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If you owe money on your credit cards, you’re not alone. Experian reports that credit card debt is the most common type of debt in the U.S., with 45% of households carrying a balance.

Meanwhile, the Federal Reserve reports that as of August 2024, the average interest rate across all credit card accounts was 21.76%. If you owe $5,000 on your credit cards, at that rate, you’re looking at spending $1,211 on interest if it takes you two years to pay your balance off.

The good news, though, is that relief may soon be in sight. The Federal Reserve lowered its benchmark interest rate by half a percentage point in September. And that rate cut is likely to be the first of many. This means that come 2025, credit card interest rates could be a lot lower.

Lower rates could soon be upon us

The Federal Reserve doesn’t set consumer borrowing rates directly. When you sign a mortgage, for example, your lender determines what rate you can borrow at based on factors that include your credit score and existing level of debt. Similarly, when you sign an auto loan, your lender is the one to determine what rate you qualify for.

But when the Fed lowers its benchmark interest rate, known as the federal funds rate, it commonly leads to lower borrowing rates. The federal funds rate is what banks and financial institutions pay for overnight borrowing. When it’s less expensive for them to borrow, that savings tends to be passed along to consumers.

Meanwhile, the Fed is expected to keep cutting its benchmark interest rate in response to cooling inflation. That, in turn, is likely to lead to lower borrowing rates on a whole in 2025 — credit cards included.

How low will credit card interest rates go in 2025?

Without a crystal ball, it’s hard to say. We don’t know how aggressively the Fed will lower its benchmark interest rate.

But let’s be optimistic and say credit card rates will fall 2 percentage points on average from where they are today. That would still leave you paying close to 20% interest on your balances. So rather than sit back and hope for a lower interest rate on your debt, a better bet is to try to pay off your credit cards as quickly as you can.

You have a few options to pay down your credit cards. One is to do a balance transfer, which could give you a 0% introductory interest rate on your debt for a period. If you’re able to boost your income with a side hustle and pay off your balance before that introductory period ends, you might save a lot of money on interest and get your balance wiped out. Click here for a list of the best balance transfer offers.

Another option is to consolidate your credit card debt into a personal loan. A personal loan won’t give you a 0% introductory period, but you might lock in a much lower interest rate on one than what your credit cards are charging you, and you’ll have a set payoff date, too. Click here for a list of the best personal loans available today.

While there’s a strong chance credit card interest rates will fall in 2025 — and to a notable degree — your best bet is to try to shed that debt as soon as you reasonably can. Once you do pay off your balances, try to avoid racking up new ones.

Even if rates dip quite a bit in the new year, credit cards will remain an expensive borrowing option. It’s best to explore other ways to borrow when you need to, or to budget carefully to avoid debt altogether.

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