6 tricks to juggle multiple credit card balances
Here's how to save on fees and interest, protect your score and stay motivated
Carrying a balance on multiple credit cards can be challenging and even dispiriting if, regardless of your repayment efforts, you don't seem to make any progress.
That might be your case. A 2017 CreditCards.com survey found that an estimated 29 million Americans have carried credit card debt for at least two years.
The impact of rolling card balances can be even larger when those balances travel in packs: According to Experian’s 2018 State of Credit report, Americans have on average 3.1 credit cards.
Here are six tricks to successfully managing rolling card balances on more than one account until they disappear:
How to juggle multiple credit card balances
- Draft a payoff plan. Make sure you pay off the card with the highest APR first.
- Watch your credit utilization. Improve your score as you tackle card debt.
- Pay more than the minimum. You will save money, time and your credit.
- Beware the balance transfer shuffle. Make sure you'll come out ahead before applying.
- Weigh installment loans versus credit cards. Scoring the lowest interest rate possible is key.
- Keep yourself motivated. Get creative, watch your credit score improve and reward yourself.
1. Draft a payoff plan
You have to look at the damage before deciding how to fix it.
Think of this as triage:
- First, take a piece of paper or spreadsheet and add a line for each card balance.
- For each card you can’t pay in full this month, add the balance, the interest rate and the total credit line for that card (so you know how much of your credit you’re using).
- Include the balance transfer rate and balance transfer fee (if there is one).
No matter how you slice it, paying off the card with the highest APR first will save you the most money. So that’s where you want to steer the bulk of your payoff funds. Our payoff calculator can help you strategize.
2. Watch your credit utilization
Drafting a successful payoff plan is more than just throwing money at bills, especially if you want to safeguard your credit as you annihilate those balances.
Generally, credit utilization ratios – how much of your available credit line you’re using compared to your total credit line on the card – above 30 percent can start to have a negative impact on your score.
And “at 45 to 50 percent, your score is tanking,” says Russell Graves, executive director of the National Foundation for Debt Management and board member of the Financial Counseling Association of America.
Further, scoring formulas look at utilization ratios for each individual card as well as all your cards together. And utilization is the second most important credit scoring factor, comprising 30 percent of your credit score.
Graves’ solution: Draft a payoff plan that looks at which accounts have the highest utilization ratios, and throw the most money at those to lower those ratios as quickly as possible.
3. Pay more than the minimum
However you split your payoff funds as you’re demolishing multiple balances, it’s smart to pay more than the minimum to every creditor every month.
- Scoring formulas (and your card issuers), view those minimum payments as a sign of financial stress. Remember: Your goal is a string of $0 balances – and good credit.
- In addition, paying more than the minimum may potentially save you hundreds, if not thousands, of dollars in interest. Plus, you could pay off your card balances (much) sooner.
- How much time and money could you save? Use CreditCards.com's minimum payment calculator to find out.
4. Beware the balance transfer shuffle
If you have a pile of dueling credit card debts, transferring them all onto one card with a 0-percent APR can seem like a no-brainer.
Not so fast.
Before you open any new balance transfer credit cards, weigh the impact on your credit score.
- Increasing your available credit will lower your aggregate utilization ratio (all of your card balances divided by all of your credit lines), and that’s good for your score.
- But applying for credit often knocks a few points points off your score. And, if you load all your balances onto one card, you might be at capacity or near capacity, which could increase the utilization ratio for that card – and lowers your score.
Look back at your credit card spreadsheet: Could one of your current cards hold all of your current balances? And if so, what would that cost you in interest and balance transfer fees?
Video: What is a balance transfer credit card?
Graves uses this rule of thumb: Payoff period of six months or less? Skip opening a new card and just knuckle down. That’s because often what little you could save in interest won’t be worth the possible score damage caused by opening a new account, he says.
If the payoff period is a year or more, then a new 0-percent APR card could save some money. If you go that route, do two things:
- Try to find a balance transfer card with no balance transfer fee, which typically runs between 3 and 4 percent of the amount transferred. “Sometimes the fees exceed what you’re going to save,” says Graves.
- Put your credit cards in the sock drawer until you’ve paid off your current balances. “The debts are not going away,” he says. “You’re just playing ‘credit card shuffle.’”
Pro tip: Harness “found” money.
From tax refunds to annual insurance dividends, “That’s money that can go toward debt,” says Jean Chatzky, author of “Age-Proof: Living Longer without Running Out of Money or Breaking a Hip” and host of the HerMoney podcast.
Another source of funds: Leftover gift cards. Sell them and use the proceeds to pay credit card balances, says Chatzky. A few popular sites where you can sell gift cards safely include Cardpool, Gift Card Granny and Raise.
Or use gift cards to pay for necessary items (groceries and bills), and put the cash you would have spent toward card balances.
5. Weigh installment loans vs. credit cards
One option to a balance transfer: A personal loan from a credit union or alternative lenders (such as SoFi or Earnest). Rates are often at or below 10 percent, says Graves.
With an installment loan, you have a fixed number of monthly payments for a specific number of months. Installment loan utilization ratios are calculated differently and have a lower impact on your overall credit score.
This means you can go from having a couple of maxed-out credit cards to having one installment loan that you’re paying on time. And that’s a big win for your credit score.
The downside: With a personal loan, there’s still a credit check and (just like opening a credit card) that can temporarily ding your credit.
Video: Drawing down debt
You also want to make sure the interest rate is significantly lower than your card APRs. “If you’re not cutting your rates in half, why are you doing it?,” says Graves.
And if you move those balances, you still want to leave the credit cards in the sock drawer until you pay off the installment loan. Otherwise, you’d only be adding to your problems by racking up more balances on those freshly paid-off cards.
6. Keep yourself motivated
When you’re juggling multiple card balances, it can seem like a long, slow slog to payoff day. Here are four ways to stay motivated:
- Break that monthly payoff amount into bites.
“It’s even helpful if you can come up with a dollar amount per day,” says Chatzky. “I move it out of my checking account and into my savings account [daily],” she admits.
- Remember those outdoor billboards used to track local fundraising goals? Create a similar device to chart your gains, says Chatzky. “Allow yourself to see the progress you’re making – the more visual the better.” And post it somewhere prominent.
Watch your credit improve.
- As you pay down those balances every month, watch your credit score climb. “It can be a motivating factor,” says Chatzky. (You can check your score and report for free anytime at CreditCards.com.)
- Every time you hit a goal (such as cutting $300 from a card balance), treat yourself to “a small indulgence,” says Chatzky.
When it comes to demolishing multiple card balances, “There’s no magic,” she says. “To keep yourself honest is the key.”
- 5 steps to make sure your cards' credit limits are vacation-ready – Heading out of town? Make sure your credit limits are high enough to cover any surprises and costs while traveling ...
- Should you use a credit card as your emergency fund? – Credit cards come with myriad benefits, such as rewards and consumer protections, and can be a financial lifeline on rare occasions ...
- Credit card limit decreased? Why it happens, and what to do about it – A credit limit decrease can happen because your spending habits changed, or if your good credit is mixed up with someone else's bad credit ...