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What the Fed Rate Cut Means for Credit Cards

The Federal Reserve held its first meeting of the year on Jan. 29. After three consecutive rate cuts since September 2024, the Fed held steady and left rates unchanged. This means the federal funds rate will stay in the 4.25% to 4.5% range.

This move doesn’t come as a surprise to many economists, with many predicting the Fed will hold off on lowering rates in March as well. What does this mean for you and your credit card debt? I’m glad you asked.

What Credit Card Consumers Can Expect

Unfortunately, the answer is “not much.” Consumers won’t see a difference in annual percentage rates since the Fed left rates unchanged.

Consumers should keep an eye on future Fed meetings for possible rate cuts. If interest rates drop in the coming year, then consumers will feel a much bigger impact. In the meantime, you should just keep paying your credit card as usual.

[Read: Best Low-Interest Credit Cards.]

What to Do Next

Regardless of any anticipated rate cuts, you should continue to pay (and prioritize) your high-interest credit card debt. There are several tried and true methods you can employ to help eliminate your debt:

Apply for a balance transfer credit card. If you’re carrying a high balance on a credit card, a balance transfer credit card is a good option. You can cut into your debt while making payments during a card’s 0% introductory APR period, which can last from 12 to 21 months.

Apply for a debt consolidation loan. You can combine multiple balances into one installment loan. The APRs may be lower on debt consolidation loans than the APRs on your credit cards.

Use the debt avalanche method. With this method, you pay off your credit card balances from the highest APR to the lowest. The only drawback, though, is if you have a high balance, it could take a long time to pay off that first credit card.

Use the debt snowball method. With the debt snowball method, you pay off your credit card debts in order from smallest to largest.

While rates might decrease in 2025, don’t put all of your eggs in this one basket. If you’re hoping these rate cuts will ease the burden of your credit card debt, you might be hoping for a while.

More from U.S. News

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Fed Rate Cut: Here Are the Winners and Losers

What the Fed Rate Cut Means for Credit Cards originally appeared on usnews.com

Update 01/30/25: This story was previously published at an earlier date and has been updated with new information.

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