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.
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.
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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.
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.
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.
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.
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This article originally appeared on GOBankingRates.com: 5 Smart Ways To Manage High-Rate Debt Until the Fed Cuts Rates Again
