If you’re struggling to manage your credit cards, you’re not alone. Credit card debt hit an all-time high in late 2022, with the average credit card user owing $5,805.
If credit card debt were easy to pay off, it wouldn’t be so prevalent. After all, no one wants to lose their hard-earned money to interest charges. But getting out from under a mountain of debt can be doable with the right combination of strategy, discipline, and in some cases professional help.
How to pay off credit card debt
There’s no one-size-fits-all method for getting rid of credit card debt, but a mix of the following approaches could help you reduce and even eliminate your debt for good.
1. Pay more than the minimum
Making the minimum payment on a credit card can be a recipe for never-ending debt. That’s because even if you pay enough to avoid late fees, you’ll still be charged interest for carrying a credit card balance.
“Often, consumers find that they are just paying the interest on debts and not seeing the overall balance decrease,” says Matt Biliouris, director of the Office of Consumer Financial Protection for the National Credit Union Administration (NCUA). “By putting more toward the minimum balance each month, you will see the numbers start to go down.”
For example, let’s say you have a $2,000 balance on your credit card and you pay a minimum of $100 a month. At a 20.40% APR—the current average APR for credit cards—it will take you 25 months to pay off the debt and cost you $453 in interest charges. By contrast, you could pay it off eight months faster and save $172 in interest by bumping up your payment to $150 a month. The more you pay per month, the more money you can save overall.
2. Choose a payoff strategy
If you have multiple credit cards, choosing a payoff strategy could help you stay focused and eliminate your balances. Experts tend to recommend one of two methods for paying off credit card debt: the debt snowball method or the debt avalanche method.
Both strategies require you to list out your accounts in terms of priority. Then you pay extra toward the first card on your list while maintaining minimum payments on the other accounts. Once your first balance is paid off, you roll those extra funds toward the second balance on your list, and continue this pattern until all of your credit card debt is eliminated.
According to Biliouris, both strategies have advantages and disadvantages. But what’s most important, he says, is that you develop a payoff plan and stick to it.
With the debt snowball method, you prioritize paying off the credit card with the smallest balance first. Once that account is paid off, you focus your efforts on the next-smallest debt, and so on.
While this isn't as cost-effective as the debt avalanche method (more on that next), it can help people who struggle with motivation since it eliminates small credit card balances fast and provides quick wins.
With the debt avalanche method, you prioritize paying off the credit card with the highest annual percentage rate first. Once that balance is paid off, you divert your extra funds toward paying off the card with the next-highest rate. It can take longer to eliminate balances with this strategy than with the debt snowball method, but the debt avalanche is the most effective approach for saving money on interest.
"If you’re a person who likes to have immediate feedback, I would recommend the snowball method, but if you want to save money, the avalanche method minimizes the total cost of borrowing," says Veronica Dangerfield, senior financial educator at Patelco Credit Union. "Whatever you choose, you want it to be highly motivating for you."
3. Consider consolidation
Taking on new debt might not seem like the answer to credit card problems, but in some cases, a personal loan could help.
That's because personal loans tend to have far lower interest rates than credit cards, especially if you have good credit. As of February 2023, the average APR for a 24-month personal loan was nearly half that of credit cards, at 11.48%.
The main benefit of using a personal loan to pay off credit card debt is that you can consolidate your balances into one lower interest rate, which means more of your monthly payment goes toward reducing the principal balance and eliminating your debt faster. But there are other benefits, as well as some drawbacks to consider.
- Potentially reduce your interest rate
- Consolidate multiple payments into one fixed-rate monthly payment
- Set a clear payoff date for your debt
- Approval depends on your credit, income, and other personal details
- Loan payments may be higher than credit card payments
- Some lenders charge application and/or origination fees
4. Use a balance transfer card
If you’re committed to paying off your credit cards fast and have the financial means to do so, another strategy to explore is opening a 0% APR balance transfer card.
These credit cards let you transfer a balance from another issuer in exchange for a temporary period of 0% APR, which often lasts 12 months or more. That means you can transfer your debt onto the card and avoid accruing interest, while 100% of your payments go toward reducing the principal balance. The key is to pay it all off before the introductory period is over and your card reverts to its normal interest rate.
It’s also important to note that while you won’t pay interest during the intro period, you will need to pay a one-time balance transfer fee of around 3%. As long as you believe the interest savings will exceed the fee, it’s likely worth it.
- Temporary interest-free period
- Savings can go toward faster debt payoff
- Consolidate multiple credit card balances
- May require good to excellent credit to qualify
- Balance transfer fees are typically 3% of the transferred amount
- New purchases are still subject to interest charges
5. Seek credit counseling
For those who are in over their heads with debt, credit counseling could be the best route to relief. A certified credit counselor at a nonprofit agency can review your financial situation, offer professional advice, and guide you through potential solutions. That may include:
- Asking creditors for help: A counselor can advise you on how to ask creditors for hardship assistance, or a reduction in fees or interest. "Credit card interest rates may be negotiable, but you often have to ask," says Biliouris. However, it’s often much easier to negotiate your card's terms with the help of an experienced credit counselor.
- Debt Management Plan (DMP): Credit counselors can also enroll you in an official debt management program (DMP), which is a voluntary agreement between you and your creditors that allows you to consolidate certain debt payments and potentially reduce your monthly payment amounts and/or interest rates. “In some circumstances, they can even implement debt forgiveness," says Dangerfield.
- Bankruptcy counseling: A certified credit counselor can conduct the court-required counseling session you need if you decide to pursue bankruptcy as a solution for your debt.
"Talking to a credit counselor is a great idea," says Dangerfield. "They can use their expertise to provide insight into the credit card industry. They could even save your credit score by giving you recommendations and advice."
When looking for a counseling agency, the Consumer Financial Protection Bureau (CFPB) recommends avoiding for-profit companies. Instead, it suggests going through a reputable nonprofit like the National Foundation for Credit Counseling or the Financial Counseling Association of America.
Biliouris adds that you can also reach out to your credit union, since it may offer credit counseling services at no charge.
High APRs can make it difficult, if not impossible, to pay off credit card debt. Without a strategy, you might never see your balances go down, especially if you're still relying on credit to cover expenses and paying only the minimum.
Fortunately, you don't have to be stuck with credit card debt for life. The best way out of debt depends on your situation, but it could include prioritizing certain credit card accounts, taking on a new loan or credit card to consolidate your debt, or seeking professional support.
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