Why debt relief makes sense with interest rates on pause

The Federal Reserve opted to keep interest rates steady at its latest meeting on March 18-19, a move that was widely expected given the recent uptick in inflation. While the Fed doesn't directly set consumer borrowing rates, its decisions significantly influence what Americans pay for everything from mortgages to personal loans and credit card debt. 

But while the Fed's pause means credit card interest rates likely won't climb higher in the immediate future, that doesn't mean relief is on the way. Credit card APRs remain at record highs, and unlike fixed-rate loans, credit card rates are variable and are typically tied to the prime rate, which moves in response to Fed policy. That means when the Fed raises rates, credit card interest tends to climb shortly after — but when the Fed pauses, rates tend to stay elevated rather than drop significantly. 

That means for those carrying large credit card balances, the cost of that type of borrowing will likely remain steep for now, making it harder to pay down debt efficiently. Luckily, borrowers have options for debt relief — and with rates paused, this may be a particularly smart time to explore your debt relief options. Here's why.

Start tackling your high-rate debt today. 

Why debt relief makes sense with interest rates on pause

There are a few reasons why debt relief makes sense even with the continued Fed rate pause, including:

High credit card rates will stay stuck

The average credit card interest rate for cards accruing interest is 22.80% currently — a record high. And while the interest rate pause is generally better for your debt than the Fed raising interest rates — a move that could lead to higher credit card rates — continuing to pay interest at today's high rates still isn't ideal. For example, if you have a $20,000 credit card balance on a credit card with a rate of 22.80%, paying off your balance in five years would require you to make monthly payments of $561 and cost you $13,690 in interest (assuming your interest rate stays constant). 

Given the high cost of today's credit card rates, a debt consolidation approach could make sense. If you roll multiple credit card balances into one loan, you can streamline the payment process and get an interest rate that's considerably lower than your credit cards. For example, the average rate for a personal loan is just over 12% currently, a difference that could mean hundreds or thousands of dollars in interest savings. 

Learn how to take control of your debt today.

The interest is still compounding

The Fed rate may be paused for now, but interest is still compounding on your high-rate credit card debt at today's high rates, meaning that over time, you're being charged interest on not just the principal balance, but also the interest that has accumulated prior. That can result in hefty interest costs over time. 

If you're at the point where interest charges are causing your balance to grow faster than you can pay it off, it may be time to consider your debt relief options. For example, a debt management plan through a credit counseling agency may be worth considering, as the credit counselors you work with will typically try to negotiate with credit card issuers to lower your interest rate and fees, making your debt easier to manage.

Budgets are still stretched

There are a number of economic issues looming currently, including high inflation, and they're taking a toll on people's finances. Nearly 60% of Americans can't afford a $1,000 emergency expense, for example, and credit card debt hit record highs in the fourth quarter of 2024. Credit card payment delinquencies are rising, too. These figures point indicate that many Americans are struggling to keep up with the payments on their debt — or just cover the basics. 

If you're struggling to make your monthly debt payments or an unexpected hardship has made it impossible for you to repay your debt each month, your debt relief options, like debt settlement, may be worth considering. When you pursue this type of relief, a debt relief company will negotiate with creditors to try and get them to accept lump-sum payments in return for forgiving the remainder of your balance. That can result in big savings, but you may also take a temporary credit hit during the process.

The bottom line

Taking action on your debt now can help you regain financial stability before interest rates or economic conditions shift again. While the Fed's rate pause offers no immediate relief on credit card rates, exploring debt consolidation, management plans or settlement options could provide much-needed financial breathing room. By addressing your debt proactively, you can reduce interest costs, simplify repayment and work toward long-term financial freedom.