Before the Federal Reserve's first rate cut since 2020, consider these 5 top money moves.

• Jerome Powell, the Federal Reserve Chair, indicated on Friday that interest rate cuts will be implemented shortly.
• The Fed's decision to trim its benchmark will affect various financial products, including car loans, mortgages, and credit cards.
• Here's how to make the most of this policy shift.

Jerome Powell, the Federal Reserve Chair, almost confirmed that an interest rate reduction will occur soon.

In his keynote address at the Fed's annual retreat in Jackson Hole, Wyoming, the central bank leader stated that it is time for policy adjustments.

A possible quarter-point reduction in interest rates in September could provide relief for Americans facing high charges, with a 1-in-3 chance of a more aggressive half-point move, according to the CME's FedWatch measure.

"As a consumer, now is the time to ask: 'What does my spending look like? Where can my money grow the most and what options do I have?'" advised Leslie Tayne, a debt relief attorney at Tayne Law in New York and author of "Life & Debt."

Some colleges now cost nearly $100,000 a year, while more Americans are struggling even as inflation cools. Investors can prepare for lower interest rates.

The federal funds rate is currently at its highest level in two decades, within a range of 5.25% to 5.50%.

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

"Ted Rossman, senior industry analyst at Bankrate.com, stated that from a consumer perspective, it's important to understand that lower interest rates will be a gradual process. He explained that the descent will be much slower than the rapid increase in interest rates, which raised the federal funds rate 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

As the prime rate decreases with a rate cut, variable-rate debt interest rates, such as those on credit cards, are likely to follow suit, lowering your monthly payments. However, APRs will only ease off extremely high levels.

If you pay $250 per month on a card with a $5,000 balance at an average interest rate of nearly 25%, it will cost you more than $1,500 in interest and take 27 months to pay off, according to LendingTree data.

If the central bank reduces interest rates by a quarter point, you will save $21 in total and pay off your balance one month earlier. However, this is still less than the savings you could achieve with a 0% balance transfer credit card, according to Matt Schulz, LendingTree's chief credit analyst.

Instead of waiting for a slight adjustment in the future, borrowers can switch to a zero-interest balance transfer credit card or consolidate and pay off high-interest credit cards with a lower-rate personal loan, according to Tayne.

2. Lock in a high-yield savings rate

It is advised to secure some of the highest returns in decades as rates on online savings accounts, money market accounts, and certificates of deposit are predicted to decrease.

Online savings accounts are currently offering rates above 5%, which is significantly higher than the rate of inflation.

If the central bank reduces its benchmark, a typical saver with $8,000 in a checking or savings account can earn an extra $200 a year by moving that money into a high-yield account with an interest rate of 2.5% or more, according to a recent survey by Santander Bank in June. Most Americans keep their savings in traditional accounts, which currently pay an average of 0.46%, according to FDIC data.

It is advantageous to secure the most competitive CD yields currently, which is significantly higher than anticipated inflation, according to Greg McBride, Bankrate's chief financial analyst," said McBride. "It is not wise to delay in making the decision.

A high-yield savings account currently offers more than 5.3%, according to Bankrate.

3. Consider the right time to finance a big purchase

Waiting for lower interest rates could reduce the cost of financing if you're planning a major purchase like a home or car.

Purchasing during periods of lower interest rates can result in significant savings over the course of the loan, according to Tayne.

The average rate for a 30-year, fixed-rate mortgage has decreased to just under 6.5%, despite mortgage rates being tied to Treasury yields and the economy. This decline is largely due to the possibility of a Fed-induced economic slowdown.

According to calculations by Jacob Channel, senior economic analyst at LendingTree, compared to 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.

Lower mortgage rates could increase homebuying demand, which would raise prices, McBride stated.

The future of the housing market is uncertain due to the decline in mortgage rates and the level of supply, as stated by Channel.

"Timing the market is virtually impossible," he said.

4. Assess the right time to refinance

Once interest rates decrease, there may be more refinancing options for those struggling with debt.

As the Federal Reserve cuts interest rates, the variable rates on private student loans, which are tied to indices such as the prime or Treasury bill rate, will decrease.

Mark Kantrowitz, a higher education expert, suggests that borrowers with existing variable-rate private student loans may have the option to refinance into a more affordable fixed-rate loan in the future.

The interest rates for private refinance range from a low of 5% to a high of 11%, he stated.

Refinancing a federal student loan into a private loan means losing the safety nets that come with federal loans, such as deferments, forbearances, income-driven repayment, and loan forgiveness and discharge options. Furthermore, extending the term of the loan will result in paying more interest on the balance.

David Peters, founder of Peters Professional Education in Richmond, Virginia, advised against extending loan terms and instead recommended keeping the original payment plan to minimize principal payments without affecting cash flow.

Depending on your current rate, home and auto loan refinancing opportunities may also be available.

5. Perfect your credit score

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

The average rate on a five-year new car loan has increased to nearly 8% due to inflation's impact on financing costs and vehicle prices.

McBride stated that financing is just one variable, and it is relatively small compared to other factors. For instance, a reduction of 0.25% in interest rates on a $35,000, five-year loan would amount to $4 per month.

McBride stated that consumers would benefit more from paying off revolving debt and improving their credit scores, which could lead to better loan terms.