How to pay off credit card debt: strategies, comparisons, and tips

Are you sick of credit card debt? That’s understandable. Credit card debt is an especially expensive way to borrow money. Credit cards also so convenient that your debt can keep growing even though you make payments every month. 

Let’s explore five popular ways to break the cycle of credit card debt. Spoiler alert: You don’t have to limit yourself to just one!

Debt snowball method

Need fast results? This might be the best solution for you. With the snowball method, you list all your debt balances from smallest to largest. Then, concentrate all your efforts (making extra payments or paying more than the minimum) on paying off the smallest debt first. Keep making the minimum payments on your other debts.

Once the first debt is paid, you add its payment to the minimum payment you were making on the second smallest debt. Repeat the process for each debt. As you knock down debts, don’t reduce the amount you pay. Let your payment snowball. Put everything you’ve got toward the debt you’re focusing on.

Knocking out the smallest balance is the quickest way to your first victory. As you gradually move on to tackling your bigger debts, your payment should be larger and your progress more noticeable. 

Anyone can try a DIY debt snowball. You just need to be able to afford all of your minimum payments, plus as much extra as you can manage.

Debt avalanche method

Maybe you want the biggest bang for your buck. In that case, tackle your highest-interest debt first using the avalanche method. 

It’s the same as the snowball method but instead of focusing on your smallest balance, focus on the debt that has the highest interest rate. 

High-interest debt is the most expensive. Eliminating your most costly debt could help you save money in interest charges over the long term. 

Anyone can try a DIY debt avalanche. 

Balance transfer credit card

Balance transfer credit cards typically have an introductory period of very low interest rates—often 0%. This means you could transfer the balances on other credit cards to the balance transfer card and avoid interest charges altogether for a period of time.

The key is having a plan to pay off the debt you transfer before the introductory period ends. That way, you’ll take maximum advantage of the super-low interest rate. Also, be aware that there are usually fees to transfer balances.

To use this approach, you’d have to be able to qualify for a new credit card that offers a balance transfer. Typically you’d need fair credit or better.

Debt consolidation loan

A debt consolidation loan is a new loan that you use to pay off multiple other debts. One advantage of this strategy is you could reduce the number of bills you pay, making it easier to manage your payments. 

Debt consolidation loans work best if you can reduce the interest rate you pay on your debt. Personal loans, a common type of consolidation loan, generally have interest rates that are lower than credit card rates. Using a personal loan to pay off credit card debt could both simplify your payments and save you money on interest charges.

This approach could be an option if you qualify for a new loan with terms that help you manage the debt.

Debt management plan through accredited credit counselors

The right credit counselor could help you make sense of your debt situation. One option they might offer you is a debt management plan to manage your unsecured debts (such as credit cards and personal loans). 

With a debt management plan, you make one monthly payment to the credit counselor. The payment is designed to clear all of your enrolled debts within 3-5 years. For some people, the payment is unaffordable.

The credit counseling agency distributes the money to your creditors. They may even negotiate more favorable payment terms for you. But if you miss a payment, your creditors may back out of any negotiated agreement.

You may have to agree to stop using credit accounts while you’re in the program.

Note that even though most credit counselors are non-for-profit organizations, they typically charge a fee for setting up and managing the debt management plan.

Comparing strategies

The following table summarizes all of the above approaches to make it easy to compare them.

Tips to pay off credit card debt faster

Along with the above methods, here are some specific tips for getting rid of credit card debt more quickly:

• Get a clear picture of your debt. Write down every debt you owe with the interest rate, total amount, and monthly payment for each. That should help you understand which debts to prioritize and which strategy might make sense for you. 

• Pay more than the minimum. Monthly payments on credit cards are almost always a tiny percentage of the total amount owed. That makes them seem affordable, but taking a long time to repay your debt will cost you more in interest. 

• Consider combining methods. Some approaches can work together for a more effective strategy. For example, a debt consolidation loan might help you reduce interest costs and get rid of your credit card balances. You might still have other debts that you didn’t consolidate (like a car loan or a student loan), so you could then use the debt avalanche method.

• Cut back on discretionary spending. Discretionary spending includes any expenses you can live without. Make a budget to choose expenses to cut. Directing more dollars toward debt payoff could leave you in better financial shape in the long run.

Have a plan to avoid new debt. Understand what caused your debt. Was it something unavoidable, like a medical emergency? Or do you tend to overspend. Many people take on new debt faster than they can pay off old debt, for instance by charging a credit card back up after doing a balance transfer. That could leave you worse off than before. Make a realistic plan and do your best to follow it.