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How to Pay Off Credit Card Debt

In this article

  1. Avalanche method
  2. Snowball method
  3. Debt consolidation
  4. Balance transfer credit card
  5. Update your budget based on your plan
  6. The path to living debt free
  7. FAQs

Paying off credit card debt can be easier than you think. By using the right method and budgeting carefully, you can start your journey to a debt-free life.

Catherine Hiles • June 2, 2023

Credit cards are helpful tools. They can help you pay for everyday or unexpected expenses without adjusting your budget. Many offer rewards such as points and cashback for using them frequently. But they also can have high interest rates, and over-reliance on them can result in substantial debt.

Paying off credit card debt can be easier than you think. If you’re wondering, “How do I pay off my credit card debt?” there are several directions you can take.

When researching how to pay off credit card debt, you’ll find four main methods: the avalanche method, the snowball method, debt consolidation, and a balance transfer. Each method has its pros and cons.

Before you decide which is the best way to pay off credit card debt, find out exactly how credit cards work.

Then, ask yourself these questions:

Answering these questions can help you decide which method is suitable for you. Here are the basics of each technique to help you decide which is best.

Avalanche method

The debt avalanche method prioritizes paying off high-interest debt first. Each month, you’ll make the minimum payment on all debts but make a larger payment on the one with the highest APR (annual percentage rate). Once the high-interest card has a zero balance, take the money you used to pay it down and put it toward the next highest-interest credit card.

For example, if you have three credit cards with 20%, 18%, and 15% interest rates, you’ll first make additional payments on the 20% one. Once that’s paid off, you’ll focus on paying off the 18% card and then the 15% card.

Using this method, you’ll pay less interest overall. That means more money in your pocket when you’ve paid off your debt.

Snowball method

While the avalanche method focuses on paying off high-interest debt, the snowball method focuses on low-balance debt. You’ll pay extra toward the credit card with the lowest balance first and the highest balance last.

Similarly to the avalanche method, you’ll still make minimum payments on all accounts to avoid fees. You’ll just put any extra toward that low-balance card first.

For example, if you have three credit cards with balances of $5,000, $3,000, and $1,500, you’ll pay off the $1,500 balance first. After that’s taken care of, you’ll put that extra money toward the $3,000 balance and then the $5,000 balance.

The snowball method lets you make quick progress on low-balance debts, which can keep you motivated while you pay off credit card debt. However, you may end up paying more interest overall.

Debt consolidation

Credit card interest rates can be pretty high, making it hard to get out of debt. A debt consolidation loan can help you pay off the debt quicker, possibly with a lower interest rate.

When you take out a debt consolidation loan, you’ll pay off all credit card balances using the funds. You’ll then have one monthly payment instead of several. Ideally, the loan will have a lower interest rate than the credit cards, which helps you pay less interest overall.

Like all loans, you’ll have to qualify for a debt consolidation loan. Many lenders require a minimum credit score in the mid-600 range. If your score is lower, you may still qualify for a debt consolidation loan, but the interest rate will likely be higher.

Debt consolidation loans simplify paying off credit card debt but may not be an option if your credit score is poor.

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Balance transfer credit card

Another method you’ll see when looking into how to pay off credit card debt is to apply for a balance transfer credit card. You’ll transfer the balances from your existing cards, so you only have one payment to make each month.

Balance transfer credit cards often have a 0% introductory interest rate, allowing you to pay off your debt interest-free. You may need to transfer the balance within a specific time frame to take advantage of the offer.

The interest rate will increase once the introductory period ends, so it’s best to pay it off as quickly as possible. Making higher payments to reduce the balance quickly can be motivating for some borrowers and stressful for others.

You may find that the card limit isn’t enough to move all your debt over, and that means you could still end up with multiple cards to pay off. Additionally, if the balance is too close to the card’s limit, it could negatively impact your credit score.

Update your budget based on your plan

Once you fully understand how to get out of credit card debt and have a plan, it’s time to fit the debt payments into your monthly budget.

Look at your monthly income—this can include your paycheck, money from a side hustle, alimony, or any regular money you can guarantee each month. Then, make a list of your monthly expenses.

Categorize your expenses as either fixed or variable.

Fixed expenses stay the same each month and are easy to predict. They include housing, utility bills, loan repayments, childcare, and insurance.

Variable expenses change from month to month. They include groceries, entertainment, medical bills, personal care, and clothing.

Decide which expenses are the most important. You can cut back on dining out for a few months to save money, but you can’t stop paying your rent or mortgage. Make a budget for each expense, and don’t go over it. You can use the money you save to help pay down your credit card debt faster.

The path to living debt free

Understanding how to pay off credit card debt doesn’t have to be complicated. With careful research, you can choose your preferred method of getting out of debt quickly and efficiently.

If you want to avoid going into credit card debt again soon, consider building a savings nest egg with the 100 Envelope Challenge.

FAQs

What's the best way to pay off credit card debt?

There is no one best way to pay off credit card debt. Your choice depends on what method will motivate you to keep making regular payments.

If you prefer speed and need to learn how to pay off credit card debt fast, the debt snowball method could be best. But if you’re motivated by making fewer payments each month, a balance transfer credit card could be the right option.

Will paying off my credit card debt raise my credit score?

Paying off credit card debt can result in a higher credit score. Credit bureaus will see that you are reliable at repaying debt. Even if you still have a balance on your cards, you should see your credit score rise over time.

One of the factors in calculating a credit score is credit utilization: the higher your balances, the lower your score. Your credit score should increase by paying down your balances. You can also look into a secured credit card to help build your credit score.

How do I pay off debt if I live paycheck to paycheck?

There’s no magic trick when looking into how to pay off credit cards. The simple answer is to spend less than you make and put the extra toward paying off debt. But that’s often easier said than done.

The first and most important task is to make a budget — and stick to it. You can choose between several budgeting methods, including zero-based, 50/30/20, and envelope systems.

Once you have your budget, you’ll be in a better place to pay off debt.

How can I pay off $6,000 in debt fast?

The fastest way to pay off debt, whether $6,000 or $60,000, is to start paying the minimum amount on either your highest-interest debt (avalanche method) or your smallest balance debt (snowball method).

The debt avalanche method will prevent you from accruing too much in additional interest, while the debt snowball method can help you reduce your number of overall monthly payments.

Alternatively, consider a debt consolidation loan or balance transfer credit card to help you pay off debt faster.

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1 Information from Federal Reserve Bank of New York's Center for Microeconomic Data as of May 12, 2023: https://www.newyorkfed.org/microeconomics/databank.html

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