7 Tips for Paying Off Credit Card Debt

There’s no single best way to get rid of credit card debt, and the right method for paying off your credit cards depends on your situation, goals, and needs. You can focus on getting each card paid off individually, transfer your balances to one card, ask for a lower interest rate, get a loan to pay off the balances, or engage in other debt payment strategies.

Whatever your financial goals and dreams, however, paying off your credit card debt is a good step in the right direction.

Credit.com’s 7 Tips for Paying Off Credit Card Debt

  1. Get organized
  2. Pay off the balance with the highest APR
  3. Pay off the card with the lowest balance
  4. Consolidate your debt
  5. Make your budget work for you
  6. Use a debt management app
  7. Be realistic

Why Pay Off Your Credit Card Debt

According to the Board of Governors of the Federal Reserve System, Americans owed a total of around $975 billion in revolving credit as of 2020. You aren’t alone if you’re looking to pay off your credit card debt. High balances and high finance charges can put a real dent in your wallet and limit your financial options, both in the moment and down the road. If you let those balances linger long enough, they could keep you from achieving important goals, such as buying a home.

Still not convinced? Here are some additional benefits to paying off your credit card debt:

  • Have more money each month to budget with once you aren’t dealing with making credit card payments.
  • Reduce your credit utilization, which can be a positive impact for your credit score. It also might mean you have available credit to help cover sudden expenses, and that can provide added peace of mind.
  • Less stress and worry about debt, as you don’t have to keep track of credit card payments.

7 Tips for Paying Off Credit Card Debt

Experian’s State of Credit Report for 2020 showed that the average consumer as 3 credit cards, carrying an average of $5,897 in total. The following tips and strategies can help you pay off your credit card debt.

1. Get Organized

No matter what method you ultimately choose, step one is getting organized. Gather all the information for every card you’re carrying a balance on. Make note of the balances, interest rates, due dates, and minimum payments for each card. Then ask yourself these questions:

  • Do you have lots of balances spread out over many cards?
  • Do you have one big balance and several small ones?
  • Have you consolidated your debt to one card but can’t seem to make any headway on your balance?
  • Have you been playing the balance transfer game?

Once you have all that information complied, add up the minimum payments on each of your credit cards. This is how much money you must pay each month to stay current on your bills. If this number is higher than you’d like, it’s time to start being strategic in getting out of debt.

Next up is to choose the best way to pay off your bills, and we have a few suggestions: paying off the highest APR first, paying off the lowest balance first, and using a balance transfer credit card to consolidate. We’ll discuss each option in detail.

2. Pay Off the Balance with the Highest APR

The first method to consider is the “debt snowball”: Look at all your balances and the interest rates associated with each. Concentrate on paying off the card with the highest annual percentage rate while still making minimum payments on your other cards. Once that card is entirely paid off, you move on to the one that has the next highest APR, and so on.

From a monetary sense, this strategy may make the most sense for you because it cuts out spending so much on interest. To implement this, you simply boost your payments on the card you’re trying to pay off. Choose an amount you can afford and stick with it. If you start by paying $150 extra on that credit card, keep paying at least $150 extra each month until the card is paid off.

Once the first card is paid off, take that extra $150 and start putting it toward the next card in line. Add in the minimum payment from the previous card as well to add additional momentum to your payoff schedule. That creates a snowball effect as demonstrated in the example below.

  • You start with three cards with minimum payments of $50, $30 and $20.
  • You pay $200 a month on the first card and the minimum payments on the other two. That $200 represents the $50 minimum payment and the $150 extra.
  • When that card is paid off, you start paying $200 extra on the next card, which means you’re paying $230 on it every month.
  • By the time you get to the third card, you pay $250 every month. That means you pay off cards even faster as you work through this process.

3. Pay Off the Card with the Lowest Balance

If you feel productive marking things off a to-do list, “debt avalanche” method may be a good strategy for you. It’s a great way to build up a little momentum and see the results of your hard work sooner. With this strategy, you increase your payment on the credit card with the lowest balance while continuing to make the minimum payment on the rest of your credit cards. Once you pay off the card with the lowest balance, you move onto the card with the next lowest balance, and so on.

It’s quicker and easier to pay a $500 balance down to zero than a $2,500 balance. And it feels good to pay a credit card bill in full, no matter what balance you began with. Plus, every low balance card you pay in full is one less minimum payment you have to keep up with each month. By knocking out one or two smaller balance cards, you’ll then be able to shift your money to focus on paying off those larger balances.

4. Consolidate Your Debt to a Single Card or Loan

Like things simple? This pay-down strategy might be for you. By consolidating your credit card debt to a single card or a debt consolidation loan, you’ll be left with a single payment each month rather than four or five. You can even automate payments so you don’t have to worry about paying anything late.

Need an extra incentive? Many balance transfer credit cards come with an introductory 0% APR period. This gives you time to pay down your debt without any additional charges accruing, and you can use the end of the introductory APR period as your end goal for having the debt paid off. Typically, the APR skyrockets once the introductory time has expired, which can act as even more motivation.

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5. Make Your Budget Work for You

There are many tips for paying off credit card debt, but if you’re not focusing on the overall problem of spending more than you make, it’s easy to stay in the same cycle. By creating a budget that accurately accounts for your expenses and income, you’ll be able to curb extra spending and find more money to throw at your credit card debt. Whether you use an app or go with a pencil and paper method like kakeibo is a matter of personal preference. As long as it works for you and your lifestyle, any realistic budget can be a good budget.

6. Use a Debt Management App

If you need some additional help keeping up with your debts, consider using a debt management app like Tally. Tally is a great option if you are working on card debt specifically, as it automates the work of paying down your credit card balances. Tally analyzes your balances, interest rates, and other factors to figure out the best way to pay down your cards.

Other debt management apps can help you figure out the best ways to pay down your debts and automate the process for you as well. 

7. Be Realistic

It’s understandable to want to get out of debt as quickly as possible, and hustle and habit changes can get you there faster than you may think. However, if you’re facing large amounts of credit card debt, it’s also important to be realistic about what you can do and how fast you can do it. 

  • How can I pay off my credit cards faster? Put as much money as possible toward your payment every month. The more you can pay above the minimum, the faster you’ll get out of debt.
  • How can I pay off $5,000 in debt fast? You can tap into your savings account or sell off a second car or things from around the house to pay off a large debt quickly. You may also be able to get a personal loan or do a debt consolidation loan, but keep in mind that this only moves the debt around and doesn’t really pay it off.
  • How do I get out of credit card debt without paying? The only way to get rid of credit card debt is to pay it off or file for certain types of bankruptcies.

Credit Card Debt and Your Credit Score

High balances on your credit cards can be bad for your credit scores. The amount of debt you’re carrying in relation to your total credit limit weighs heavily on your scores. If you’re maxing out your credit cards, your utilization is high and your credit score is probably feeling the pinch.

Paying off your credit card debt can be good for your personal bottom line, your credit score, and your peace of mind. But it does take work. Put some of these tips for paying off credit cards into action today to get started.

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