The Ultimate Guide to Credit Cards
Thursday, February 22, 2024

7 Ways to Manage Credit Card Debt When Rates Rise (Feb. 2024)

Managing Credit Card Debt When Interest Rates Rise
Marcie Geffner

Written by: Marcie Geffner

Marcie Geffner
Marcie Geffner

Marcie Geffner is an award-winning reporter, editor, and writer. Her stories about banking, credit cards, insurance, economics, small business, and other subjects have been featured by the Los Angeles Times, Washington Post, Bankrate, Credit Karma, Bookmarks Magazine, FOX Business, CNBC, Yahoo! Finance, and dozens of major U.S. newspapers. Her articles have been cited in seven nonfiction books and two U.S. Congressional hearings. She edits nonfiction, memoir, and fiction, and contributes to Kirkus Reviews. Marcie holds a bachelor’s degree in English from UCLA and MBA from Pepperdine University.

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Edited by: Lillian Guevara-Castro

Lillian Guevara-Castro
Lillian Guevara-Castro

Lillian Guevara-Castro brings more than 30 years of editing and journalism experience to the CardRates team. She has written and edited for major news organizations, including The Atlanta Journal-Constitution and the New York Times, and she previously served as an adjunct journalism instructor at the University of Florida. Today, Lillian edits all CardRates content for clarity, accuracy, and reader engagement.

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Reviewed by: Ashley Fricker

Ashley Fricker
Ashley Fricker

Ashley Fricker has more than a decade of experience as a finance contributor and editor, and has specialized in the credit card industry since 2015. Her credit card commentary is featured on national media outlets that include CNBC, MarketWatch, Investopedia, and Reader's Digest, among many others. She has worked closely with the world’s largest banks and financial institutions, up-and-coming fintech companies, and press and news outlets to curate comprehensive content and media. Ashley holds a bachelor's degree in multimedia journalism from Florida Atlantic University.

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Advertiser Disclosure

After decades of low interest rates, the Federal Reserve hiked its key bank rate multiple times in 2022. The Fed’s actions were intended to slow US economic activity and tamp down rising rates of inflation. Consumers who used their credit cards to cope with higher prices now face the additional financial pinch of higher rates for their card debt.

According to the Fed’s data, the average annual percentage rate (APR) for US card accounts that were charged interest rose to 18% in the third quarter of 2022 and then spiked in the fourth quarter to 20%, an increase of about 4% in just one year.

The rate of inflation has slowed, but remains higher than the Fed wants it to be. That suggests prices and card APRs are likely to remain elevated for some time.

Consumers who pay their card balances in full every month may not notice higher APRs, but for those who carry over a balance, higher APRs can result in significantly higher monthly interest charges for the same level of debt.

Consumers who were caught unprepared may well wonder what they can do to minimize the financial pain. Here are seven ideas worth a look:

1. Pay Off Some or All of Your Credit Card Debt

Even if you can’t afford to pay off all of your card debt, it’s worth the effort to try to make bigger payments each month. 

Always pay at least the minimum on every card you have to avoid penalties and fees. Then pay as much as you can toward whichever one of your cards has the biggest balance or highest APR. The more you reduce your card debt, the less you’ll be impacted by higher card rates.

Woman using a calculator sitting on the couch, calculating credit card debt concept
Paying off card debt is the most-straightforward way to avoid high interest fees.

If your savings are flush, you may want to redirect a portion of those funds to debt reduction. Just be careful not to deplete your reserves to the point where you won’t be able to respond financially to an emergency. Ideally, you should always have enough savings to manage a temporary job loss, unexpected car repairs, or medical bills.

2. Use Your Lower-APR Cards Instead of Higher-APR Cards

Even when card rates are relatively high overall, some cards will charge you higher APRs than others. To shift your spending for new purchases to your cheaper cards, examine your monthly statements to find the APRs you’re currently paying. Then prioritize using the cards that charge you the least.

If you have more cards than you currently want to use, consider putting a freeze on the cards you’d prefer not to use at this time. Freezing a card won’t eliminate your minimum monthly payment or stop interest charges on your unpaid balance, but it will let you block any new spending on that card without closing your account and possibly hurting your credit score.

To freeze a card, look for this option on your card company’s website or mobile app. If you don’t see it, call your card company and ask. The phone number should be on the website and on the back of your card.

3. Request a Lower APR

Negotiating your cards’ APRs isn’t easy, but sometimes, a phone call can result in a lower APR that could make your card debt more manageable.

For example, if you’re being charged a penalty APR because you missed a payment, your card company may be willing to lower your APR if you’re a loyal card customer with good or excellent credit and a modest balance. Credit card companies are often willing to hear what you have to say if you otherwise have a good history of on-time payments, and can explain why you missed the payment.

Chart showing how card APRs affect interest payments
You can see how your card’s APR affects how much you pay in interest each month.

One phone call to customer service could end an extended period of higher interest charges.

4. Ask to Convert Your Higher APR Cards

Most card issuers offer multiple cards with different APRs. If you’re an established customer with a higher APR card, contact your card company and ask if you can convert your account to one with a lower APR. 

You’ll typically need good or excellent credit to qualify for the lowest APR cards, but your new APR doesn’t have to be the lowest available to still give you some relief. If you have a significant amount of card debt, APRs that are even slightly lower may help you better manage it or pay it off sooner.

If you’re offered a different card, be sure to ask whether it has an annual fee. If it does, consider the impact of that before you say yes. The fee alone could be higher than your interest savings.

5. Opt Out of Higher APRs For Your Existing Card Accounts

Card companies can and often do change the terms of existing card accounts. Examples of terms that can be changed include credit limits and APRs. 

A federal law requires your card issuer to give you 45 days’ notice before increasing your APR for new purchases, except in certain situations. If you receive a notice, you may be able to decline or opt out of the revised terms. 

The opt-out option typically comes with a deadline. After that date, you won’t be able to decline the rate increase.

Young business woman holding a credit card standing with outstretched hand showing stop sign, preventing you.
You can decline the bank’s notice of increased rates and the account will be closed. But you will get to pay your debt down at your existing interest rate.

If you choose to opt out of your card’s new terms, your issuer will probably close your account. If that happens, your debt won’t disappear, you won’t be able to make new purchases with that card, and your credit score may be negatively impacted. But you will be allowed to pay off your current balance at your current rate, and the savings could be significant.

If you’re more than 60 days late with a payment, your card company can raise your rate for your current balance and for new purchases with no notice or opt-out opportunity. That’s another good reason to always make at least your minimum payment on time.

6. Take Advantage of Balance Transfer Offers

A balance transfer card may be the easiest, though not necessarily the cheapest, way to cope with higher APRs on your cards. In fact, with a good balance transfer card, your APR could drop to 0% for all or a portion of your card debt for as long as 18 months, sometimes even longer. That could give you an opportunity to pay off that debt at a lower cost.

There are some caveats:

  • The 0% APR for a balance transfer is a temporary rate. When that rate expires, your new regular APR will be much higher.
  • The 0% APR may apply only to your transferred balance and not to new purchases, even if you use that card.
  • Balance transfers are usually capped, so you may not be able to transfer all the debt you have to a 0% balance transfer card.
  • Balance transfers often involve fees, usually 2% to 5% of the amount transferred. These fees may cost more than the interest you would’ve paid without the balance transfer.
  • You’ll need good or excellent credit to qualify for the top balance transfer cards.
  • If you freeze a card account to stop new spending, you’ll need to unfreeze it before you can transfer all or part of your balance.

7. Apply For a New Card With a 0% Rate on New Purchases

More credit may not sound like the best way to manage your existing debt, but if you have good or excellent credit, you may be able to qualify for new cards with lower APRs for purchases and balance transfers. 

Some cards offer a 0% APR for purchases for up to a year or longer after you open your account and a low regular APR after that promotion ends. Here are our favorites:

Bank of America® Customized Cash Rewards credit card Review

at Bank Of America’ssecure website

0% INTRO APR RATING

★★★★★

4.8

OVERALL RATING

  • $200 online cash rewards bonus after you make at least $1,000 in purchases in the first 90 days of account opening.
  • Earn 3% cash back in the category of your choice, automatic 2% at grocery stores and wholesale clubs (up to $2,500 in combined choice category/grocery store/wholesale club quarterly purchases) and unlimited 1% on all other purchases.
  • Choose 3% cash back on gas and EV charging station, online shopping/cable/internet/phone plan/streaming, dining, travel, drug store/pharmacy or home improvement/furnishing purchases.
  • If you’re a Bank of America Preferred Rewards® member, you can earn 25%-75% more cash back on every purchase. That means you could earn 3.75%-5.25% cash back on purchases in your choice category.
  • No annual fee and cash rewards don’t expire as long as your account remains open.
  • 0% Intro APR for 15 billing cycles for purchases, and for any balance transfers made in the first 60 days. After the Intro APR offer ends, a Variable APR that’s currently 18.24% – 28.24% will apply. A 3% Intro balance transfer fee will apply for the first 60 days your account is open. After the Intro balance transfer fee offer ends, the fee for future balance transfers is 4%.
  • Contactless Cards – The security of a chip card, with the convenience of a tap.
  • This online only offer may not be available if you leave this page or if you visit a Bank of America financial center. You can take advantage of this offer when you apply now.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR for 15 billing cycles for purchases
0% Intro APR for 15 billing cycles for any balance transfers made in the first 60 days
18.24% – 28.24% Variable APR on purchases and balance transfers
$0
Excellent/Good

Additional Disclosure: Bank of America is a CardRates advertiser.

Bank of America® Travel Rewards credit card Review

at Bank Of America’ssecure website

0% INTRO APR RATING

★★★★★

4.8

OVERALL RATING

  • Earn unlimited 1.5 points per $1 spent on all purchases, with no annual fee and no foreign transaction fees and your points don’t expire as long as your account remains open.
  • 25,000 online bonus points after you make at least $1,000 in purchases in the first 90 days of account opening – that can be a $250 statement credit toward travel purchases.
  • Use your card to book your trip how and where you want – you’re not limited to specific websites with blackout dates or restrictions.
  • Redeem points for a statement credit to pay for travel or dining purchases, such as flights, hotel stays, car and vacation rentals, baggage fees, and also at restaurants including takeout.
  • 0% Intro APR for 15 billing cycles for purchases, and for any balance transfers made in the first 60 days. After the Intro APR offer ends, a Variable APR that’s currently 18.24% – 28.24% will apply. A 3% Intro balance transfer fee will apply for the first 60 days your account is open. After the Intro balance transfer fee offer ends, the fee for future balance transfers is 4%.
  • If you’re a Bank of America Preferred Rewards® member, you can earn 25%-75% more points on every purchase. That means instead of earning an unlimited 1.5 points for every $1, you could earn 1.87-2.62 points for every $1 you spend on purchases.
  • Contactless Cards – The security of a chip card, with the convenience of a tap.
  • This online only offer may not be available if you leave this page or if you visit a Bank of America financial center. You can take advantage of this offer when you apply now.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR for 15 billing cycles for purchases
0% Intro APR for 15 billing cycles for any balance transfers made in the first 60 days
18.24% – 28.24% Variable APR on purchases and balance transfers
$0
Excellent/Good

Additional Disclosure: Bank of America is a CardRates advertiser.

Bank of America® Unlimited Cash Rewards credit card Review

at Bank Of America’ssecure website

0% INTRO APR RATING

★★★★★

4.8

OVERALL RATING

  • $200 online cash rewards bonus after you make at least $1,000 in purchases in the first 90 days of account opening.
  • Earn unlimited 1.5% cash back on all purchases.
  • If you’re a Bank of America Preferred Rewards® member, you can earn 25%-75% more cash back on every purchase. That means you could earn 1.87%-2.62% cash back on every purchase with Preferred Rewards.
  • No annual fee.
  • No limit to the amount of cash back you can earn and cash rewards don’t expire as long as your account remains open.
  • 0% Intro APR for 15 billing cycles for purchases, and for any balance transfers made in the first 60 days. After the Intro APR offer ends, a Variable APR that’s currently 18.24% – 28.24% will apply. A 3% Intro balance transfer fee will apply for the first 60 days your account is open. After the Intro balance transfer fee offer ends, the fee for future balance transfers is 4%.
  • Contactless Cards – The security of a chip card, with the convenience of a tap.
  • This online only offer may not be available if you leave this page or if you visit a Bank of America financial center. You can take advantage of this offer when you apply now.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR for 15 billing cycles for purchases
0% Intro APR for 15 billing cycles for any balance transfers made in the first 60 days
18.24% – 28.24% Variable APR on purchases and balance transfers
$0
Excellent/Good

Additional Disclosure: Bank of America is a CardRates advertiser.

If you’re not able to qualify for a low or 0% APR card due to your credit history, improving your credit scores over time may make you a good candidate for more favorable credit opportunities in the future.

Choose and Take Action

You can’t control rising prices or the Fed’s interest rate increases, but you can choose how to respond to higher APRs on your credit card debt.

If you receive a notice of a higher APR coming or you’re already struggling with high APRs, take a deep breath and try to calmly review your situation. Consider the pros and cons of each option, decide which makes sense for you, and then do it. One or two relatively easy changes could take the pressure off your financial situation.

Advertiser Disclosure

CardRates.com is a free online resource that offers valuable content and comparison services to users. To keep this resource 100% free, we receive compensation for referrals for many of the offers listed on the site. Along with key review factors, this compensation may impact how and where products appear across CardRates.com (including, for example, the order in which they appear). CardRates.com does not include the entire universe of available offers. Editorial opinions expressed on the site are strictly our own and are not provided, endorsed, or approved by advertisers.