The Fed raising rates means credit card debt is even more expensive — here's how a 0% APR card can help you save

The offer mentioned below for the for the Chase Sapphire Preferred® Card is no longer available.

Over the last few months, talks of the Federal Reserve raising interest rates have grabbed headlines. The central bank raised rates in March for the first time in over three years, and another hike was announced Wednesday. Each of these rate hikes means any debt with a variable interest rate will become incrementally more expensive to have.

Anything from student loans, car loans, mortgages and credit cards — the later which has notoriously high interest rates — will be affected by the announcement. And with revolving consumer credit debt reaching $1 trillion in Feb. according to the Fed Consumer Credit report, consumers will pay millions more in interest and fees.

To boil it down, the average credit card debt is roughly $4,700. And with an average interest rate of 14.56%, it would take a person almost six years to pay it off if you pay $100 per month — along with $2,303 in interest charges.

The good news is that there is a simple way to get out of paying credit card interest, as well as strategies to quickly pay down your debt.

Select details what you need to know about rising interest rates, and how to use a 0% intro APR credit card to your advantage.

The headlines around interest rates typically reference mortgages, as even a slight increase in a mortgage's APR can mean paying tens of thousands of dollars more in interest over time. However, higher interest rates for credit cards also hurt and can be a reoccurring budget killer.

For example, if you have the Chase Sapphire Preferred® Card, your interest rate is 20.24% - 27.24% variable on purchases. Even at the lower 18.99% interest rate with a $5,000 balance and a $300 monthly payment, you'll accrue over $700 in interest over 20 months.

Select recommends that you don't spend more than you have and that you always pay off your credit card balance on time and in full to avoid interest and late payment fees. But sometimes, consumers may not have enough cash to pay off their entire statement balance or need to finance a large but essential purchase.

And with the increasing cost of living, every dollar leaving your wallet for unnecessary expenses hurts even more. So, instead of paying interest to your credit card issuer, you may consider using a 0% intro APR credit card to pay down your principal balance and avoid racking up more interest charges.

You can use a 0% intro APR credit card in two ways, including making purchases directly on the card or initiating a balance transfer from one card to another.

Last tax season, I used the Capital One SavorOne Cash Rewards Credit Card (see rates and fees) to pay my tax bill. However, I wanted to split up the payments over time and fortunately the card had an intro APR offer; therefore, I haven't had to pay any interest charges as, I've been making on-time payments on it. Plus I was able to earn the welcome bonus along the way.

So using one of these cards can be a great strategy when you have large purchases that you need to finance, but it's important to make sure you have a plan to pay down your credit card debt. Otherwise, it can be a slippery slope into further debt.

Here's how you can use a 0% intro credit card to your advantage.

0% intro APR card for new purchases

For example, if you know you have a large purchase coming up, maybe it's a new iPhone or kitchen renovation, you may consider using a card like the Wells Fargo Active Cash® Card. It offers 0% intro APR on new purchases for 15 months from account opening (20.24%, 25.24%, or 29.99% Variable APR thereafter; balance transfers made within 120 days qualify for the intro rate and fee of 3% then a BT fee of up to 5%, min: $5. This means you can pay off your purchase over the course of 15 months without accruing any interest.

0% intro APR card for balance transfers

If you have debt that you need to pay down but you're drowning in interest charges, consider transferring your balance to a card like the Citi® Diamond Preferred® Card. It gives you a 0% intro APR for 21 months on balance transfers from date of first transfer (18.24% - 28.99% variable afterwards). However, keep in mind you will need to pay a 5% fee to bring your balance from another card to this one and transfers must be completed in the first 4 months.

While it often makes sense to pay a balance transfer fee if you have a high amount of credit card debt, you'll want to run the numbers before you initiate a balance transfer to make sure the fee you're paying is less than what you would pay in interest.

The focus in recent months has been on interest rates for homes, but with over 180 million Americans currently holding a credit card, interest rate shifts also affect the plastic in your wallet. While low-interest debt may make sense to hold onto to prioritize investing, credit card debt is never good to have. However, a 0% intro APR credit card is a solid way to consolidate credit card debt and/or avoid interest charges altogether.

If you currently have credit card debt, especially with looming rumors of an oncoming recession, it's advantageous to eliminate your high-interest debt as quickly as possible. Additionally, be sure your emergency fund is fully funded to protect you in case you incur unexpected expenses.