When the Federal Reserve cuts interest rates, it could be good news for your credit cards and loans. It's the perfect opportunity to get better rates for yourself and use those lower rates to pay off your debt. Depending on the size of your debt, even a 1% interest rate could save as much as a few hundred dollars a month.
Pay off debt sooner. When interest rates get cut, don't be surprised to see lower finance charges and minimum payments on your credit cards and loans. Rather than decreasing your payment because you have lower minimums, keep your payment amount the same. Or, even better, increase your payment amount. Either way, you'll see your debt level fall faster than it did at higher interest rates.
Keep in mind, federal rate cuts don't immediately affect your credit cards and loans. It could be two or three months before the change is reflected in your interest rates.
Transfer balances to a lower-rate credit card. If your credit card has a fixed rate and your creditor won't budge on the interest rate, you may be able to transfer the balance to a card with a lower interest rate. Those with higher credit scores will have an easier time finding low or zero-percent interest rate credit cards.
Refinance loans for lower rates. If you're locked into a high interest rate loan, a good time to refinance is after a rate cut. With a good credit score - think 720 or higher - you can often get a lower rate on your loan allowing you to repay the balance sooner.
