How To Pay Off Credit Card Debt

Struggling with credit card debt? You’re not alone. Americans are now more than $1 trillion in credit card debt. Combined with record-high interest rates, digging out of debt might feel like it'll take a Herculean effort.

The best way to pay off credit card debt fast is to develop a debt repayment plan that you can actually stick to.

Here’s how to pay off credit card debt — and stay out of it, too.

1. Add Up Everything You Owe

Start by tallying everything you owe. Knowing how much you owe in total allows you to prioritize the debt you want to pay off first.

Go through your bank accounts, statements, and maybe even your credit report to gather the data on all your outstanding debts. Record the outstanding balance for each debt, the interest rate, and its minimum monthly payment.

It's crucial to start here because writing everything down makes you aware of how much you really owe. Knowledge gives you control!

2. Build Your Budget

Once you know how much you owe, build a budget. Cutting expenses can help you reallocate your income, freeing up cash to put toward your debt.

Using a notebook or spreadsheet, record your expenses from the past 90 days. You can pull this data from a budgeting app (if you use one) or look at your credit card and debit card statements.

Zoom in on your discretionary expenses. These are things like going out for dinner or splurging on a trip to Target. You might not have control over the price of gas or the cost of rent, but you do have control over these expenses!

Once you have everything laid out, evaluate your expenses. Is it in line with what you expected? Where can you spend less?

These are a few ways you may consider cutting expenses:

• Strategic grocery shopping: Buying in bulk reduces how often you go to the store and minimizes impulse purchases.

• Cut subscriptions: All of those $10-$15 monthly subscriptions add up. If you have four streaming services, for example, consider choosing one and cutting the rest.

• Order takeout: Save big restaurant trips for special occasions like birthdays or anniversaries. Opt for takeout instead and skip the DoorDash fees by picking up the food yourself.

• Buy secondhand: Just because you’re paying off debt doesn’t mean you have to sacrifice everything you enjoy! Cut your spending costs by buying gently used items from your local thrift store or on Facebook Marketplace.

• Reduce major expenses: Housing and transportation are probably two of the largest expenses in your budget. You could consider biking to work, taking public transportation, or even downsizing your home if it's possible.

As you go through this process, you might notice emotions associated with how you spend money. Maybe you go out to eat if you’re feeling lonely or go shopping when you’re anxious.

Become aware of how your relationship with money may have played a role in how you got into debt in the first place.

RELATED: 7 Bad Money Habits Keeping You in Debt

3. Choose a Debt Repayment Method

Once you’ve assessed your spending and found opportunities to cut back, see how much you have left over.

Use this to pay more than the monthly minimum payment on one of your cards. 

To figure out which card to make an extra payment on, select a debt repayment method that works for you. These are two of the most popular options:

• The debt snowball method starts with your smallest debt first. This gets you motivated and builds momentum toward paying off larger debts.

• The debt avalanche method orders your debts from highest interest rate to the lowest. By tackling the most expensive debt first, you reduce the total cost of your debt. However, it comes with a bit more psychological friction than the snowball.

RELATED: What Is APR and Why Does It Matter?

Tailored debt repayment plan

Personal finance is personal for a reason. Some debts carry more weight than others.

You might have a credit card debt that isn’t the lowest balance or the highest interest rate that you want to prioritize first. You can create a tailored repayment plan to prioritize repaying whichever debt is most important to you.

To make it successful, consider using a visual aid. This can be something as simple as a printable debt repayment tracker. Every time you make a payment, color in the tracker to record your progress.

Tips for Paying Off Credit Card Debt Fast

Once you have a plan in place, look for ways to optimize your spending to help you get out of debt faster.

Pay more than the minimum

The best way to get out of credit card debt is to pay more than the minimum. That’s because the minimum payment is designed to help banks and credit card companies generate revenue by charging interest.

Minimum payments don’t really tackle your actual debt, which is why they can add thousands of dollars to your total bill and take decades to pay off!

Start using cash

One of the easiest ways to rein in your spending is to stop using your credit cards for discretionary purchases. Sometimes swiping a credit card feels like free money, making it easy to spend beyond your means.

Swap your credit cards for your debit card or use an envelope system to pay for things in cash. And when the money's gone, it’s gone!

Doing this can help you protect any money you’ve allocated for debt repayment, rather than using it to cover day-to-day expenses. 

Transfer your balance to a 0% APR card

A balance transfer credit card offers 0% APR for a certain period, usually between 6 and 21 months. During the promotional period, you aren't charged any interest, which means your entire payment will go to the principal.

Let’s say you owe $10,000 on a card with 22% APR and are making the minimum monthly payment of $284. Even if you make no other purchases, it’ll take you almost five years to pay off your debt, and you’ll pay a whopping $6,300 in interest.

But let’s say you transfer it to a card with 0% APR for 18 months. If you keep making the same payments, you'll pay off over $5,000 interest-free in 18 months.

Or even better, if you can double your monthly payment to $572, you’ll pay off the entire balance in 18 months without paying any further interest.

Most credit cards charge a balance transfer fee, usually either 3% or 5% of the transferred balance. Before opening a new credit card, make sure you’ll save more in interest than you’d pay in fees.

Automate your payments

When extra money lingers in your checking account, it can be tempting to spend it. Automating your debt payments helps you stick to your repayment plan.

A bonus is that when you’re out of debt, you'll already have this habit in place to begin automating your savings. Instead of budgeting for debt repayment, you can start building wealth!

RELATED: Should You Pay Off Debt or Invest?

What To Do if You Can’t Pay the Minimum

If you’ve tallied up your debts, looked at your expenses, and are still struggling to make your minimum payments, you might need extra help.

Here are some actions you can take.

Call your credit card company

Creditors recognize that life happens. Many would rather get something instead of nothing. Depending on your situation, you might be able to negotiate a repayment plan or enroll in a hardship program.

Call your credit card company and explain your situation. Ask them what they can do to make your payments more affordable.

Consolidate your debt

Debt consolidation loans pay off your existing credit card balances with a new loan, usually at a lower interest rate. This means you make one monthly payment, which is typically more manageable. And your debt won’t accrue interest as quickly.

You can do this with a special debt consolidation loan, a personal loan, or use an asset like your home’s equity to access a line of credit.

But there are risks to consider before doing this. If you use your home as collateral, for example, you could lose your home if you still can’t make payments. And if you continue to use your credit cards, you could go even deeper into debt.

READ MORE: How To Consolidate Credit Card Debt

Enroll in credit counseling

Nonprofit credit counselors help people struggling with credit card debt. The counselor works with your creditors on your behalf to create a payment plan that works for you. 

If you go this route, be mindful that you won’t be able to use your credit card, and your credit may take a hit.

Also, be wary of for-profit debt settlement companies — these are different from nonprofit credit counseling and may come with large fees that'll eat into your repayment.

File for bankruptcy

While not ideal, bankruptcy is an option to consider if your credit card debt becomes too overwhelming. There are two types of bankruptcy to consider:

• Chapter 7: Eliminates unsecured debt where there isn’t an asset or property that the courts can seize. This includes credit cards.
• Chapter 13: Restructures debt payments into a pay-off plan that usually lasts three to five years. This is an option to consider if you have property you want to protect, like a home or car.

It's important to understand that bankruptcy is a scarlet letter on your credit. Chapter 7 is reported for up to 10 years, while Chapter 13 lasts for up to 7 years.

This can make it hard to qualify for loans in the future. And if you do qualify, you probably won’t get a very good interest rate.

FAQs

TL;DR: Yes, You Can Pay Off Your Credit Card Debt

Credit card debt feels overwhelming, but you can tackle it with the right approach.

The key is paying more than minimums (which are designed to keep you in debt longer), choosing a repayment strategy that motivates you, and stopping the cycle by not adding new debt while you're paying off existing balances.

And if you're struggling to make minimums, call your credit card companies immediately — they'd rather work with you than get nothing at all.