How to Pay Off Credit Card Debt

by | Nov 7, 2019

If you’ve found yourself facing an ever-growing amount of credit card debt, you’re not alone. As of 2019, credit card debt in the United States is around $839 billion. Out of those billions of dollars, the average American household carries a balance of $8,398, according to statistics from

While credit card debt is just part of life for many Americans, if you’re reading this, you probably don’t want it to be part of yours. Paying off credit cards takes time and self-discipline. It’s a challenge, but it can be done. Here’s what you need to know about paying off credit card debt for good.


Get to Know Your Numbers


The first step to paying off big credit card debt is knowing exactly how much you owe. If you’ve just been using your card and making minimum payments without paying attention to the balance, it’s time to use a different strategy. It will be almost impossible to tackle your debt if you don’t even know where you stand.

Pull out your most recent credit card statements to get an accurate picture of the current balance. Then list out how much you owe for each card and the amount of the minimum payment. Add up the balance from each card and you’ll have the exact amount that needs to be paid off.

This number might seem scary at first, but don’t panic. Knowing how much you owe gives you the power to put together a realistic strategy for paying off multiple credit cards. Now that you have it, you can move to the next step, which is using the best debt payoff method that works for you.


How to Pay Off Credit Card Debt With the Avalanche Method


The goal for repaying debt with the avalanche method is to pay off the credit card with the highest interest rate first. Here’s an example of what paying off your credit card debt might look like with the avalanche method:


  • Credit Card 1 – Balance: $3,000 (20% interest rate)
  • Credit Card 2 – Balance: $5,000 (22% interest rate)
  • Credit Card 3 – Balance: $8,000 (18% interest rate)


In this example, you would make minimum payments on credit cards #1 and #3, then pay as much as possible towards the balance on credit card #2 until it’s paid off. Once that card is paid off, you would move on to making extra payments on credit card #1 and repeat the process. The upside of this method is that it allows you to save on the amount of interest you would pay on your credit cards over time, which makes the most financial sense.

However, we all know financial sense only means so much when it comes to our personal finances. While the avalanche method will help you save interest in the long run, depending on how much credit card debt you have, it could take a while before you see any progress. You might end up losing motivation to pay off your debt with the avalanche method, in which case the debt snowball is probably the better option.


How to Pay Off Credit Card Debt With the Snowball Method


When repaying your debt with the snowball method, you’ll pay off your smallest balance first. Here’s what paying off those same credit card balances would look like with the snowball method:


  • Credit Card 1 – Balance: $3,000 (20% interest rate)
  • Credit Card 2 – Balance: $5,000 (22% interest rate)
  • Credit Card 3 – Balance: $8,000 (18% interest rate)


With this method, you would make minimum payments on credit cards #2 and #3, while paying extra on credit card #1. Once that card is paid off, you would move onto paying extra on credit card #2 and repeat until all of your balances are at zero.

While you’ll ultimately end up paying more interest over time, the snowball method gives you quicker wins as you pay off debt. This can give you the motivation you need to get all your balances knocked out.


Make a Balance Transfer


Whether you decide to go with the avalanche or snowball method, another option that can help quickly eliminate credit card debt is to transfer your balance to a different card. The key here is to move your balance from a high-interest credit card to one with a lower interest rate or in the best-case scenario, a 0% interest rate.

By doing a balance transfer, you’ll have the advantage of paying off your debt without accumulating additional interest for a specific period of time. Most balance transfer options will offer a 0% introductory interest rate for up to a year or 18 months, and after that time you’ll be charged interest at a regular rate, typically between 18-24%.

While it can be a useful tool to help pay off your credit card debt, you should still weigh all of the options to make sure it’s the right choice for you. Most credit cards with a balance transfer option will charge a balance transfer fee, which can be anywhere from 2-5% of the total balance you wish to transfer. Depending on how much you owe, this fee could cost you just as much – or more – than what you would pay in interest on your current credit card.

It’s also important to stay disciplined in repaying your debt as quickly as possible once you transfer your balance. You can easily fall into the trap of only making minimum payments since your interest rate is lower, and find yourself back to paying a high interest rate again in a year without putting much of a dent in your total balance. Think of a balance transfer as a resource rather than a “get out of jail free” card and stay committed to paying off as much of your credit card debt as you can.


Take Out a Personal Loan


If you have several credit cards with high interest rates and trying to pay all of them off becomes overwhelming, another option to consider is a low-interest personal loan to pay off your credit card debt. Interest rates for personal loans are typically much lower than credit card interest rates, so this can be another way to save yourself money over time.

However, as with balance transfers, don’t consider yourself home free if you’re approved for a personal loan. While you can use the loan to pay off your credit cards, you’ll still be responsible for making your monthly loan payment on time. You’ll also have zero balances on your credit cards (which you should keep open to help with your credit utilization), and you might be tempted to start using them again.

Spoiler alert: do not do this! You’ll only wind up with credit card debt (again), in addition to a loan payment. Resist the temptation by locking your credit cards away in a safe, literally freezing them, cutting them up, or whatever it takes to prevent yourself from continuing a vicious cycle of debt.


Consider a Debt Settlement or Bankruptcy


Other debt repayment strategies might not be available if you’re past due on paying your credit cards. In this case, consider options to settle some of your debts with collectors if possible. With debt settlement, you can get in contact with the collection agency that’s taken on your account from your credit card company and negotiate your credit card debt – typically agreeing on a lump-sum payment to settle your balance.

Depending on how much you owe, you could end up paying less than 50% of your original balance. Should you decide to go through the debt settlement process, be sure to get all the terms in writing before making any payments. The last thing you want is for collectors to keep coming after you for a debt you’ve already paid. Request a letter that states the exact amount you will be paying and that the account will be reported as paid in full to credit bureaus.

Bankruptcy is the last resort to turn to if all other options have been exhausted. Filing for bankruptcy will have a significant impact on your credit for several years, so you shouldn’t make the decision lightly. However, if you’re drowning in credit card debt and don’t see any other way out, a bankruptcy can offer some relief until you get back on your feet.

You can file either a Chapter 7 or Chapter 13 bankruptcy. A Chapter 7 will require you to surrender some of your property, while a Chapter 13 allows you to keep your property. Both bankruptcies will cost you attorney and court filing fees, which can be costly, but once the process is complete, you’ll have a chance at a fresh start. It’s highly recommended that you speak with a financial advisor before making the decision to go through with the bankruptcy process.

Dealing with credit card debt is stressful, but there is a way out of it. Making the decision to pay off your debt is a big step, and that’s one step closer to get you to the financial freedom you deserve.


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