Will credit card debtors catch a break with the expected Fed rate cut? Not really

On Sept. 17, 2025, the Federal Reserve’s Federal Open Market Committee is likely to lower its benchmark interest rate, the federal funds rate, by 25 basis points (a quarter of a percentage point). Assuming that happens, it will be the first change to the federal funds rate in 2025. Inflation is relatively low and the job market is weakening, so the Fed will likely remove some of the pressure applied by higher interest rates.

Credit card rates tend to move in tandem with Fed actions. In other words, if the Fed lowers rates by a quarter point, existing credit cardholders should see their credit card rates come down by a quarter point as well (often within a billing cycle or two).

Unfortunately, that’s not going to make it easier to pay off your credit card debt.

Credit card rates will remain elevated even if the Fed does follow through with a rate cut. The average credit card rate is 20.12 percent, according to Bankrate’s weekly sweep of more than 100 popular credit cards offered by the 50 largest issuers. This figure has consistently been above 20 percent since March 2023. Prior to that, it had never touched 20 percent (we started tracking in 1985).

Have a question about credit cards? E-mail me at [email protected] and I’d be happy to help.

A sample credit card debt payoff scenario

The average credit card balance is $6,473, according to TransUnion. Here’s what it would look like to pay off that amount based on the current average interest rate of 20.12 percent compared to the average interest rate if it falls a quarter point to 19.87 percent:

If you make minimum payments toward the average balance at the average rate, you’ll be in debt for 219 months (more than 18 years), and you’ll end up paying $9,426 in interest.

That’s because credit card rates are high and the typical minimum payment is very low (the exact formula varies from issuer to issuer; the common example I chose was 1 percent of the balance plus interest each month, with a floor of $35).

In this scenario, the minimum payment starts at $173 per month and declines along with the balance. If the average credit card rate falls a quarter point to 19.87 percent, the monthly minimum payment only goes down by a measly dollar. The minimum payments still stretch out over 219 months and the total interest expense is $9,300, a total savings of just $126 over those 18 and a quarter years.

More rate cuts likely lie ahead, but it still won’t help credit cards

As of the afternoon of Sept. 12, the CME FedWatch tool indicated that investors’ best guess is for the federal funds rate to end the year between 3.50 and 3.75 percent (75 basis points lower than it is today). By the end of 2026, the most popular estimate is for the federal funds rate to sit between 2.75 and 3 percent.

The crystal ball gets pretty cloudy when we look that far out, but regardless, credit card rates are high, and they’re going to stay relatively high. For argument’s sake, let’s assume that 2.75 to 3 percent figure is correct at the end of next year. That’s one and a half points lower than where the federal funds rate sits today. If the average credit card rate falls by the same amount, it would be about 18.62 percent in early 2027 (all of this is approximate; rates for new cardholders — which our national averages measure — often don’t fall quite as much as Fed actions).

Even then, the minimum payment math is still ugly (at 18.62 percent, minimum payments equate to 216 months in debt and a total interest expense of $8,673). The cumulative decline would be significant (about $750 in interest savings), but paying more than eight grand in interest over 18 years still isn’t a pretty picture.

How to bring your credit card rate down to zero

This is why the best advice for credit card debtors is to take matters into your own hands and make your personal credit card rate 0 percent. More than half of cardholders (54 percent) typically pay in full each month, according to Bankrate’s 2025 Credit Card Debt Report. These cardholders are in a great spot. By paying in full, they avoid pricey interest charges, and they’re in position to benefit from valuable travel and cash back rewards programs as well as other perks (convenience, purchase protection, extended warranties, travel insurance and so on).

Of course, despite the best intentions, not everyone can afford to pay their credit cards in full each month. According to Bankrate’s research, the most common causes of credit card debt are practical items such as emergency expenses (think medical bills, car repairs and home repairs), followed by day-to-day expenses like gas and groceries. If you have credit card debt, the best thing you can do is to sign up for a credit card with a generous 0 percent balance transfer promotion.

How balance transfer cards work

The longest interest-free balance transfer offer on the market is 24 months, on the U.S. Bank Shield™ Visa® Card*. After the term ends, a 17.74% – 28.74% Variable APR kicks in. The transfer fee is 5 percent or $5, whichever is greater. Here’s how this card can help you pay off your debt relatively quickly, at the lowest possible cost.

If you divide the average credit card balance ($6,473) into 24 equal monthly installments, you only need to pay about $270 per month to knock out the entire amount within two years. If you factor in the $324 transfer fee to the total amount owed, it works out to around $283 per month for 24 months.

All of that feels much more achievable than trying to tackle the $6,473 mountain all at once. Consider this: Even if you committed to paying off the average credit card balance in two years, if you were charged the average interest rate of 20.12 percent throughout that time, you would end up owing $1,442 in interest. Yes, that’s a lot less than the minimum payment scenario, but it’s still a sizable chunk of change. The balance transfer approach could save you all of that interest, assuming you’re able to pay off the entire amount before the clock runs out.

The best way to use a balance transfer card is to divide what you owe by the number of months in your interest-free term and try to stick to that level payment plan. Don’t add any new purchases — even if they’re interest-free — because it’s hard to hit a moving target.

The best balance transfer cards typically require good to excellent credit scores. If you have a lower credit score (below the mid-600s, for instance), or if you have more than $5,000 or $6,000 in credit card debt, the balance transfer approach might not be best for you.

Other ways to pay off credit card debt

Reputable agencies such as Money Management International and GreenPath offer debt management plans (DMPs) with much more favorable terms than typical credit card agreements. They don’t require stellar credit, and they won’t be scared off if you have a five-figure credit card balance.

You can probably consolidate your 20, 25 or 30 percent rates into a DMP with a 6 percent rate lasting four or five years. The good ones charge low fees (in addition to the interest rate on the DMP (you can expect something like a $50 setup fee and a $25 monthly charge). There’s some tough love — these agencies typically require you to close your credit cards with outstanding balances — but many clients come out the other side with a lot less debt and a much higher credit score.

You could also consider other debt payoff tactics such as cutting your expenses and/or upping your income (perhaps via a side hustle, a higher-paying job or by selling stuff you no longer need). A dollar saved is a dollar earned, after all. You don’t need to do these things forever. If you buckle down for six months, you could see a notable improvement in your finances.

The bottom line

While the average credit card rate should soon fall below 20 percent, it doesn’t make a big difference to your budget if you’re paying 20 percent or 19 percent or 18 percent on your credit card debt … these rates are all high. The key is to make your personal credit card rate zero, either by paying in full or by taking advantage of a 0 percent balance transfer promotion.