How to Pay off Credit Card Debt


While many people have at least some credit card debt, once it gets too high, it can be overwhelming and anxiety-inducing. Recent credit card debt statistics show the average American household has over $9,000 in credit card debt. This can harm your credit score by increasing your utilization rate. Learning how to pay off credit card debt can help improve your credit score and potentially reduce some of your financial stress.

We have nine strategies for paying off your credit cards that many people use to get out of debt. As you go through these strategies, remember that your situation is unique, and it’s important to find the ones that work for you. You may only use one method on the list, or you might find that using a combination of a few of them works best. 

Regardless of which strategies you choose, you’ll learn how to pay off your credit card debt faster, helping you save money on interest and boost your credit score.

Table of Contents:

  1. Create a Budget
  2. Try the Debt Snowball Method
  3. Use the Avalanche Method
  4. Get a Balance Transfer Card
  5. Build Your Emergency Fund
  6. Negotiate a Debt Settlement
  7. Start Using Cash
  8. Increase Your Income
  9. Take Out a Debt Consolidation Loan

1. Create a Budget

Best for: People who don’t have an adequate budget

A budget can help you with all of the other tips for paying down your debt because it helps ensure you know exactly where your money’s going. You can start by creating budgeting categories for each of your monthly expenses. These may include:

  • Credit card payments
  • Rent
  • Utilities
  • Groceries
  • Savings

Creating a budget will also allow you to see how much money you have left over to make additional payments toward your debt. This doesn’t mean you should never treat yourself, either. You can create budgeting categories and have a specified monthly amount to spend on fun. A credit card payoff calculator can help you track progress as well.

2. Try the Debt Snowball Method

Best for: People motivated by accumulating wins

The debt snowball method is how to pay off credit card debt fast for those motivated by small successes. This strategy involves paying off your smallest debt as soon as possible. It works because looking at each of your credit card balances can feel like it’s too much, but paying off one in its entirety can give you some momentum.

Once you pay off your smallest balance in full, you move on to the next smallest balance. The balance you pay off keeps getting larger, which is why it’s called the “snowball method.” As you save money to pay off the total balance, continue paying your minimum balance on your other cards to avoid late payments. 

3. Use the Avalanche Method

Best for: People motivated by saving money on interest fees

The avalanche method is the inverse of the snowball method. This strategy has you start with your largest balance or your credit card with the highest interest rate. Credit card interest works by charging you a percentage of your balance, potentially making your balance much higher than your original spending amount.  

To use this method, make the minimum monthly payments on each of your cards and put additional funds toward your highest-interest card or card with the largest balance. For example, if you have $500 to pay down your credit card balances, put the majority toward the card with the highest balance or interest. This is one of the fastest ways to pay off credit card debt because you’re heavily reducing the amount you pay in interest.

Debt Snowball Method Debt Avalanche Method

  • Pay off the card with the smallest balance first and continue until you’re debt-free
  • The downside is you can accrue interest on your other cards
  • Great for people who are motivated by small wins
  • Pay off the card with the largest balance or highest interest rate first and continue until you’re debt-free
  • The downside is that it can take some time to pay off each card
  • Great for people who are motivated by saving money on interest fees

4. Get a Balance Transfer Credit Card

Best for: People looking to simplify their monthly payments

A balance transfer card is a type of credit card that many people use to help them pay down their debt faster and save on interest fees. This type of credit card allows you to take the balances from your other credit cards and transfer them to one card. Ideally, the balance transfer card has a lower interest rate. It’s sometimes difficult to keep track of all of your credit card bills, so this also helps simplify your monthly payments.

Before applying for a balance transfer card, be sure to do your research and shop around. Many of these cards have 0% introductory APR, meaning you don’t pay interest if you pay the balance off in a certain amount of time. Be careful, though, because once the interest kicks in, it may be higher than your original cards.

5. Build Your Emergency Fund

Best for: Everyone

A recent study from Empower found that more than one in five Americans have no emergency savings, and this is one of the primary reasons people keep using their credit cards. Continuing to use credit cards makes it difficult for people to pay down credit card debt, and an emergency fund can help keep that spending to a minimum. 

Before you start paying down your credit card debt, consider starting an emergency savings fund. While doing this, you can continue making minimum payments and save at least $500. This way, you can tap into your savings rather than using credit cards if you have an unexpected expense. 

This will also get you in the habit of practicing good financial management. Financial experts recommend saving at least three to 12 months of expenses. Saving this amount can take some time, but it’s invaluable should you unexpectedly lose your job or have an injury that prevents you from working.

6. Negotiate a Debt Settlement

Best for: People who can afford to make a lump sum payment

Many people don’t realize that they can settle their debt for less than what they owe. Debt settlement involves contacting your creditors and negotiating to settle your debt for a lesser amount. Many creditors will do this if it’s an older balance, but you need to be ready to pay the full amount when you call. You can use this strategy with collections agencies as well.

7. Start Using Cash

Best for: People trying to limit their credit card usage

As you begin to reduce your credit card debt, it’s helpful to start using cash. Many people develop a habit of using their credit cards like cash, but this adds to your debt. Switching to cash helps prevent you from accumulating more debt and spending less. A Forbes survey found that over 50% of people said they were more likely to make impulse purchases when using a credit card, and 22% said they feel less bad when spending with a card.

Switching to cash is a great way to stay on budget because you can’t spend more than what you have unless you withdraw more. 

8. Increase Your Income

Best for: People who want to pay their debt down faster

One of the best ways to pay down your credit card debt fast is to increase your monthly income. It’s difficult for some to pay down their debt because their monthly income only allows them to pay their minimum balance. Finding ways to increase your income allows you to pay more than the minimum, so you can take advantage of strategies like the snowball or avalanche methods.

There are a variety of ways to increase your income, such as: 

  • Ask for a raise
  • Request more hours at work
  • Find a side hustle
  • Sell things you don’t need

If you’re looking for a side hustle, there are many opportunities to make money online. Find one that works for you, and you can pay down your debt faster than you thought.

9. Take Out a Debt Consolidation Loan

Best for: People who want to simplify their debt payments

For some, taking out a debt consolidation loan is the best way to pay off credit cards because it can lower your interest and remove credit cards from the equation. A debt consolidation loan is just a personal loan that you use to pay off your credit card debt. Similar to a balance transfer card, this may reduce your interest rate and can simplify your payments.

To get started, add up the total balances of all your credit cards and then apply for that amount for your loan. Once the funds are received, you can use them to pay off your credit cards in full. Then, you only have to make your monthly loan payments.

Is Your Debt Impacting Your Credit Score?

One of the key factors affecting your FICO® credit score is your credit utilization. Your utilization is how much you owe vs. your maximum limit. It makes up 30% of your credit score, and it’s recommended that you keep your amount owed below 30% of your total limit. For example, if you have a $5,000 credit card limit, you want to owe less than $1,500.

If you don’t know your credit score or what you need to work on, Credit.com can help. Sign up for your free credit report card today to get a view of your credit health.

 



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