Debt relief moves to explore with interest rates on pause

With high interest rates locked for at least two more months, borrowers stuck in debt should consider making some strategic moves now. Getty Images

The news on Wednesday that the Federal Reserve was keeping its benchmark interest rate frozen wasn't exactly unexpected, but it still marked yet another major disappointment for borrowers. Saddled with high rates on everything from credit cards to personal loans to mortgages, the Fed's decision this week all but ensures the status quo for around another two months, or until the central bank meets again in mid-September. Until then, the federal funds rate will remain frozen at a range between 4.25% and 4.50% and lenders who use that as a benchmark will likely keep rates elevated.

This is especially troubling for those borrowers coping with high-rate debt, particularly via credit cards. With rates there just under a recent record 23% high, compounding interest to work through and an average balance of around $8,000, these borrowers may find themselves looking for relief, particularly now that the Fed won't be meeting again anytime soon. Fortunately, there are a variety of debt relief moves to consider, some of which can provide the ideal path toward regaining your financial independence. Below, we'll break down three worth considering right now.

Start by reviewing your credit card debt forgiveness qualifications here.

Debt relief moves to explore with interest rates on pause

While each borrower's needs differ, the following moves may help now that any assistance courtesy of rate cuts has been paused:

Review your budget – closely

When was the last time you took a detailed look at your budget? Use this time to closely examine it for potential cost savings. Everything from subscription services to food shopping needs should be evaluated for ways to cut costs. You may be surprised at how much unnecessary spending you've been doing each month. 

And, while this may not help make much of a dent in your existing credit card balances, it can go a long way toward keeping them where they are versus growing them further in the weeks and months to come. Additionally, if you ultimately do choose a debt relief option, you'll need to know where it fits into your overall budget, so this timely move helps in multiple ways.

Learn about the debt relief options available to you now.

Understand the risks associated with debt relief options

There are multiple attractive debt relief options ranging from credit counseling and debt management programs on one end of the spectrum to credit card debt forgiveness to bankruptcy for extreme cases. Each, however, is associated with risks, of which credit score damage is at the top of the list. 

Still, there may be fees associated with select debt relief options, and you may need to free up a portion of your budget to make payments as agreed to, for example, if you use a debt management program. Understand all of these risks in advance before getting started; that way, you're in a better position to manage them if you ultimately decide that a specific debt relief strategy is right for you.

Address the issues that caused your debt to grow

While reviewing your budget and understanding the risks associated with debt relief options is critical, it's equally important to address the root causes of your debt issues. Without doing so, even the most effective debt relief strategy won't work as intended. You may have built your balances quickly or slowly, but it will take an extended period to erase them, so use this time to understand what caused your debt to grow. 

By taking a hard look at the causes, you'll be better able to avoid making the same mistakes in the future. It may sound like an obvious next step, but it's an easy one to avoid taking when some debt relief options feel like a complete fresh start.

The bottom line

A pause in interest rates may be disappointing, but if it's the motivation to work toward paying down your debt in a more expeditious way, it doesn't have to be. By making the above three moves now, either in conjunction with one another or independently, borrowers can begin the delayed work of tackling their debt once and for all an, critically, regain the financial health that's been diminishing in recent years. 

Matt Richardson

Matt Richardson is the senior managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.