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How to pay off credit card debt

If your credit card debt has become problematic, here are effective ways to pay it off


Tackling credit card debt requires a strategy. Whichever you choose, your plan to pay off your debt will only be effective if you stick with it.

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Debt, in and of itself, isn’t always a bad thing. Certain low-interest debt, like student loans and mortgages, can be an investment that will increase in value and generate income in the long term. That’s usually not the case, however, with credit cards.

“It’s important to reduce credit card debt … because credit card interest is compounded daily and can cause your financial growth to remain stagnant,” explains Dino Selita, president of The Debt Relief Company. “Credit cards are only meant to be used as a short-term vehicle for borrowing against your cash flow. As a lending product, they will cost more in interest than any other financial product.”

As Selita notes, credit cards can be a useful tool to help you manage your budget and earn rewards from your spending. But it’s simply not worth going into debt to enjoy those perks.

Consider the following scenario: You have $800 in credit card debt on a card with an 18% APR. You make a decision to pay off this card and stop making purchases on it. However, you only make minimum monthly payments of $25. It would take you 44 months to pay off the balance, and you’d spend almost $300 in interest.

Moreover, your credit score can take a hit if you carry high credit card balances. Credit utilization is the second most important factor of your FICO score, and if you use more than 30% of your credit line, it will likely hurt your credit (although keep in mind that the 30% threshold isn’t the hard and fast rule it’s often made out to be). If you’re wondering what your credit utilization is, figure it out by using our credit utilization ratio calculator.

Additionally, maxed-out credit cards can be a red flag to creditors and lenders, who may see them as a sign you’re in financial trouble.

If you’ve found yourself struggling with credit card debt and are worried it’s impacting your credit, don’t panic – there’s a way out.

Potential strategies

Credit card debt creeps up on you, then quickly overwhelms you. With some of the highest interest rates across all forms of credit, credit card debt can accumulate fast and wreak havoc on your credit score and overall financial well-being.

If you realize you’ve gotten in over your head with credit card debt, it’s time to build a strategy to eliminate it. Here are effective ways to pay it off and get your financial life back on track.

Avalanche method

The avalanche strategy is a popular way to eliminate credit card debt. It focuses on paying off credit cards with the highest APR first in order to save as much as you can on interest.

“So, if you have one credit card with a 15% interest rate and another with an 18% interest rate, you would pay off the debt accumulated on the 18% credit card first,” explains Freya Kuka, founder of the personal finance blog Collecting Cents. It saves you money in the long run to eliminate the most wasteful recurring payments first. “This method works well for disciplined people who want to be debt-free with the most effective strategy.”
Make sure you’re still making minimum payments on your lower-interest credit cards as well, to avoid late fees and damage to your credit. Missed payments and unpaid debts will remain on your credit report for seven years.
Then, when you’re finished paying off the card with the highest interest, move to the second-highest APR and repeat until you’re fully rid of credit card debt.

Snowball method

Paying off credit card debt can be mentally exhausting. You may feel like you’re spending a big chunk of your income trying to eliminate it, yet all of your accounts are still showing a balance.

If you’re worried this might make you lose motivation, consider using the snowball method. It works by the same principle as the avalanche method, but instead of focusing on high-interest credit card debt, you concentrate on paying off the cards with the lowest balances first.

For example, if you have one credit card with a balance of $2,000 and an 18% APR and another card with a $750 balance and a 14% APR, you would pay the second credit card down first because it has a lower balance, even though it also has the lower interest rate.

“My husband and I used the snowball method to get completely out of debt, including our mortgage. In all, we have paid off over $260,000 in debt,” says Stacie Heaps, personal and family finance writer at Families for Financial Freedom. “I am a big fan of the snowball method because it gives you quick wins at the beginning that help you get motivated and stay motivated to get out of debt.”

Keep in mind that using this method is likely to save you less on interest compared to the avalanche strategy. But if you know seeing immediate progress is necessary for you to continue, the snowball method might be an excellent option.

Debt consolidation

The idea behind debt consolidation is combining high-interest balances and converting them into low-interest debt, such as a personal loan or another credit card. There are a couple of ways to do it:

Get a balance transfer credit card

Balance transfer cards allow you to transfer a high-interest credit card balance to a new card with a temporary 0% APR. The no-interest period typically lasts between 12 and 18 months. Using a credit card payoff calculator can help you find balance transfer cards to fit your needs.

If you pay off the balance during that period, a balance transfer card can be an amazing deal. You won’t just lower the interest – you’ll eliminate interest charges for the length of the introductory period.

If you don’t finish paying off the debt by the end of that period, however, the card’s regular APR will kick in, and it may be even higher than your current interest rate.

To make sure you don’t get caught with high interest rates, consider transferring only the amount you know you’ll be able to pay off in time. You could then set up a payment plan for yourself with higher monthly payments. For example, if you owe $1,200 and your 0% introductory period is 12 months, you would pay $100 per month so that it’s paid off in time.

Note that balance transfer cards are typically available to consumers with good and excellent credit. If you know your credit needs some work, you might want to choose a different method of reducing debt.

Consider a debt consolidation loan

Another option for those with good credit is a personal loan. When you use this method, you need to take out a loan with an interest rate that’s lower than your current debt. Once you apply it to your credit card balances, you’re left with a single fixed monthly payment.

This makes a personal loan not only a smart way to pay less in interest but also a convenient one. It’s easier to keep track of one loan than a few credit cards. Plus, having to make one payment a month instead of many can help alleviate some financial stress.

While a longer-term personal loan can reduce how much you pay a month, aim to pay it off as soon as you can. Longer repayment terms may lead to paying more in interest over time, even if your new interest rate is lower.

Emergency fund

According to a Bankrate survey from January 2022, 56% of the 1,004 U.S. adults surveyed can’t pay their expenses from their savings account during an emergency.

It’s important to have an emergency fund because it can help you create financial security to avoid debt during a financial emergency, plus:

  • You don’t have to use your credit card.
  • You won’t go into debt for a loan.

You shouldn’t use an emergency fund for your daily spendings or monthly expenses — keep in mind that it’s for emergencies.  A good rule of thumb is to have around three to six months of basic expenses in your savings account.

Today’s inflation might be making it tough to start a savings account. You can start by lowering your expenses in the following ways:

  • Reduce the number of your streaming services accounts.
  • Instead of constantly buying coffee outside, try having coffee at home.
  • Avoid spending on restaurants and fast food.
  • Create a budget and stick to it.

While you build your savings account, don’t stop paying the monthly balances of your credit cards. Try to deposit a specific amount in your savings account, either on weekly, biweekly or monthly basis.

Bottom line

As you tackle your debt using one of these methods, you might also try negotiating with your credit card company to settle your debt, reduce your interest rate or agree on a more feasible repayment plan.

Credit card debt can be quick to accumulate and tough to get out of. Don’t let it bring you down: Pick a strategy that you think you can stick with, and keep working at reducing your balances. With enough discipline and patience, you’ll finally start seeing zeros on your credit card statements.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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