How to Get Out of Credit Card Debt Fast

You’ve gotten to the point where you’re tired of watching your hard-earned money disappear into credit card payments, and you want a change. It’s time to get started on clearing credit card debt from your life so you can breathe easier and move forward.

Those are all sensible feelings. Credit card balances usually have the highest interest rates of common types of debt. A key benefit of credit card debt relief is getting rid of those high interest charges. Then you can put your money into savings for the things you want—instead of your credit card companies’ pockets. 

Some strategies get you out of credit card debt faster than others. The best one to use depends on your situation. Get to know these ways to pay off credit card debt so you can choose the approach that works best for you. That choice could be the first step toward your new and better financial future. 

Credit Card Debt and Its Impact

Having credit card debt can feel like sinking into quicksand. You find yourself steadily going deeper and deeper. 

Here’s why:

• Credit card interest rates are generally much higher. Other forms of consumer debt have lower interest rates. Until you start paying down credit card debt, heavy interest charges keep piling on to the amount you owe.

• Credit card minimum payments are very low. That may seem user-friendly, but it's not. Minimum payments are designed to stretch repayment out over a longer time so you pay more interest. A typical minimum payment barely makes a dent in what you owe.

• Credit card debt has no defined repayment period. Loans typically have regular payments made over a set schedule. With credit card debt, the payments can vary and you can repeatedly add to the amount you've borrowed. That allows credit card debt to drag on and on.

• Interest compounds over time. That means its impact will keep growing unless you do something about it. Besides interest on the amount you borrowed you may also find yourself paying interest charges on any unpaid interest from previous months. 

• Late fees can make the problem even worse. If you find yourself struggling to make payments, you may get hit with late fees. These are like pouring gasoline onto a fire—they just add to what you owe, making the problem even worse. 

For all these reasons, tackling credit card debt requires a sense of urgency. 

Paying off credit card debt is like a good investment. The benefits get bigger every month. The key is to find ways to pay off credit card debt faster.

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What Are Strategies to Pay Off Credit Card Debt Fast?

If you’ve decided it’s time to get rid of your credit card debt and get your financial house in order, you have plenty of options.

Getting to know various debt reduction strategies can help you recognize which best fits your situation. And sometimes, the right answer is to use more than one strategy. 

Here are some of the most effective and popular methods to get off the slow train of minimum payments and deal with your debt faster:

• DIY payoff with the snowball or avalanche method

• Debt consolidation

• Debt counseling

• Debt management

• Debt settlement

• Bankruptcy

Each of these options could be the right choice, and they won’t all be right for you.

Let’s say you have a total of $20,000 in debt across the following accounts:

• Credit card A: $10,000 balance, with an interest rate of 28% and a minimum payment of $333.33

• Credit card B: $2,000 balance, with an interest rate of 26% and a minimum payment of $63.33

• Credit card C: $3,000 balance, with an interest rate of 25% and a minimum payment of $92.50

• Medical bills: $5,000 in total, with an interest rate of 8% and a minimum payment of $83.33

Your total minimum payments owed across all your debts is $572.49. You’re committed to paying off these debts, and aren’t going to add to your balances. Here’s how quickly you could pay them off using these debt reduction methods. 

Accelerating Debt Reduction: Snowball and Avalanche

Debt reduction can be a big task, so two popular methods recognize that you may want to start small, then steadily gather momentum. These are the snowball and the avalanche methods. 

The debt snowball method

With the debt snowball, you prioritize your credit card debt repayments from the smallest to the largest balance owed. While making the minimum payment on the rest of your card balances, pay as much as you can to the account with the lowest balance. 

That'll be the fastest way to your first debt payoff. You can then apply the same strategy to the next smallest debt, and so on.

With our example debts above, you’d start with credit card B. You can afford an extra $400 a month on top of your minimum payments, for a total of $972.49 per month. 

Using the debt snowball method, you’ll pay off your $20,000 in debt in 27 months, with interest costs of $5,667.70—that’s a savings of 50 months and $6,596.90 in interest compared to sticking with your current minimum payments. 

This approach can be very motivating because it’s the quickest way to start knocking off debts. This gives the feeling of progress. As you continue, your payment gets bigger and you have fewer bills to pay.

The debt avalanche method

A snowball gradually gathers size as you roll it along. An avalanche gathers size and force faster and faster as it roars forward. The debt avalanche is designed to make your debt reduction efforts increasingly effective as time goes on.

With this method, you focus on the debt that has the APR. Credit card A is the clear winner. You can afford that same $972.49 per month, so you’ll be sending $733.33 a month to card A as you build your avalanche. It’s going to take you a little longer to get to your first payoff, compared to the snowball method. But you’ll save money on interest charges. (Again, assuming you’re not adding new debt during this process.) For our debt avalanche, you could be free of these four debts in 26 months for $4,734.52 in interest.

Making just minimum payments would have taken you 51 months longer and cost you $7,530.08 more. 

The avalanche may not eliminate any one balance as quickly as the snowball method. However, it reduces the total amount you owe more quickly. You can track your progress by seeing how quickly that total debt starts to shrink.

Debt Consolidation to Pay Off Credit Card Debt

Debt consolidation involves using one source of credit, like a new loan, to pay off multiple existing debts.

What does that accomplish? Depending on your situation, debt consolidation could:

• Simplify your finances by reducing the number of monthly payments you have to make

• Reduce the interest you pay by exchanging high-interest debt for a lower-rate debt

• Adjust your monthly payment amount to better suit your financial resources

• Have a positive impact on your credit record by moving credit card debt to an installment loan

Debt consolidation depends on having a good enough credit score to qualify for new credit to pay off old debts. How this works depends on what type of credit you can qualify for, and what types of debt you currently have.

Possibilities include consolidating debt with a balance transfer credit card, a personal loan, or a home equity loan.

If you qualify for a lower interest rate but you keep making the same payment or a bigger payment, you could pay off your debts faster than by making minimum payments. It’s important here to consider how the loan term you choose could affect your total cost and timeline. The longer you take to repay a loan, the more interest you’ll pay. 

Freedom Debt Relief is not a credit repair organization and does not provide or offer services or advice to repair, modify, or improve your credit.

Balance transfer credit card

A balance transfer credit card typically has a zero-interest introductory period lasting six to 21 months. You transfer existing credit card balances to your new balance transfer card. If you can eliminate interest charges, your full payments can go towards debt reduction. (Most balance transfer cards charge a 3-6% fee for each transfer.)

Using our example list of debts above, let’s game out a balance transfer debt payoff scenario. 

You get approved for a card with a $22,000 limit and 12 months of 0% APR. The card has a 5% balance transfer fee, so your total balance after moving your existing debts over comes to $21,000. If you can swing a payment of $1,750 per month, you could pay off all of your existing debt in a year and won’t incur any additional interest. If you’re limited to that $972.49 figure from our debt snowball and avalanche examples, you’ll still have over $11,600 in debt left at the end of the year—and the odds are good that your balance transfer card’s APR will soar to at least 20%.  

So the key to making a balance transfer work is having a clear budget plan that allows you to pay off the debt during that zero-interest introductory period. That plan should also include avoiding new charges on the cards you’ve just paid off. 

When considering a balance transfer card, be sure to look at the length of the balance transfer period, how much money you can afford to pay per month, and the amount of any balance transfer fees. 

Personal loan

Personal loans are usually unsecured installment loans. Interest rates are typically lower than credit card rates. That makes them a good tool for debt consolidation. 

When considering a personal loan for debt consolidation, look at the affordability of the monthly payments. Also take into account the total amount you have to pay over the life of the loan.

Using our $20,000 in debt example from above, let’s say you qualify for a personal debt consolidation loan at 18% interest. Your payment amount is determined by the loan term. If you can swing a payment of $723.05 per month, you could pay your debt off in three years. If you can only afford $508.87 per month, your debt will be gone in five years. You save interest with a shorter loan term—$6,029.72 for three years, and $10,472.11 for five years. Both of these scenarios could clear your debts faster than by making minimum payments.

Home equity loan

If you own a home and have built up some equity in it, that’s a resource you could use for debt consolidation.

A home equity loan is guaranteed by your home. That means if you fail to repay the loan, you could lose the home. This is a financial safety net for the lender. The result is that home equity loans could be easier to qualify for compared to other kinds of loans. Also, the interest rate tends to be lower than other borrowing options. That makes them an excellent tool for debt consolidation under the right circumstances. 

With home equity loans, you have the option of stretching payments out over a long time. This could make the monthly payments more affordable. But the longer you take to repay a debt, the more interest you’ll pay.  

Going back to our $20,000 example from above, if you qualify for a home equity loan at 12% interest with a 10-year repayment term, you could pay off your debt for $286.94 per month. But you’ll pay $14,433.03 in interest. Pay more per month and shorten your repayment term to save money on your debt payoff—a five-year repayment term gives you a payment of $444.89 per month and you’ll pay $6,693.34 in interest. 

A home equity loan could diversify your credit mix in a way that helps your credit record. 

Moving your credit card debt to a personal loan or home equity loan could have a positive effect on your credit if it improves your credit utilization ratio. That’s your credit card balances compared to your credit limits. Higher utilization tends to hurt credit scores. Installment loans don’t affect your credit the same way.

Credit Counseling

If you can't qualify for a debt consolidation loan, or you simply can't decide how to pay off credit card debt, credit counseling and a debt management plan might help. 

Nonprofit credit counseling agencies could help you deal with overspending problems. Credit counselors are typically certified. They should have experience in consumer credit, financial and debt counseling, and budgeting. Counselors consult with you, review your finances, and help develop a debt management plan to help you deal with your debt.

Pay off your debt through a debt management plan (DMP)

One service credit counseling agencies offer is called a debt management plan (DMP). DMPs organize your payments and figure out how to best use your resources to pay off debt. 

In a debt management plan, you make one monthly payment to a credit counselor. That credit counselor then decides how to best allocate that money among your creditors. The credit counselor may also negotiate with individual creditors to get better repayment terms.

When you start a DMP, you may have to close your credit card accounts, or at least stop using them for a while. That way you don't add to your balances when you’re supposed to be paying them off. You're also likely to have to pay a set-up fee and a monthly fee for as long as the DMP continues. However, that may prove to be money well spent if this solution helps you conquer debt problems.

DMP program payments are often high. They’re designed to fully pay off your unsecured debts in three to five years. If you’ve been making minimum payments, you might be in for a big payment shock. Many people find the payment unaffordable. But if you’ve got a good income, a lot of unsecured debt, and you want a helping hand, credit counseling could be an option to consider.

Using our $20,000 figure from above, if you paid it off with a DMP over three years at 9% interest, you’d pay $635.99 per month, and $2,895.81 in interest overall.  This plan would clear your debts faster than making minimum payments.

Get Rid of Debt Through Debt Settlement

The solutions discussed so far are ways of paying the full amount you owe. Sometimes that's just not possible. If that's the case, you may want to consider solutions that can reduce what you owe. These solutions include debt settlement and bankruptcy. 

Debt settlement is a process in which a creditor agrees to accept less than the entire amount owed as full payment. You can negotiate this yourself, or work with a debt settlement professional. 

Creditors are only likely to be open to negotiating a reduction in the amount you owe if you're missing payments. It’s hard to save money when you’re also struggling with debt. Some people choose to stop paying their debts in order to save money for settlement offers. If you stop paying your debts, your credit standing will suffer.

When you’ve saved enough to make an offer, you or your representative can open negotiations with your creditors. 

The advantages of debt settlement include:

• You may be able to get rid of some debt faster and for less money when compared to minimum payments.

• Debt settlement, unlike bankruptcy, doesn't create a public record. You have more privacy.

• You only have to settle your debt if you agree to the terms. With bankruptcy, a judge or trustee tells you how much you have to pay, and what assets (things of value you own) you must turn over. 

• You shouldn't have to pay any settlement fees until a creditor has agreed to a settlement and you've approved it. A reputable debt settlement firm won’t charge upfront settlement fees (it’s against the law).

The drawbacks of debt settlement include:

• Your creditors aren't required to settle with you. Instead they might keep calling you, turn your debt over to a collection agency, or even take you to court. 

• If you hire a debt settlement company, expect to pay fees (15% to 25% of the enrolled amounts).

• Amounts forgiven in debt settlement are treated as taxable income unless you're considered insolvent (you owe more than the total value of your possessions). 

Let’s say you work with a professional debt settlement company that is able to settle your $20,000 in debt for $10,000, and charges you 20% of the enrolled amount (so $4,000). You pay off $14,000 in total, between program fees and settling your debts, and it takes you three years, for a cost of $389 per month. 

People just like you are seeking debt relief in Colorado and across the country. The first step is the most important one—explore your options.

Get Rid Of Debt Through Bankruptcy (Chapter 7 and Chapter 13)

Another way to pay less than the total amount you owe is to declare bankruptcy. This involves explaining to a court why you can't pay your debts. The judge and a court trustee review the details of your finances, and decide whether you qualify to walk away from your debts, or if a payment plan is more appropriate. To figure out whether bankruptcy is a viable option for you, talk to a bankruptcy attorney licensed to practice where you live. 

Bankruptcy could help you deal with your debt faster than any other strategy, if you qualify  for Chapter 7, the liquidation bankruptcy. 

The two most common forms of bankruptcy for individuals are Chapter 7 and Chapter 13. 

Chapter 7 bankruptcy

Chapter 7 is the type of bankruptcy that usually makes the most sense for people with lower incomes and high unsecured debts. If you can afford a payment, you won’t qualify for Chapter 7.

In Chapter 7, the judge decides which of your possessions you can keep, and which will be sold to pay your creditors. Then your debts are discharged—in other words, you don't have to pay.

Chapter 7 bankruptcy works for unsecured debts like medical bills and credit card balances. In our example from above, your $20,000 in credit card and medical debt would be cleared entirely in a matter of months. You won’t be left with nothing, but you might have to give up some assets, and would be on the hook for the cost of filing bankruptcy. For Chapter 7, that’s $388, which includes a $245 filing fee, a $78 administrative fee, and a $15 surcharge.  

Filing for bankruptcy gives you protection from creditors. They have to stop trying to collect and they can’t sue you for a debt or foreclose on your home. (They can start again when your case is complete, unless the debt is discharged, in which case, it’s permanently resolved.) Discharging your unsecured debts in bankruptcy could give you a chance to get caught up on your debts that can’t be included in your bankruptcy filing.

Chapter 13 bankruptcy

Chapter 13 bankruptcy is a payment plan. You don’t lose any of your assets. You’ll have to pay all of your disposable income into your plan for five years (three if your income is below a threshold). 

You have to pay to file Chapter 13 bankruptcy too—$313, which includes a $236 filing fee plus a $78 administrative fee. If you get a five-year repayment plan for your $20,000 in debt, you’ll be on the hook for a monthly payment of $333.33. 

The bankruptcy trustee distributes the money to your creditors, according to the court-ordered plan. 

After your plan is complete, any remaining balances are forgiven, tax-free. 

There are limits to how much debt you can have to qualify for a Chapter 13 bankruptcy. Also, you have to submit your tax returns to the court every year, and the trustee may increase or decrease your payment accordingly.

Paying off Credit Card Debt Can Have Multiple Benefits

If you're struggling to pay off credit card debt, you have several options. Often, the hardest part is getting started. Usually, the longer you wait, the worse debt problems become. So the sooner you begin, the sooner you can start working toward a better financial future.