How to pay off credit card debt: Strategies that work

Millions of people navigate credit card debt, and you can too. Credit card debt is unsecured debt, which means it is not backed by collateral like a home or a car. Credit card debt is hard to pay off, partly because it’s very easy to run up big balances, and partly because the required monthly payment barely covers more than the interest. A clear plan could change the picture and help you tackle your credit card debt for good.

Here is more on how to reduce credit card debt, with realistic, actionable strategies.

Why minimum payments slow your progress

If you only make the minimum payments on a credit card debt, you will stay in debt longer—especially if your cards carry high annual percentage rates (APRs). Minimum payments are typically structured to cover mostly interest charges, which leaves the principal balance largely untouched. The longer the balance sits, the more interest you’ll pay on it. 

If you can pay more than the minimum each month, even modestly, and if you avoid adding new debt to your existing debt, you will reduce how much you pay overall and shorten the time it takes to pay off the debt.

Two DIY repayment strategies

If you have multiple credit card balances, focus extra payments on one card at a time. Two approaches are most common.

The snowball method

The snowball method starts with the smallest balance. List your debts from smallest to largest. Focus extra payments on the smallest balance while making minimum payments on the others. 

Once that card is paid off, add its minimum payment to the amount you were paying on Card 1, and apply it to the next smallest balance. This approach is the fastest way to get to your first debt payoff and helps many people stay motivated. 

An app for getting out of debt makes it easier to monitor your balances and stay on track.

The avalanche method

The avalanche method focuses extra payments on the card with the highest interest rate first, then moves to the next highest once the first balance is cleared. This approach reduces the total interest paid over time (again, assuming you’re not adding new debt). For people trying to pay off cards with very high APRs, the savings in interest could be substantial.

Neither method is objectively better. The snowball may offer faster positive reinforcement; the avalanche may cost less in total interest over time. The approach most likely to work is the one you are most likely to sustain.

Consolidate credit card debts into one payment

Debt consolidation combines multiple unsecured debts into a single payment, ideally at a lower interest rate. Two common options are worth understanding.

Personal loan for debt consolidation

A personal loan for debt consolidation replaces multiple credit card debts with one personal loan that has a fixed monthly payment and a fixed interest rate. Whether it reduces your overall cost depends on the rate you receive and your loan term. 

Balance transfer card

A balance transfer card is a way to move high-interest balances to a card with a 0% introductory APR that typically lasts at least 12 months (depending on the offer). Balance transfer fees generally apply, typically 3% to 5% of the amount you transfer. Any left-over balance after the promotional period ends is subject to the card's regular rate. 

Balance transfers don’t give most people enough time to meaningfully consolidate balances. (If you can pay off your debts in 12-18 months, you might not really need a true debt consolidation strategy.)  Also, for debt consolidation, this strategy is unsustainable if it turns into seeking out and juggling new balance transfer offers each time your low APR expires.

Steps to free up money for repayment

If monthly payments feel overwhelming, or if it seems impossible to pay more than the minimum, here are a few strategies that might help:

• Review your monthly spending for expenses you could cut, at least temporarily. 

• If you get a one-time windfall, such as a tax refund or bonus, use it to pay down your debt.

• Set up automatic minimum payments to reduce the chance you’ll miss a payment due date and get hit with a late fee.

• Contact your creditors directly. Some may lower your interest rate if you ask, particularly if you have a history of on-time payments. 

When to consider additional help

If your balances feel unmanageable with a DIY approach, other options may be worth exploring.

A nonprofit credit counseling agency could set up a debt management plan for you. A DMP typically includes all of your unsecured debt. You make one payment to the credit counselor and they distribute it to your creditors. Your credit counselor might be able to negotiate a lower interest rate on your debt, which could help you pay it off faster. A DMP generally takes three to five years to complete, and you’ll pay off your debts in full.

If you can’t afford to fully repay your debts, you might be a candidate for debt settlement. That’s when your creditor agrees to accept less than the full amount you owe and forgive the rest. Debt settlement is for someone experiencing financial hardship. It’s not quick or easy, but it’s possible to get significant debt reduction.