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4 Best Ways To Pay Off Credit Card Debt

Credit cards are one of the most challenging forms of debt to pay off. That’s because they’re a type of revolving debt, and you can add more charges even as you continue paying them off. Don’t worry, though. Paying them off is possible with the right strategies!

Yes, bringing your card balances to zero is much easier when you use the correct methods. Read through this guide to discover the best approaches to take.

Key Takeaways

  • The "Debt Snowball" and "Debt Avalanche" methods are well-established debt repayment strategies that should be your first choice for paying off credit card debt.
  • Using windfall funds and getting a side hustle can be added to a credit card repayment strategy as well.

Best Methods for Paying Off Credit Card Debt

When most people want to pay off their credit card debt, they assume only discipline and determination are necessary. On top of that, they tend to focus only on the “payment” part of that equation.

To pay off your credit card debt successfully, you must take a multi-prong approach involving the best strategies and methods.

Here are the 4 best ways to pay off your credit card debt:

1. Pay Off the Smallest Debts One at a Time

One of the most popular ways to pay off debt is the most straightforward, take the debt with the smallest balance and pay it off. Then, you pay off the next debt. This method is called the "debt snowball method."

The debt snowball method is a payment strategy championed by Dave Ramsey, a famous American radio personality. He’s been promoting this strategy for years, and many people find it helpful when getting rid of credit card debt.

An infographic outlining steps to pay off credit card debt.

More on the Debt Snowball Method

Generally, the debt snowball method aims to pay off the smallest credit card balance first, regardless of the interest rate.

Here’s what that strategy looks like in practice:

  1.        First, compare your credit cards and find the one with the smallest balance. Then, pay as much as possible over the minimum amount to that card until the balance is zero. Simultaneously, you’ll pay the minimum amount on all your other credit cards to stay current with them.
  2.        Once you pay off the first card, move on to the one with the next smallest balance. At this point, the amount of money you have available is larger. In other words, getting rid of the smallest debt first allows you to snowball your finances and pay the second quicker.

All you have to do then is repeat the process one card at a time until all your debt is gone.

The debt snowball method has its fair share of pros and cons, including:

  • Pro: After paying off the smallest debt, you’ll feel an immediate sense of accomplishment. That will also help you stay motivated to pay off all your other credit cards.
  • Pro: This approach is straightforward and will speed up credit card payments with time.
  • Con: You might pay more for interest charges because you’re focusing on the smallest credit card balances first, without considering their interest rates
  • Con: This approach is not ideal for people more concerned with interest payments rather than achieving quick wins.

Overall, the debt snowball method keeps you motivated in the long run. So, you won’t have to rely purely on your discipline to keep going.

The Debt Avalanche Method 

Another popular credit card payment strategy is the debt avalanche method. With this approach, you’ll do the opposite of the debt snowball method.

With the debt avalanche method, your primary focus is the card with the highest interest rate. You’ll pay as much as possible to that card while still paying the minimum on all the others.

Naturally, this method isn’t ideal for everyone. Here are the pros and cons you must know before choosing to use this method:

  • Pro: With this approach, you’ll minimize how much you pay towards interest.
  • Pro: This approach is excellent if you’re more concerned about interest payments.
  • Con: It’ll take longer to see your first win. That’s because you prioritize cards with more significant balances instead of smaller ones.
  • Con: You’ll need more discipline to keep going, as it takes longer to pay off the first credit card you prioritize

2. Pay Double the Minimum Payment

Paying double the minimum payment on your debt can significantly accelerate your debt payoff. Let's assume you have a debt with a minimum monthly payment of $100. If you pay double the minimum ($200) each month, you'll reduce the principal balance faster, leading to less interest being accrued over time.

For example, let's say you have a credit card debt of $5,000 with an annual interest rate of 20% and a minimum payment of 3% of the balance. If you pay only the minimum, it would take you over 17 years to pay off the debt, and you would end up paying over $7,800 in interest!

However, if you pay double the minimum ($200) each month, you could pay off the debt in about 33 months (less than 3 years) and save over $5,700 in interest.

This strategy not only reduces the time it takes to become debt-free but also saves you a significant amount of money in interest payments.

3. Stop Relying on Credit Cards

The credit card is a uniquely challenging form of debt to pay off. That’s because it’s a type of revolving credit. In simple terms, that means you can put more charges on a credit card even as you’re trying to pay it off.

So, while the debt snowball and avalanche methods are effective for paying off a credit card, they’re not enough on their own. You must also have a strategy to reduce and stop adding new charges to your credit cards.

That’s why a method to speed up paying off your credit cards is to reduce your reliance on credit cards.

Reducing your reliance on credit cards involves several steps that can help you regain control over your finances. Here are some tried-and-true techniques for keeping that plastic in your wallet:

  •       One approach is to create a budget and stick to it, prioritizing your expenses and avoiding unnecessary purchases.
  •       You can also consider alternative payment methods, such as using a debit card or cash, to limit your credit card use.
  •       Another effective strategy is to pay more than the minimum balance each month, which can help reduce the amount of interest you accumulate over time.

By reducing your reliance on credit cards, you can take control of your finances and work towards a debt-free future.

4. Use Side-Hustles and Windfalls To Make Extra Payments

Suppose you’ve already chosen your preferred credit card debt payment strategy (i.e. debt snowball or debt avalanche), and you’ve stopped putting new charges on your cards.

In that case, the next thing to worry about is paying as much money as possible to your credit cards.

You’re likely using your primary income to do that. 

However, another smart strategy to use is using other forms of income to make more payments to your card balances, such as:

  • Side hustle income. When you’re laser-focused on paying off your credit cards, you can use your spare time to make more money through a side hustle. That could be an online business, delivering pizzas, or driving for a rideshare service; anything that brings in extra dollars to pay your cards.
  • Windfalls. Early in your card payment journey, it would help if you decided that any windfalls (money that you receive unexpectedly) should be paid to your credit cards immediately. That could be birthday money, refunds, cash prizes, or anything else.

Using side hustles and windfalls to pay your credit cards is incredibly powerful and shouldn’t be ignored. This approach will help you pay your cards off even more quickly than ever before.

Overall, a smart approach to paying off credit card debt involves several different strategies simultaneously. However, most people focus on the payment strategy, such as the debt snowball (pay the smallest balance first) and the debt avalanche (pay the card with the highest interest rate first).

Those methods are excellent, but your approach should also ensure no new credit card charges and making extra payments using side hustles and windfalls.

The Best Strategy for Paying Off Credit Card Debt

In our opinion, when it comes to paying off credit card debt, the debt avalanche method stands out as the most effective strategy for many individuals. Numerous respected financial advisors and thought leaders agree that this approach leads to best results. We personally have tackled an embarrassing amount of student loan debt with this method and paid off auto loans with this method.

By focusing on high-interest debts first, you can potentially save a significant amount of money compared to other methods. While the debt snowball method, which prioritizes paying off the smallest debts first, can provide a psychological boost, the debt avalanche method is often more cost-effective in the long run.

Of course, the best strategy for you depends on your unique financial situation and goals.

Plan to Pay Off Credit Cards Using These Additional Strategies

Paying off credit card debt requires careful planning and strategic execution. It's important to create a realistic plan that fits your budget and financial goals. Here are three effective strategies for tackling credit card debt:

  1. Debt snowflake method. This approach involves making small, extra payments towards your debt whenever you can. For example, instead of spending spare change, you apply it towards your debt. Over time, these small payments add up and can help reduce your debt faster.
  2. Increase your income. Look for ways to increase your income, such as taking on a part-time job, freelancing, or selling items you no longer need. Applying this additional income toward your debt can accelerate your repayment.
  3. Negotiate with creditors. Contact your credit card companies to see if they are willing to negotiate a lower interest rate or a repayment plan that is more manageable for you. Sometimes, creditors are open to these discussions, especially if it means they will receive payment more reliably.
  4. Credit counseling. Consider seeking help from a reputable credit counseling agency. They can provide you with a debt management plan, budgeting advice, and negotiation assistance with creditors. Just ensure you choose a non-profit agency to avoid scams.
  5. Balance transfer. Similar to consolidation, a balance transfer involves moving your high-interest credit card balances to a new card with a lower or 0% introductory interest rate. This can save you money on interest, but be mindful of any transfer fees and the new card's ongoing interest rate after the introductory period.

Remember, the key to successfully paying off credit card debt is consistency and discipline. Choose a strategy that aligns with your financial goals and lifestyle, and stick to it.

Related Frequently Asked Questions (FAQs)

Readers who wanted to understand how to pay off credit card debt also researched the following topics:

What Questions Should I Ask a Debt Consolidation Company Before Working with Them?

When considering a debt consolidation company, it's essential to ask the following questions:

  • What are your fees and interest rates? Understand the cost structure to ensure it aligns with your budget.
  • How does the consolidation process work? Get a detailed explanation of the steps involved and the timeline.
  • Will my credit score be affected? Learn about the potential impact on your credit and how long it might take to recover.
  • Are there any hidden fees or charges? Clarify if there are additional costs beyond the stated fees.
  • What happens if I miss a payment during consolidation? Understand the consequences and any contingency plans in place.
  • Are there alternative options for my financial situation? Explore whether debt consolidation is the best solution or if other options are available.
  • Can you provide references or testimonials from past clients? Gather feedback from others who have used their services.

Remember, it's crucial to feel comfortable and informed before committing to any debt consolidation program.

How to Get Caught Up on Bills Fast?

If you find yourself falling behind on bills, there are practical steps to catch up quickly.

  1. Start by identifying and prioritizing essential bills based on urgency and consequences for non-payment.
  2. Develop a realistic budget to allocate funds to outstanding bills. 
  3. Contact creditors to negotiate temporary payment plans or request extensions, and consider temporarily reducing non-essential spending to free up money.
  4. Explore additional income sources, such as part-time work or selling unused items.

Communicate with creditors early to anticipate difficulties, as they may offer assistance or flexibility. Check for local assistance programs or charities that can provide support. Open communication with creditors and seeking professional advice when needed are crucial throughout this process.

What Happens If You Stop Paying Credit Cards?

Stopping payment on credit cards can lead to various consequences. Here are some events that may happen (it will depend on your loan and loan provider):

  • Late fees and interest will accumulate, increasing the total amount owed.
  • Your credit score will likely suffer, making it harder to qualify for loans or credit in the future.
  • Expect increased communication from creditors and possibly collection agencies seeking payment. In extreme cases, creditors may take legal action to recover the debt through wage garnishment or asset seizure.
  • Creditors may also offer settlement options, allowing you to pay a reduced amount to settle the debt.
  • Unpaid debts may be reported to credit bureaus, impacting your credit report for several years, and a damaged credit history may restrict your ability to obtain new credit or loans.

Before stopping payments, explore alternative solutions such as debt consolidation or negotiating with creditors to avoid severe consequences.

What Is a Consolidated Payment?

A consolidated payment involves combining multiple debts or financial obligations into a single, more manageable payment, often associated with debt consolidation programs. The process typically begins with a debt assessment, identifying and assessing various outstanding debts, such as credit cards, loans, or medical bills.

A debt consolidation company may negotiate with creditors to obtain lower interest rates or more favorable terms. The individual then makes a single monthly payment to the debt consolidation company, which distributes the funds to each creditor on their behalf. This simplifies the repayment process, making it easier to manage and potentially reducing the total amount paid over time.

Consolidation can lead to interest savings if the new interest rate is lower than the combined rates of the individual debts. It's crucial to carefully review the terms and conditions of any consolidation program to ensure it aligns with your financial goals and capabilities.

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