The Fed's rate cut isn't going to help your credit card debt — here's what will

If you were hoping the Federal Reserve’s recent rate cut, its first of 2025, was going to make your credit card debt easier to pay off, the reality is that there are many other, more important, factors at play.

Credit card rates are influenced by things like your credit score, your monthy payment amounts, your card type and issuer — “most of which have nothing to do with what the Fed does,” credit specialist John Ulzheimer, formerly of FICO and Equifax, tells CNBC Select. “I’d say, in the grand scheme of things, card users aren’t going to benefit much, if at all [from the Fed’s rate cut].”

If you pay interest on your credit card because you carry a balance month to month, there are some better ways to lower your rate and get rid of that debt once and for all. Let’s dive into it.

Your creditworthiness, aka your credit score, is the “primary driver” of how high or low your interest rate is, Ulzheimer says. The better your credit, the less your debt will cost you. Since your payment history — whether you pay on time or late — makes up 35% of your credit score, it’s the most important factor.

Experian Boost is a free tool that can instantly boost your credit score. It lets you add on-time payments of household bills like rent, utilities, cell phone and insurance to your Experian credit file.

Balance transfer credit cards offer introductory interest-free periods where you can work on paying down your debt over time without accruing additional interest. Balance transfer periods can last anywhere from 15 to 24 months, giving you at least a year to two years to pay off your credit card balance.

The U.S. Bank Shield™ Visa®Card offers an introductory no-interest period of two years, then 17.74% to 28.74%. To qualify, you’ll need to transfer the balance in the first 60 days. The balance transfer on this card costs 5% of the balance, which is pretty standard. Transferring a credit card balance of $10,000, for example, would cost $500.

To be sure your $10,000 balance is gone by the end of the two years (once the 0% intro APR period is up, interest kicks back in), split evenly you’d pay $417 per month for 24 months, with zero interest accrual.

Many personal loans are used for debt consolidation, which allows borrowers to exchange a high-interest credit card balance for a lower-interest form of debt, with one fixed payment each month. The average rate on a personal loan is around 12%, nearly 8% less than the average rate on a credit card.

There are options even if your credit isn’t great: Avant Personal Loans, for example, accepts FICO® Scores as low as 550, and it provides loans from $5,000 to $35,000 that can be used for debt consolidation.

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