How to slay your credit card debt with ‘small wins’

If you want to tackle a large debt, target specific purchases, researchers say

Kelly Dilworth
Personal finance writer
Specializing in new trends in credit

How to slay your credit card debt with small wins

When you’re staring down at a handful of credit card bills you know you need to tackle, it can feel daunting just to get started. Rather than launch a plan of attack, it’s often easier to quickly pay the minimum amount due and move on. 

But according to a growing amount of research on the financial power of “small wins,” paying off your credit card debt doesn’t have to feel so grueling. You can shrink your debt more quickly – and feel happier doing so – simply by dicing it up into smaller, more manageable chunks and tackling your bills piece by piece, instead of all at once.

Researchers at Ohio State University and Harvard School of Business recently proposed a financial intervention that they say will not only make paying off debt feel less painful; it will also motivate you to pay more over time. 

Their proposal: Rather than only focusing on the big, overwhelming number at the bottom of your bill, pay off specific purchases you made that month – such as a weekly grocery run or dinners out – so your balance feels more manageable and you feel more in control over your bills.  

“It may be a small amount, but it reduces the individual’s debt incrementally, in bite-size portions that they can actually afford,” wrote researchers Grant E. Donnelly and Michael Norton in a recent Wall Street Journal op-ed.

See related: Startups are using artificial intelligence to help consumers cut debt

Crossing off a single debt motivates you to pay more overall

Donnelly and Norton pointed to the Pay It, Plan It feature offered by American Express. Pay It, Plan It allows you to choose which big purchases you want to pay off over time and which ones you want to pay off with your next statement. 

If you don’t have an American Express card – or if your purchases aren’t large enough to qualify for Pay It, Plan It – you can also add up the balances of whatever you want to pay off immediately and use that to determine your monthly repayment. Or, you can quickly go online after you’ve gone shopping and pay off whatever amount is on your receipt. 

Targeting specific purchases, rather than simply choosing an arbitrary sum each month, not only makes your debt feel smaller and more manageable; it can also help jumpstart your repayment plan. The feel-good buzz you get each time you cross a debt off your to-do-list can motivate you to pay more overall. 

“Repayment-by-purchase offers individuals a way to make progress toward reducing their debt instead of being paralyzed by the mass of what they owe,” wrote Donnelly and Norton. 

In addition, it makes specific debts feel more in reach. “It reduces the feeling that a statement is an endless sea of debts.” 

See related: Should you use a credit card as your emergency fund? 

Small wins can also make you happier and more proactive 

Along with colleagues at the University of Pittsburgh and Yale, Donnelly and Norton put this theory into practice for a forthcoming study and found strong evidence that it’s effective. 

For example, when study participants who typically carry a balance were given the opportunity to pay off specific purchases, rather than just pay one lump sum, they chose to pay 15 percent more overall – a large enough increase to significantly affect their balances. People also tended to target everyday expenses such as groceries rather than only pay off frivolous purchases. 

The findings support previous research that found accumulating small wins can be an effective motivator for credit card holders confronted with big balances. For example, a number of studies show paying off cards with smaller balances first – popularly known as the “debt snowball method” – can help motivate people to keep paying down their debts, even if they would have been better off prioritizing bigger balances with higher rates. 

First popularized by the financial guru Dave Ramsey the debt snowball method works, say researchers, because small wins make people feel better in the moment and want to keep working toward their goals. More complicated or daunting methods, by contrast, can discourage people from even getting started, or cause them to give up early. 

Separate research has shown accumulating small wins can have a comforting effect on people and make them happier and more proactive. Business researchers Teresa Amabile and Steven Kramer found workers tend to feel more motivated when they can point to small achievements. 

Bottom-line: It’s hard to get going when you feel intimidated by a big balance or depressed each time you open your credit card statement. But you can help lessen those negative feelings and feel more in control over your finances by breaking your debts down into more manageable pieces.  

Rather than let the enormity of your challenge get the best of you, try zeroing in on the line items that you know you can afford to pay off and celebrate each time you knock a purchase off your statement. 

If you have multiple cards with debt on them, try tackling the cards with the smallest balances first to see if paying those cards off helps inspire you to keep going. The more wins you accumulate over time, the more motivated you may feel to keep paying off old purchases. 


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Updated: 12-15-2018