4 things credit card users should do with interest rates on pause

During and following the COVID-19 pandemic, inflation grew at an alarming rate. This led to the Federal Reserve raising rates numerous times over the last couple of years in an attempt to curb inflation. 

However, when the inflation rate started to fall, the Federal Reserve opted to pause hikes to the federal funds rate target — and it did so again this week for the fourth consecutive time. That's important because the federal funds rate forms the foundation for the interest rates you pay when you borrow money. 

One area where you could see an impact is your credit card rates, which are variable in nature. So, when the Federal Reserve changes its benchmark rate, there could be changes to your credit card interest rate and minimum payment pretty shortly after. So, what should credit card users do now that the Fed rate hikes are paused again?

Compare your credit card debt relief options now. 

4 things credit card users should do with interest rates on pause

"Many Americans are seeking to pay off their credit card debt sooner rather than later, given how high credit card interest rates are at present," says Steven Connors, founder and president of Connors Wealth Management. "Especially if you have a balance month to month (or year to year). Interest paid can get quite expensive before you know it."

The good news is that the Federal Reserve's rate hike pause lets you chip away at your credit card debts now, before any potential rate increases. Here are a few things you can do to take advantage of the Fed's rate hike pause: 

Take advantage of debt relief services

The Federal Reserve isn't increasing interest rates right now, but rates aren't necessarily headed down either. If you're dealing with overwhelming credit card debt that you can't pay off soon, consider reaching out to a debt relief service for help. 

These services typically negotiate with your lenders on your behalf to reduce your interest rates or your principal balances. They also work with you to create an affordable payment plan designed to get you out of debt as quickly as possible. As a result, you may be able to pay your debts off sooner and save in the process with a debt relief expert on your side.  

Find out how much money a debt relief service can save you today. 

Consolidate high-interest debt

One "solution would be for those with better FICO scores to transfer the balance to a 0% credit card offer," says Connors. "Many times, they will have this introductory offer that may last a year (sometimes longer or shorter too) but can keep a lid on your current balance." 

If a balance transfer credit card isn't right for you, consider consolidating your debt with a home equity loan. 

"You may own a home that has appreciated nicely in recent years, and you could also borrow against your home equity, and take out a home equity loan," Connors says.

That may be a feasible option considering that the average American had nearly $200,000 in tappable home equity as of August 2023. Moreover, home equity loans and home equity lines of credit usually come with competitive rates since your home is being used as collateral. 

Limit your credit card use

Once you bring your interest down, it's important "to change your behavior," says Connors. "If you can't pay cash, then don't charge it on a credit card." 

That could mean making a budget to understand your income and expenses and learn what you can afford to spend without tapping into your credit card's credit limit. 

"Have you made a budget with your income and your expenses each month?" Connors asks. "I think this is at the core of being debt-free. If your buying habits evolve to one where spending subsides and impulsive purchases become a habit of the past, this can be a very beneficial development." 

Make additional payments when possible 

"Pay as much each month to the credit card balance as possible," says Connors. 

But don't create financial hardship for yourself in the process. 

"Work with the actual household numbers first, and make certain that necessities are covered," Connors says.

The bottom line

Interest rate hikes are on hold, allowing you to make a dent in your debts at their current interest rates. If you're having a hard time making your minimum payments at today's interest rates, though, it may be time to reach out to a debt relief service for help.