By Sabrina Karl

The Federal Reserve hiked the federal funds rates by another massive increment Wednesday. Though expected, the 0.75% increase is historically notable, as it represents the third consecutive hike of that size since June, and the fifth hike this year.

The Fed generally prefers to raise rates gradually, usually by a quarter percentage point. But with inflation running above 8%, the Fed sees a need for dramatic action. As a result, its 3% hike since March is the fastest pace seen since Ronald Reagan was a new president.

When the Fed raises rates, it’s good news for savers and bad news for many types of borrowers. That means some perennially smart money moves are even wiser now.

First, if you have variable-rate debt, like credit card balances, paying those down should be your highest priority. The national credit card interest rate average has risen above 18% APY, so every month you carry a balance, you’re paying a lot of interest on that decision.

Plus, the Fed isn’t done, likely hiking rates another 1% to 1.25% this year, and then further still in 2023. Whenever the Fed raises rates, your credit card company does, too. So owing less means you’re less exposed to increasingly expensive interest payments going forward.

Second, for those with cash in the bank, it’s always wise to consider high-yield savings accounts rather than the savings account offered by your primary bank. But this is even more true now that rates are rising.

For instance, the national average savings account rate is only 0.13%. But Investopedia.com lists a dozen banks that are paying 2.50% to 3.25% on savings balances. And those rates keep rising.

While there’s no escaping today’s economic realities, reducing your debt interest or increasing your savings interest are two of your smartest money moves right now.