5 Smart Ways To Manage High-Rate Debt Until the Fed Cuts Rates Again
Written by
Travis Woods
Edited by
Jenna Klaverweiden
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
The Federal Reserve continued to leave interest rates at a benchmark level on January 26, choosing to neither cut nor increase rates for now.
In an era in which many borrowers face elevated credit card costs, personal loans and variable-rate lines of credit, high-interest debt will continue to strain budgets and delay financial goals in 2026. Here are five smart ways to manage that high-rate debt until the Fed potentially cuts rates.
1. Identify Your High-Rate Debt
Before you determine your financial strategy, it’s important to identify which debts are costing you the most. High-interest debt can be anything with an annual percentage rate (APR) above 8%; look for things like most credit cards, personal loans and short-term payday advances.
Prioritizing paying these down can save money over time by preventing their high interest rates from accumulating.
2. Use Tried-and-True Strategies
Look to what works in terms of debt payment rather than some novel new technique.
For instance, the debt avalanche method — paying extra toward the debt with the highest interest rate first while making smaller (or minimum) payments on others — is one tried-and-true method to reduce the total interest you pay. Another option is the debt snowball method, in which you pay down the smallest debt first (while making minimum payments on the rest) to build momentum.
3. Consolidate When Sensible
If you can qualify for it, consolidating debt into a lower-rate personal loan or even a balance transfer card (which often has a 0% introductory APR) can help streamline your payment and temporarily reduce interest.
4. Free Up Money in Your Budget Wherever You Can
Reworking your normal monthly budget to at least temporarily cut out discretionary spending, or reallocating your savings toward debt repayment, can radically speed up your debt repayment progress.
Every available dollar that goes above your minimum payment helps you cut into the interest and reduce your principal more quickly.
5. Automate All Payments
By setting up automatic payments, you can avoid late fees and thus protect your credit score — a crucial factor in getting better loan terms when interest rates eventually fall.
More From GOBankingRates
