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Many people struggle to pay off credit card debt today. Credit card debt can quickly spiral out of control if you’re not actively monitoring your balances, making (at the very least) minimum payments, and controlling your spending.
The good news? While paying off debt can seem like an impossible feat, the reality is that there are strategies out there that can help you get on top of your outstanding debt and back into creditors’ good graces.
I know because I was once in credit card debt and dug myself out. It wasn’t fun, but I learned a lot about myself and how to be smarter with money.
If you’re looking to eliminate the debt looming over your head (and improve your credit history simultaneously), here are some helpful tips on how to pay off credit card debt.
How to Pay off Credit Card Debt
1. The debt snowball method
Credit card debt can feel overwhelming because those with it tend to have their outstanding balance spread across multiple credit cards.
You may even have personal loans, student loans, and other high-interest debt that keep hitting you along with your monthly credit card bills. One payment strategy that can help you ease the burden and work towards becoming debt-free is the debt snowball method.
The snowball method helps borrowers eliminate debt by first paying off the accounts with the lowest balance. To start, organize your credit cards by minimum payment, from smallest balance to largest.
Make the minimum payment on all the cards except for the one with the smallest outstanding balance. You will put as much money as possible towards this card each month. Once you pay off that credit card, repeat the process with the next card with the lowest balance.
Doing this method builds momentum as you pay off credit card balances quickly. Seeing this progress excites you to continue pushing ahead. The downside is that you may end up paying more in interest charges.
If you’re constantly making payments but feel you’ve yet to make any real progress, using a debt snowball plan can be an excellent strategy to try out for yourself.
2. The debt avalanche method
While the snowball and the debt avalanche method might sound similar, the latter focuses on first paying off cards with the highest interest rate. You organize your debt by interest rate, from highest to lowest. Pay the minimum on each card except for the highest interest debt, and pay as much as you can towards it.
Why is this a good idea? When you pay off high-interest cards, you save money by eliminating the debt costing you the most in interest payments. The downside to the debt avalanche is it could take you longer to become debt-free, as you aren’t focusing on cards with small balances.
3. The debt snowflake method
Another variation that some people use is the snowflake method. We all know that snowflakes are tiny, but they can lead to a large amount of snow over time. The same idea applies to this debt management plan. Here, you take any small amount of money you have available and make a payment. If you found $5 on the sidewalk, you put it towards your debt. If you go grocery shopping and save $3 on milk, you take that money and make a payment. Over time, these micro-payments add up and help you pay off credit card balances bit by bit.
The most significant drawback to this method is zero organization. Many people make these payments to random cards, so it can feel like you are not progressing. A simple solution to overcome this is to organize your debts and make micro-payments on the same card so you do see an impact.
4. Debt consolidation
Trying to juggle multiple credit card payments to keep your head above water can be a tremendous struggle. To bypass this struggle, some choose to go the route of getting a debt consolidation loan. Debt consolidation loans can be personal loans or home equity loans that consolidate debt into one new debt vehicle, making it easier to stay on top of your debt and make payments.
This method can help you pay off credit card balances more efficiently. You benefit from interest savings, as most consolidation loans offer a lower interest rate than credit cards and a stable new monthly payment since you only have one loan to focus on paying off. Also, you have an actual deadline that you can look forward to if you want to be debt-free.
But remember that the choice to consolidate debt will not work for everyone. The approval process for a debt consolidation loan depends on credit scores and reports, which may result in rejections rather than a debt-free life.
While these loans are a worthy option, you must be cautious when taking them. Nothing stops you from using your credit cards and carrying a balance. In a recent study, 31% said that consolidating their debt did not improve their finances.
Also, if you use home equity, ensure you can pay off the debt as you are putting your house up as collateral.
5. The balance transfer credit card approach
Imagine that you could pay off your debt with a zero percent credit card APR (annual percentage rate). It may sound too good to be true, but that’s precisely the premise of a balance transfer credit card.
Aptly named, balance transfer credit cards allow you to shift your debt from another issuer to a new card, where you get an introductory 0% APR for a pre-determined amount of time. If you play your cards right and know how to spend your money wisely, this means that none of your money goes towards interest payments you’d otherwise be paying, helping you eliminate the principal balance instead.
Much like with debt consolidation loans, balance transfer cards have their downsides as well as their upsides:
- You generally need to have good credit for approval.
- Most charge a balance transfer fee that could add 3% of the amount owed to your new balance.
- You must refrain from making new purchases on this card as they will carry a much higher interest rate.
If you make new purchases on the balance transfer card, your monthly payments will apply according to the card’s terms and conditions. In many cases, your payment gets split between the transferred and purchase balances, which could cost you more money in the long run.
Overall, taking out a balance transfer card can be excellent for those with discipline in the right circumstances.
6. Work with your credit card issuer
Credit card companies know a thing or two about the trouble people face regarding their finances. While your credit card company might not feel like they’re on your side, working with them can be a good idea.
If you struggle to make minimum payments or feel your debt is spiraling out of control, call your credit card company to learn about their available tools and resources. They could reduce your monthly payments for a few months or offer a lower or fixed interest rate, making it easier to pay off credit card debt over time.
When I struggled to pay off my credit card, I called my card company and asked about my options. They lowered my rate for six months, from 17% to 5%, allowing me to save some money.
If you are struggling with debt, call your card issuer. The more you communicate with them, the easier it will be to navigate the debt repayment process.
7. Review your spending
Repaying debt involves constantly chipping away at it, but this is only half the battle. Where you spend your money and how you save can also affect how quickly you can pay off credit card debt and erase other financial obligations.
To get rid of debt faster, you’ll need to examine your finances. You should assess your cash flow, understand where and how you spend your money (living expenses, luxury spending, etc.), and make smarter financial decisions.
If you don’t have one, set up a budget to see your income and all of your monthly or infrequent expenses at a glance. Then, determine if there are any areas in your budget that you can cut out to make more room for debt repayment.
Cutting down on discretionary spending may seem like a sacrifice at first, but you’ll be happier living frugally for a short period to eliminate your outstanding debt.
One caution here is not to eliminate all your discretionary spending to pay off credit card debt overnight. I made this mistake, and while it was great at first, I quickly resented my debt because I could not enjoy life. The result was me rebelling and digging myself deeper into debt. Fortunately, I wised up and made adjustments, allowing for some discretionary spending while still focusing on paying down debt.
8. Get a side hustle
Saving money by reducing your discretionary spending can be a great way to put more money toward your debt. That said, if you don’t have a sizeable income, there may only be so much you can dedicate to your payments, which may not always be enough to make a dent in your balance. Finding a way to bring in additional income solves this problem.
But what will realistically help you bring in extra cash each month? Here are a few side hustle ideas to help you get started:
- Get a Second Job: If you have extra time, consider getting a second, part-time job. You can apply the extra money you earn to help you handle your debt and improve your financial situation.
- Do Odd Jobs or Gig Work: Not everyone has the time to take on extra hours during the week. If this is the case, consider doing odd jobs or gig work. Whether you’re interested in delivering groceries, driving people around, or even providing lawn care services to people in your community who are willing to pay, there are plenty of ways to make money when it best suits your schedule.
- Freelance: If you’re a professional with desirable skills like marketing, social media management, or project management, you could leverage those skills to make more money by freelancing. Using platforms like Upwork or Fiverr to connect with clients gives you greater control over how you work and what you get paid.
- Start an Online Store: Starting an online store has become a popular side gig, especially with dropshipping. If you have crafts you like to create and sell or want manufacturers to fulfill orders while you focus on running your online shop, you could try to sell goods to generate a good chunk of cash and put it towards debt reduction.
- Rent Items You Own: Starting an online store isn’t for everyone. You could always rent items you have and don’t use. You could rent a room, garage, furniture, and more. You’d be surprised what people are renting.
9. Get creative
When you commit to paying off your credit cards, you may have to think of out-of-the-box ways to speed up the process. For me, I used all sorts of tricks to help. To start, I took advantage of games that pay money. I would play a few games in my free time to earn points. I would then redeem these points for gift cards to retailers I shop at so I wouldn’t have to spend the money.
When grocery shopping, I bought as many store-brand items as possible and changed my diet to low-price staples, including pasta, cereal, eggs, oatmeal, peanut butter, and jelly. After shopping, I would look at the receipt to see my savings and put that amount toward my debt to help pay off credit card balances faster.
Finally, I went through my house and sold things I no longer used. While this wasn’t an ongoing source of money to put towards my debt, it was a decent amount that helped reduce my balance and contributed to my goal to pay off credit card debt.
10. Use windfalls
Suppose you’re lucky enough to receive a significant sum of money all at once, like an annual bonus at your job or an inheritance. In that case, you’re in an advantageous position to pay off a significant portion of your credit card debt, if not all of it. If you know that you have a windfall coming, set aside some time to figure out what you’ll need to set aside in taxes (if applicable) and how much you can realistically use to pay off debt.
I used a strategy to put 85% of my tax refund towards my debt, 10% into savings, and the other 5% I spent however I wanted, guilt-free.
11. Take extreme action
High amounts of debt from credit cards may require you to take more extreme action to eliminate it so you can move on with a more financially stable life. But what does this look like? Some basic examples include getting a roommate or living with your parents to save money.
Some extreme examples include living in your car or moving to a new area to lower expenses. Whatever you decide to do, ensure you are comfortable doing it. While having credit card debt is stressful, it shouldn’t force you to do things you are unwilling to do.
Following a debt reduction plan, like the snowball method, and reducing your expenses will allow you to pay off credit card debt over time. It may take longer than you hope, but remember—you did not get into debt overnight. It took time to dig the hole; it will take time to dig out, too.
