The Fed Holds Rates Steady So Don’t Expect Changes to Your Credit Cards

The Federal Reserve voted to once again hold its benchmark interest rate steady at this week’s monetary policy meeting March 18-19, which means you shouldn’t expect your credit card APRs to change.

Although the federal funds rate only directly dictates lending between banks, the central bank’s monetary adjustments are passed on to consumers, impacting financing rates on loans and credit cards.

Raising or lowering the federal funds rate — the overnight interest rate between banks — creates a domino effect that can lead credit card issuers to increase or decrease their APRs, affecting how much you owe for carrying an outstanding balance.

By holding rates steady, the Fed acted as many experts predicted. In its press releasethe central bank cited a stable unemployment rate, expanding economic activity and favorable labor market conditions. However, it also acknowledged inflation remains slightly elevated at 2.8% for the 12 months ending February 2025.

Borrowing rates for consumers have been high in the past several years, despite three interest rate cuts last year.

While experts predict the Fed will lower rates later this year, potentially as early as late spring, credit card interest rates likely will remain high for the foreseeable future. In the meantime, try using one of these tips to start paying down your existing debt.

If you’re struggling with credit card debt, there are steps you can take

Your card’s APR likely won’t change in the short term but that doesn’t mean you should wait for a rate cut before tackling any debt you have.

“I don’t think a drop in the federal funds rate will offer much relief to cardholders who are carrying balances,” said credit expert John Ulzheimer, formerly of FICO and Equifax, in an email to CNET. “Paying 23% instead of 25% still means you’re paying 23% to service your debt. That’s certainly better than a stick in the eye, but to say it’s ‘good’ isn’t accurate.”

Even in the face of high interest charges, working to pay down your debt now will leave you in a better spot later. Try these steps to minimize the damage credit card debt can do.

1. Pay at least the minimum monthly payment on time

Even if you can’t pay your full balance, making the minimum payment will help to keep you out of hot water.

“At the very least, you should be paying the minimums on your cards to avoid late fees and damage to your credit,” said credit expert Leslie Tayne. “However, it should be a priority to eliminate this debt completely, even if that means slowing progress on savings and other goals.”

If you miss a paymentyou could damage your credit and be charged costly late fees. However, keep in mind the balance will continue to accrue interest even if you’re making the required minimum payment, which makes this an imperfect solution.

2. Stop using your credit card and switch to cash or a debit card

Credit cards are great financial tools to pay for large or unexpected purchases over time, improve your credit, earn points or cash back for trips or dream buys or even give you access to generous travel benefits, such as airport lounges or priority security access. But they also can tempt you to overspend and incur debt quickly if you don’t manage them responsibly.

If you find yourself spending more when using a credit card, maybe it’s time to give plastic a break.

Studies suggest that paying with a credit card might lead to overspending because the “pay pain” is removed from the transaction. In other words, when you charge a purchase on your credit card, the money doesn’t leave your wallet or bank account immediately, which may mislead you into thinking you can afford whatever you’re buying.

Switching to cash might be more difficult than before, especially because many businesses during the pandemic switched to contactless payments or stopped accepting cash for safety reasons.

However, you could use a P2P payment appsuch as Venmo or Zelle, or your debit card. That way, the moment you make a purchase or pay a bill, the money gets instantly withdrawn from your bank account, helping you see how much you’re spending.

If you’re looking for rewards, there are debit cards that offer cash back on purchases without requiring credit.

3. Try the debt snowball or debt avalanche method

If you’re looking for a way to pay down high-interest credit card debt, these strategies could help lower your balance.

The first option for paying off your debt is simple, if you’re able to do it: Apply your disposable income to credit card debt. (Don’t panic if you don’t have enough disposable income.)

The average US consumer has three credit cards, so your credit card debt might be spread across multiple balances of accounts.

There are two popular methods for paying down multiple balances: the snowball method and the avalanche method.

• The snowball method suggests paying off your smallest debt first, regardless of its interest rate, while making minimum payments on the other cards. This “small wins” strategy lets your initial success carry you until you pay the debt with the highest balance.
• The avalanche methodon the other hand, proposes that you start with the debt with the highest interest rate. Once you’ve paid off that high-interest balance, you move on to the balance with the next highest interest rate, and so on.

But which method is better?

Avalanche method proponents — and many personal finance experts — will tell you that paying off high-interest debt first makes more sense from the financial standpoint. If you pay down the debts with the highest interest rates first, you’ll spend less overall on interest charges.

But if paying off that debt will take you years, it can be discouraging to see minimal progress for maximum effort. You might end up throwing in the towel and continue accruing debt.

The best advice is to go with the method that’ll keep you going, whether it’s snowball, avalanche or a combination of both. In the end, what’s important is to save money by avoiding interest charges.

4. Transfer your balance to a 0% APR credit card

If you have a good credit score, you may be eligible to apply for a balance transfer credit card. The best balance transfer cards let you transfer a balance from another card — as long as it’s from a different bank — and pay it with no interest for a set period of time, usually between 12 and 21 months.

“My top tip for anyone carrying a balance is to sign up for a 0% balance transfer card,” said Ted Rossman, a senior industry analyst at Bankrate.

“You can move your existing, high-cost debt from one or more cards over to one of these cards and potentially save hundreds or even thousands of dollars in interest charges.”

The trick is to pay off your balance within the introductory period and avoid making new purchases while paying down the transferred balance.

Instead, hatch a plan. Divide the transferred balance — say $3,000 — by the promotional period, 18 months.

With these numbers, you’d need to pay at least $167 monthly to pay it down within the given time frame. However, if you can, pay more. If you cannot pay down the balance in time, you could be stuck with a substantial APR.

When researching balance transfer cards, consider the fees they may include. Most cards charge a balance transfer fee, usually 3% to 5% of the amount transferred. Some cards charge no balance transfer feesbut these cards are generally hard to come by and have shorter promotional periods.

For a balance of $3,000 with a 3% balance transfer fee (the industry standard), you’d pay an extra $90. But that cost will typically be far less expensive than paying interest charges during the same period on a card with a regular APR.

5. If you need more time than a 0% APR card can provide, consider a personal loan

If you need more time than a balance transfer offer allows, personal loans might make more sense, Rossman said.

Personal loans have lower fixed interest rates than credit cards, especially if you have good credit. It won’t be as low as 0%, but it could be relatively close.

Personal loans could provide five to seven years for you to pay down the balance. Apply for the loan and use the funds to pay off your credit card.

For people with poor or limited credit, consider a reputable nonprofit credit counseling agency, Rossman said. These agencies provide helpful strategies for reducing debt with low fees.

6. Focus on paying down card debt, not on earning points or cash back

Every savvy cardholder’s dream is earning cash backpoints and miles on everyday purchases and redeeming them for free trips or new tech.

But if you’re carrying a balance on your credit cards and keep charging expenses you can’t pay at the end of the month for the sake of earning points, you should stop immediately.

There’s a reason why. The current average interest rate is above 20%, according to the Federal Reserve. Some of the best credit cards earn up to 6% back in rewards per dollar spent on specific categories, such as grocery store purchases or airline tickets. Most of the best flat-rate cash-back cards earn no more than 2%.

So any cash backpoints or miles earned will be easily wiped out by interest charges if you don’t pay for your purchases in full when your statement is due.

Set aside your cards while you work to pay off the balance. Rewards can be used to lower your overall balance through statement credits, although likely not as fast as interest charges can accumulate.

7. Consider additional sources of income to pay off credit card debt

But what if you don’t have any additional cash at the end of the day, or the month, to pay down card debt?
That might be why you got into debt to begin with — and that’s OK. We’ve all been there. Adding an extra source of income can help you tackle any debt faster.

Here are a few ideas to try to earn more disposable income and pay down credit card debt:

• Take on a side hustle. Are you good at math or fluent in a foreign language? Tutoring can be a viable option for a side job. Do you have free time during the week and a car in good condition? You might want to consider Uber, Lyft or DoorDash. Many successful Etsy stores started as a side hustle. Rover, a dog walking app, lets you walk local pets, for a price. Consider an activity you enjoy and make sure to follow these tipsas taking on a side gig might have tax implications.
• Rein in your expenses. It may sound obvious, but it’s not always that simple. According to the Federal Reserve47% of Americans don’t have $400 in emergency cash. It’s difficult to align your expenses with your income, but creating a budget and sticking to it can help you make a plan for paying down card debt. Plus, you don’t have to create a budget from scratch or manage it all on your own. The best budgeting apps can help keep track of your spending and identify expenses to cut back.
• Sell stuff you don’t use that’s just sitting around the house. From that dress you wore only once at a wedding to the portable sauna you got for your birthday that’s collecting dust, selling used and new items online can help you earn the extra cash to help pay off credit card debt. There are plenty of places to do that, including Facebook Marketplace.

The bottom line

Credit card rates are still high, so allowing your balance to accrue interest without chipping away at it will only stretch out the problem. Instead, try the tips above to alleviate some of the pressure.

If paying off the debt entirely isn’t a viable solution, try to at least keep up with the minimum payment. While it won’t prevent interest from accruing, it will keep you out of even greater financial trouble.

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