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The biggest news in the world of personal finance on Sept. 18, 2024 was the first of what is likely to be multiple federal funds rate cuts. The Federal Reserve cut its benchmark interest rate by half a percentage point, a bigger cut than many experts expected. As a result, we’re likely to soon see lower interest rates across Americans’ savings accounts, personal loans, and credit cards.

If you have a credit card balance, this is good news for you — but not as good as you might hope, given how expensive credit card debt is to begin with. Here’s a closer look at how rates have trended in the past, as well as a few ways to get out of debt.

Credit card interest rates: Then and now

For more insight into how credit card interest rates have risen over the last few years, we can turn to data collected by the Federal Reserve Bank of St. Louis. In May 2022, right after the Federal Reserve began raising its benchmark rate, the average interest rate on credit card accounts assessed interest (as opposed to those with an intro 0% APR) was 16.65%. As of the most recent figure reported (in May 2024), that number had grown to 22.76%.

We could see credit card interest rates tick back downward now if the Federal Reserve makes more cuts this year and into 2025. But ultimately, the difference of a few percentage points in your card’s APR won’t save you a ton of money on payments if you’re carrying a balance. The best way to cope is to pay off that balance, if possible.

Prioritize paying off your cards

Despite the promise of a lower credit card interest rate, credit cards remain one of the most expensive ways to borrow money. And if you’re carrying a balance from month to month, it’s worth focusing on paying it off for good.

If you’re living paycheck to paycheck, that’s easier said than done. Here are a few tips to deal with credit card debt — including one method that can transform your finances entirely.

Balance transfer card

With good credit, you might qualify for one of the best balance transfer credit cards. But this is best suited to those who don’t have a ton of debt and expect to be able to pay it off in a fairly short amount of time. You’ll often get a period (often a year to as long as 21 months) with an intro 0% APR.

You can divide your balance by the number of months at 0% to settle on a monthly payment that will have you out of debt by the time the intro period is over. You’ll most likely have to pay a balance transfer fee of 3% to 5%, so keep this in mind. Transferring your balances leaves your original cards with a zero balance, so avoid using them so you don’t wind up in the same situation again.

Check out our picks for the best balance transfer cards, which can make it easier to pay off your balance while avoiding high interest rates.

Debt consolidation loan

Got a fairly decent credit score (670 or better)? You might be able to consolidate your credit card debt using a top-rated debt consolidation loan. This will come with a fixed interest rate that’s lower than a credit card rate, a set pay-off period (often two to five years), and the ease of making just one payment instead of potentially several. Your credit cards remain open with this option, too, so be sure you don’t take on more debt.

Debt settlement

I’d consider this option a last resort. You may be able to negotiate with your creditors to pay less than you owe to get out of debt. And you can do this yourself rather than paying a scammy “credit repair” company! But unlike in the previous two methods, your credit card accounts will be closed, and the credit score hit from this move is likely to be substantial.

Get professional help

If you’re drowning in debt and out of options, Speak to a nonprofit credit counseling service, like the National Foundation for Credit Counseling. It’ll create a debt management plan for you and limit your access to credit, so there’ll be a credit score hit here, too. But you can also get help with budgeting and managing your finances going forward.

Increase your income

OK, here’s the method I used in 2022 — but I recognize that not everyone has this ability. I was fortunate enough to have extra time that let me take on a side hustle from home. Here’s the important bit: If you start a side hustle, any money you earn (less taxes) can be rolled right to your debt payoff.

And if you hang on to that side hustle after your debt is paid off, you can enjoy the benefits of more income. This could mean achieving a big financial goal (like becoming a homeowner), investing for retirement, or padding your savings account.

Even if we see lower rates on credit cards and carrying a balance becomes less costly, it’s still not wise to let credit card debt linger. Consider using one of these methods to get out from under it.

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