2 Ways to Reduce the Interest on Credit Card Debt

by Christy Bieber | Updated July 21, 2021 - First published on May 23, 2021

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Don't assume you're stuck with a credit card's high interest rate forever.

Credit cards can be a great tool for earning rewards, but there's a big downside to using them. The interest rate you'll pay tends to be very high a lot of the time.

If you never carry a balance, this shouldn't be a problem. You can reap the rewards that credit cards provide without worrying about wasting a fortune on interest charges.

Unfortunately, while paying your balance in full each month is always the best course of action, this isn't possible for everyone.

If you've ever found yourself with a lot of credit card debt, it can be frustrating to see so much of your monthly payment go toward interest charges. And the high rate makes it really difficult for you to quickly make progress paying down that debt.

The good news is that you aren't necessarily stuck with this expensive rate for the entire time you're paying off your debt. You actually have two possible options that could reduce the cost of borrowing -- a balance transfer credit card or a personal loan. Keep reading to learn more about each option.

1. A balance transfer

Balance transfer credit cards can be a great way to reduce the interest rate on your credit card debt if you can qualify.

A balance transfer is an offer from a credit card company. If you agree to transfer your debt to their card, they'll give you a special promotional rate on the transferred amount. Usually, balance transfer offers come with a rate of 0% -- but it only lasts for a limited time, such as 12 or 15 months.

If you qualify for a balance transfer card, that means you might be able to reduce your interest rate all the way down to 0%. You will often have to pay an upfront fee to transfer your balance, though. This fee is usually around 3% to 4%, but will likely be a lot less than the amount of interest you would end up paying if you didn't transfer your debt.

The big downside to this approach is that you'll be right back to a higher credit card interest rate if you can't pay off the transferred balance before the promotional rate expires. This may still be a good option, though, because it gives you time to save money on interest and pay down your principal balance each month. That can make paying off your debt easier.

2. A personal loan

A personal loan is another way to reduce your credit card's interest rate. Personal loan rates are often well below the rate on credit cards as long as you're a reasonably well-qualified borrower. You can apply for a personal loan, and if you are offered a competitive interest rate, you can take out the loan and use the proceeds from it to pay off your credit card.

Unlike a balance transfer, a personal loan isn't going to give you a rate of 0%. But you'll have a predetermined payment schedule. And as long as you've opted for a fixed-rate loan, your rate, monthly payment, and total interest costs shouldn't change over time.

If you want the predictability of knowing exactly what you'll pay to be free of your debt and when you'll be done paying it off, a personal loan could be a better option. This may also be the right approach if you think it'll take you several years -- rather than 12 or 15 months -- to pay your balance in full.

Ultimately, both a personal loan and a balance transfer could work to make debt payoff easier by reducing your interest rate. It's just a matter of deciding which option is right for you. And to do that, you'll need to see what interest rates you qualify for as well as determine your timeline for paying your balance off.

For more information and helpful advice, check out our guide on how to pay off debt.

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