their student loans when they encounter a job loss, surprise medical expense or other economic hardship,” Shafroth said.

The Trump administration said this spring that the number of student loan borrowers in default could soon rise from more than 5 million to roughly 10 million in the coming months.

How unemployment, hardship deferments work

Under the Senate Republicans’ proposal, student loans received on or after July 1, 2026, would no longer qualify for the unemployment deferment or economic hardship deferment. The House plan does away with both deferments a year earlier, on July 1, 2025.
The unemployment deferment is typically available to student loan borrowers who are seeking but unable to find full-time employment or are eligible for jobless benefits, among other requirements, according to the National Consumer Law Center. Under the deferment, borrowers can pause their payments for up to six months at a time, and for a total of three years over the life of the loan.
The absence of the relief “means that for someone who lost their job and is struggling to keep their head above water, the government will demand monthly payments on student loans,” Shafroth said.
The bill comes as the share of entry-level employees who report feeling positive about their employers’ business prospects dropped to around 43% in May, a record low, according to a recent report by Glassdoor.

The economic hardship deferment, meanwhile, is generally available to student loan borrowers who receive public assistance, earn below a certain income threshold or work in the Peace Corps. The total time a borrower can spend in an economic hardship deferment is also three years.
The end of the deferments “eliminates one of the key benefits on subsidized loans,” said higher education expert Mark Kantrowitz.
Persis Yu, deputy executive director of the Student Borrower Protection Center, agreed.
“The ability of borrowers to pause payments and interest on subsidized loans during financial shocks and hardship is a critical benefit of the federal loan program,” Yu said.

The ability of borrowers to pause payments and interest on subsidized loans during financial shocks and hardship is a critical benefit of the federal loan program.

deputy executive director of the Student Borrower Protection Center

Around 150,000 federal student loan holders were enrolled in the unemployment deferment in the second quarter of 2025, while around 70,000 borrowers had qualified for an economic hardship deferment, according to data by the U.S. Department of Education.
The absence of the deferments will push more federal student loan borrowers into a forbearance, experts say, during which interest continues to climb on their debt and borrowers often resume repayment with a larger bill.
Republicans say doing away with the payment pauses will encourage borrowers to enroll in repayment plan they can afford.

GOP: Bill helps those who ‘chose not to go to college’

Sen. Bill Cassidy, R-La., chair of the Senate Health, Education, Labor, and Pensions Committee, said in a statement on June 10, that his party’s proposals would stop requiring that taxpayers who didn’t go to college foot the loan payments for those with degrees.
“Biden and Democrats unfairly attempted to shift student debt onto taxpayers that chose not to go to college,” he said.
Cassidy said the higher education legislation, which also stretches out student loan repayment timelines, would save taxpayers at least $300 billion.

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