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Smart Money

How to Pay Off Credit Card Debt

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 • October 14, 2022

In This Article

  1. Assess your credit card debt
  2. How to pay off credit card debt fast
  3. Update your budget
  4. FAQs
  5. The path to living debt free

Credit cards are helpful tools. They can help you pay for everyday and surprise expenses without adjusting your budget. Many offer perks such as points and cashback for using them frequently. But they also tend to have high interest rates, and overreliance on them can result in substantial debt that feels overwhelming.

Paying off credit card debt can be easier than you think. If you’re wondering, “How do I pay off my credit card debt?” the following tips can help

Assess your credit card debt

Before you can start paying off your credit card debt, you must understand it completely. Find out more about how credit cards work.

Ask yourself these questions:

  • How many credit cards do you have? 
  • What is the total balance, and how is it split between cards? 
  • What is the interest rate on each card? 
  • What is your credit score? 
  • What keeps you motivated while working toward a goal? 

Answering these questions can help you decide which method is suitable for you.

How to pay off credit card debt fast

There are four main methods for paying off credit card debt: Avalanche, snowball, debt consolidation, and balance transfer. Each method has its pros and cons. 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 card with 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. However, you may end up paying more interest overall.

Debt consolidation

Credit card interest rates can be notoriously high, which can make 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 the process of paying off credit card debt but may not be an option if your credit score is poor.

Balance transfer credit card

Another way to pay down 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.

Once the introductory period is up, the interest rate will increase, so it’s in your best interest 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 high enough to move all your debt over. 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

Once you fully understand your credit card debt and plan to pay it off, it’s time to fit the debt payments into your monthly budget.

Take a 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.


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

There is no one best way to pay off credit card debt. While one person may succeed with the debt avalanche method, another might find they can pay off their debt faster with a debt consolidation loan.

It’s essential to research all methods to determine which is best for you. If you’re easily discouraged and need 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 will 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.

How much credit card debt is normal?

“Normal” is a relative term. However, the Federal Bank of New York reports an average of $5,769 in credit card debt for cardholders in the first quarter of 2022. That’s around 3% more than the same period in 2021.

Your debt may be more or less than that amount. Making a plan to pay it off is vital to not fall deeper into debt.

The path to living debt free

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

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