5 Strategies to Pay Off Credit Card Debt

Discover the main strategies for paying off credit card debts

Let’s face it: few things keep you up at night as much as an out-of-control credit card debt. Maybe you started out paying the minimum amount every month, thinking you’d be able to balance it later. But when the bill starts to pile up with interest, the situation seems like a snowball that never stops rolling.

If you’re in this situation, you can be sure: you’re not alone. In the United States, millions of people face the same challenge every day. The good news is that there are simple, practical strategies to regain control of your finances and pay off your credit card without getting even more lost. Let’s see how?

1. Understand exactly how much you owe

The first step to solving any problem is to face it head on. Get your statements, make a list of your cards and write down:

• The total amount owed;
• The interest rate (APR) for each card;
• The minimum monthly payment.

We often end up ignoring the size of the hole because looking closely is scary. But knowing how much you really owe is essential to devising a strategy.

If you want a practical tool to track your debts and expenses, Mint is a free app widely used in the US. It organizes your finances, categorizes expenses, and helps you visualize what is taking a toll on your budget.

2. Choose the best strategy

There are two popular tactics for paying off debt: the snowball and the avalanche. Both work well, but the choice depends on your profile and motivation:

Snowball Strategy: You start paying off the smallest debts first, regardless of the interest. The idea here is to gain motivation by eliminating small debts faster. Each victory gives you the boost to keep going.

Avalanche Strategy: You prioritize paying off the debts with the highest interest rates. It may take longer to see results, but in the long run you save a good amount of money in interest.

If you need a dose of motivation at each step, the snowball is your best bet. However, if you are focused on saving, the avalanche will work better.

3. Negotiate with your credit card company

It may seem surprising, but negotiation works. Contact your credit card company and ask for a lower interest rate or a more amenable payment plan. In many cases, they would rather renegotiate than risk a total default.

Say something like, “I’m committed to paying off this debt, but I need a little help with the interest. Is there a payment plan that would fit better into my budget?”

You may be surprised at the options they offer. In fact, keeping communication open can even prevent the debt from being sent to collection agencies, which would impact your credit score.

4. Transfer the debt to a zero-interest card

If your credit score is still in good standing, consider transferring the debt to a credit card with a promotional 0% APR (the so-called balance transfer cards).

These cards usually offer 12 to 18 months interest-free on balance transfers. This gives you a break to focus on paying off the debt without the interest continuing to mount. Just one important detail: always pay the minimum required on the new card so you don’t lose the benefit.

Companies like Chase, Citi and Capital One usually have good options, so it’s worth doing some research.

5. Create an extra income (even if it’s temporary)

Sometimes, cutting expenses isn’t enough to get out of the red, especially with credit card interest eating up a good portion of your budget. So, how about creating an extra income, even if it’s temporary?

You can:

• Do freelance work online on sites like Fiverr or Upwork;
• Sell clothes, electronics or other idle items on eBay;
• Work as a driver or delivery person for Uber or DoorDash.

Every extra dollar that comes in should be directed directly towards the debt. This speeds up the process and, in a short time, you’ll see the difference in your bill.

6. Consider consolidating your debts

If you have debts on several cards, it may be a good idea to look into taking out a personal loan to consolidate your debts. This option works like this: you take out a loan with a lower interest rate than your credit card and use the money to pay off all your bills. Then, you only pay a fixed installment each month.

Banks and platforms like LendingClub and SoFi offer good conditions for those looking to consolidate debts.

Conclusion

Paying off credit card debt is not easy, but it is absolutely possible. The most important thing is to take the first step and follow a strategy that works for you. Ultimately, small daily actions will bring you closer to financial freedom and, believe me, the feeling of finally seeing a zero balance is worth all the effort.

Written by

Juliana Raquel