3 ways to cut credit card costs as rates rise

Rise of digital payments

Credit card debt is expensive. On average, people carrying it are already paying a high 14.99 percent interest rate, and that bill will only get more expensive as rates rise further.

Most credit card contracts have variable interest rates, which means borrowers would feel an increase in rates by the Federal Reserve instantly. Every 0.25 percent increase in rates would add approximately $25 of interest to every $10,000 of debt annually. Although not dramatic, rate increases will make expensive debt more costly.

Fortunately, you have three relatively easy ways to cut your rate and save.

A balance transfer

If you have an excellent credit score, a balance transfer is the cheapest way to lower your credit debt. Ideally, you want to look for a balance transfer credit card that doesn't charge a transfer fee and carries a 0 percent intro APR. CompareCards, a comparison website owned by LendingTree, highlights cards from some leading issuers that have no balance transfer fee and charge no interest for 15 months. 

Here are a few things to remember.

First, you can transfer debt only between different banks. For example, if you have debt on a Wells Fargo (WFC) credit card, you can't transfer debt to another Wells Fargo card.

Second, you should make sure you get the balance transfer completed as soon as you open the account. The clock on the promotional offer starts ticking when you open the account, not when you transfer the debt.

Finally, if you have a lot of debt, you might not be approved for a card with a limit high enough to cover the full amount. But you shouldn't worry: Transfer as much as you can, and consider one of the other options below for whatever is remaining.

A personal loan

In recent years, the personal loan market has exploded. Companies like LendingClub and Prosper introduced Americans to the concept of using personal loans to refinance expensive credit card debt.

Now, even Goldman Sachs (GS), via its new consumer brand Marcus, is offering low-cost personal loans online. With most lenders, you can check your rate online without affect your credit score. A number of lenders charge no origination fee, and you can obtain funds quickly.

And perhaps the best part of a personal loan is its structure: If you take out a five-year loan, five years is your deadline for paying it off. Credit cards constantly provide the temptation to make only the minimum due, which can leave you with a lingering debt balance for years if not decades.

You can shop for a personal loan on sites like LendingTree or CreditKarma. Compare the APR you're offered with the APR on your credit card before making your final decision.

Just call and ask for a rate reduction

Believe it or not, contacting your credit card company and requesting a rate cut often works. Clearly, the reduction won't be as dramatic as a balance transfer or personal loan, but the savings can still be significant.

Nick Clements is a former banker turned consumer advocate and co-founder of the personal finance and lending information website MagnifyMoney.com by LendingTree.