Fed rate cut lowers interest rates to near zero—but how much are you really saving on your credit card debt?

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The Federal Reserve Board announced an emergency rate cut on Sunday, March 15, lowering interest rates to near zero. This rate cut comes less than two weeks after the Fed cut interest rates by half a point and marks continued effort to minimize the economic impact of the coronavirus (COVID-19).

"The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook. In light of these developments, the Committee decided to lower the target range for the federal funds rate to 0 to 1/4 percent," the Fed said in a statement.

The latest Fed rate cut lowers interest rates by 100 basis points, compared to 50 basis points from the March 4 rate cut. This will likely cause a 1% decrease in interest rates on many financial products, such as credit cards, mortgages, loans, savings accounts and more.

But how much does a 1% rate cut really save you on existing debt? CNBC Select did the math and explains the effect that the Fed's emergency rate cut has on your credit card interest rates.

You can expect your credit card's interest rate to decrease by roughly 1% as a result of the latest Fed cuts, which is even more than the March 4 rate cut of 0.50%. This means that if your interest rate is 15.24%, it may drop to 14.24%, for example.

Card issuers often implement this change soon after the Fed announcement, but it can take one to two billing cycles to appear on your account. Be on the lookout for a lower interest rate within the coming month or so.

A 1% decrease in your interest rate seems pretty sizable, but in the grand scheme of things, it won't really help you get out of debt much faster.

For instance, say you have a $6,000 balance on a card with a 15.24% APR and you plan to make $200 monthly payments until your debt is paid off. At that rate, your payoff plan would look like this:

• Total payoff period: 39 months
• Total interest charges: $1,601

If your rate is lowered to 14.24%, you'd pay this debt a little faster, with some savings:

• Total payoff period: 38 months
• Total interest charges: $1,460

The 1% decrease in your APR would save you $141 in interest payments, and you could pay off your debt one month faster. 

Since the Fed rate cut won't do much to ease the sting of a large credit card balance, a better debt payoff solution might be to open a 0% APR credit card that offers no interest on balance transfers for over a year.

For instance, take the example from above: You have a $6,000 balance on a card and decide to make $200 monthly payments. If you were to transfer your debt to a card with no interest for 15 months, no balance transfer fee and a 15.24% APR once the 15-month intro period ends, you could save even more if you have a plan to pay off your debt.

To fully pay off your balance of $6,000 and avoid any interest, you'll need to make 15 monthly payments of $400 during your promotional interest period. But even if your budget only allows for $200 monthly payments, this route still stands to save you money.

Here's how it breaks down:

• Total payoff period: 32 months (15 months interest-free, then 17 months at 15.24%)
• Total interest charges: $349

This strategy could bring you a whopping $1,252 in savings, and you'd pay off your debt seven months faster, which is much more significant than a 1% decrease.

While a balance transfer credit card can help you get out of debt, keep in mind there are often restrictions. Balance transfers typically set maximum limits to the amount of debt you can transfer (often a percentage or set dollar amount of your credit limit), and transfers between cards from the same bank aren't allowed.

As a rule of thumb, read the fine print before requesting a balance transfer to know what terms apply. And be aware that having good or excellent credit (scores 670 and greater) is often required to qualify for a balance transfer card. (Learn how to make the most of your balance transfer.)

Here are some of CNBC Select's favorite balance transfer cards.

For rates and fees of the Discover it® Balance Transfer, click here.