How to Pay Off Credit Card Debt: Strategies, Comparisons, and Tips

Credit cards charge interest that adds up fast. Extra payments toward your balance now could save you money over time. This guide compares six strategies for getting relief from your credit card debt, from do-it-yourself payoff methods to options that involve a lender or counselor.

Tips to Pay Off Credit Card Debt Faster

Start with these steps to build a plan for paying off credit card debt. Combine them with one of the strategies below for the best results.

• Get a clear picture of your debt. Write down each debt you owe. Note the interest rate, total amount, and monthly payment. Having it all laid out in front of you helps you understand which debts to prioritize and which strategy might work.

• Pay more than the minimum. Monthly minimum payments on credit cards are typically a tiny percentage of the total amount owed, which may make them seem affordable. That’s not necessarily the case. A long repayment timeline could cost you more in interest.

• Consider combining methods. Some approaches might compliment one another. Say you take out a debt consolidation loan to 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). To pay those down, you could apply the debt avalanche or snowball method.

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

• Have a plan to avoid new debt. New debt may build up faster than old debt gets paid off, especially if a credit card balance creeps back up after debt consolidation or a balance transfer. Set a plan for handling costs like a medical bill or a car repair so you don't need to rely on a credit card, and follow it as closely as you can.

• Contact your card issuer. Ask about a lower interest rate or a temporary hardship option. Card issuers are sometimes willing to work with customers who reach out directly. Many companies with hardship programs don’t advertise them; it’s okay to ask.

These steps could help you manage credit card debt on your own. If your balances stay high even with a plan, a debt relief program is one more option worth exploring.

1. Debt Snowball Method

The snowball method could be the right choice if you want the quickest win.

With the snowball method, you take the following steps:

1. List all your debt balances from smallest to largest. 

2. Concentrate all your efforts (making extra payments or paying more than the minimum) on paying off the smallest debt first. 

3. Keep making the minimum payments on your other debts. 

4. Once the first debt is paid off, add its payment to the minimum payment you were making on the second-smallest debt. 

5. 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.

The smallest balance disappears fastest, giving you a quick win early on. As you move on to bigger debts, your payments grow, and your progress becomes easier to see. It’s motivating. Progress is felt. Getting that first debt cleared can be really energizing, giving you the positive reinforcement you need to stick with your plan and tackle the next debt.

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.

Imagine you owe $500 on one card, $2,000 on a second, and $5,000 on a third. With the snowball method, you'd pay the minimum on the $2,000 and $5,000 balances while putting every extra dollar toward the $500 balance. Once that $500 balance reaches $0, you take that monthly payment and add it on top of the minimum payment on your $2,000 balance. You repeat the process until every balance reaches zero.

2. Debt Avalanche Method

Maybe you want the biggest bang for your buck, even if it takes a while. In that case, tackle your highest-interest debt first using the avalanche method.

It's the same strategy as the snowball method. Except, instead of focusing on your debt that has the smallest balance, you focus on the debt that has the highest interest rate.

The logic is straightforward: Your most expensive debt is the one that costs the most in interest. Pay it off first to potentially save money over time. Anyone can try a DIY debt avalanche.

With the debt avalanche method, you'd rank your balances by interest rate instead of amount. Say a $500 balance carries a 22% APR, a $2,000 balance carries 24% APR, and a $5,000 balance carries 18% APR. You'd put extra payments toward the $2,000 balance first, since it has the highest rate. Then, the $500 balance, and finally, the $5,000 balance.

If the avalanche saves you money, it’ll be at the end of your payoff. You could finish your debt payoff about a month earlier compared to the snowball method. Use an online snowball vs avalanche calculator to find out what’s possible.

3. 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 your 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.

Limitations and drawbacks: There are usually fees to transfer a balance. And a credit card issuer generally doesn't allow you to transfer a balance between cards issued by the same company.

This approach requires you to apply for a new credit card that offers a balance transfer. Typically, you'll need fair credit or better.

Imagine you have a $4,000 balance at 22% APR. A balance transfer card with a 0% introductory rate for 15 months means what you pay goes 100% toward the principal instead of interest during that window, which could reduce the total interest you pay.

Debt Consolidation Loan

A debt consolidation loan is a new loan that you use to pay off multiple other debts.

Debt consolidation loans work best when the new loan has a lower interest rate than your current debt. One advantage of this strategy is fewer payments to track each month.

Personal loans, a common type of consolidation loan, generally have interest rates that are lower than credit card rates. A personal loan used for debt consolidation could simplify your payments and save you money on interest charges.

This approach could work well if you qualify for a new loan with terms that fit your budget.

Imagine you have three credit card balances totaling $8,000 at rates between 20% and 25% APR. A debt consolidation loan at 16% APR would combine those balances into one monthly payment and reduce the rate you pay on the full amount. This could lower your total interest costs over the life of the loan.

4. Home Equity Loan or HELOC

A home equity loan or a home equity line of credit, known as a HELOC, is a way to borrow against equity in your home. You could use that money to pay off credit card debt. 

A home equity loan gives you a one-time payment with a fixed interest rate and a set repayment schedule. A HELOC is a line of credit you use to borrow, repay, and borrow more, as often as you like, up to your limit, for the first few years of the loan. 

Interest rates on a home equity loan or HELOC are often lower than credit card rates. Your home secures the loan, which means your lender could foreclose if payments aren't made. That lowers their risk of loss, which usually means lower costs for you. 

Repayment periods typically range from 10 to 30 years, depending on your lender and the term you choose. Home equity loans charge fixed interest rates. Most HELOCs have a variable interest rate, which means your payment could change over time.

Homeowners use this option for home improvements or other large planned expenses, in addition to paying off high-interest debt. This approach could work well if you have sufficient equity in your home and want to spread payments over a longer term than a personal loan typically allows.

Imagine you have $10,000 worth of credit card debt at an average interest rate of 24%. You also want to update your bathroom. If you qualify for a home equity loan at 12% that’s big enough to cover both, you could lower the rate on your credit card debt and reach a remodeling goal at the same time.

5. Debt Settlement

Debt settlement is a process where a company negotiates with your creditors to accept a one-time payment for less than the full balance you owe on unsecured debt, such as credit card debt. Freedom Debt Relief offers this service. Most people who consider debt settlement are already behind on payments, since creditors generally don't negotiate with customers who are current.

You'd need money set aside before you make an offer to a creditor. A debt settlement company typically sets up a dedicated account where you make an affordable deposit each month to build funds for those offers. The money in that account stays yours. The debt settlement company can’t legally charge you a fee until after they reach an agreement with your creditor, you approve it, and at least one payment has been made towards it.

A debt settlement company typically works with unsecured debts like credit cards, medical bills, and personal loans. This doesn't require you to apply for a new loan the way consolidation does. Debt settlement takes several years and doesn't have a fixed end date. Duration hinges on negotiations between creditors and settlement company.

This approach could fit your situation if you genuinely can’t afford to fully repay your debts, and other strategies haven't kept up with what you owe.

Imagine you have $10,000 in credit card debt and you recently got divorced. You’re now managing all of the household bills by yourself, and you’re struggling. A debt settlement company gets your creditor to agree to accept $5,000. You pay that amount, the other $5,000 is forgiven, and that debt is permanently behind you. The debt settlement company charges a $2,500 fee, for a grant total of $7,500.

Debt settlement may negatively impact your credit.

6. Debt Management Plan Through Accredited Credit Counselors

The right credit counselor could help you manage full repayment of your debt. One option they might offer you is a debt management plan (DMP) for 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 three to five years. 

The payment amount should fit your budget before you enroll in a plan. Some people are unable to complete their plan because the required payment is too high.

The credit counseling agency distributes the money to your creditors. They may even negotiate more favorable payment terms for you.

If you miss a payment, your creditors may back out of any negotiated agreement. You typically have to agree to stop using credit accounts while you're in the program.

Most credit counseling agencies are nonprofit organizations. They still charge a fee to set up and manage a debt management plan, but you could ask about possible fee waivers.

Imagine you have $10,000 in unsecured debt across several accounts. A credit counselor could set up a debt management plan with a single monthly payment. Your counselor negotiates a lower interest rate on your credit card account, and you fully pay it off within about three years.

Choose the Right Way to Pay Off Credit Card Debt

Every strategy on this page could help you make progress on credit card debt. Your best option depends on your total balance, your budget, and how much support you want along the way.

A DIY method like the snowball or avalanche approach works well if you're comfortable managing the process yourself. A balance transfer or consolidation loan could help if you qualify for a new rate that's lower than what you're paying now. A debt management plan or debt settlement could work well if your balances feel out of reach without help. Consider how quickly you want results, how much structure you want from a third party, whether you have a hardship, and whether you're comfortable managing multiple creditors yourself.

Whichever path you choose, revisit your budget every few months to see whether a faster or more structured option makes sense as your situation changes.

If you're not sure where to start, get a free debt assessment to review your options.