7 Tips to Help You Pay Off Credit Card Debt

Tips on paying off credit card debt
Key Takeaways:
  • It’s hard to get out of credit card debt if you’re still using your cards.
  • Learning to budget is a key part of a payoff strategy.
  • Payoff plans and borrowing strategies can be equally effective.

Paying off credit card debts and other bills can feel like a major struggle, but it doesn't have to be. Here are some practical and effective tips to get out of debt and stay that way. Ditch your financial woes, take back control and start tackling all outstanding debts. 

Here’s how. 

1. Know your debts and conquer them

It’s hard to solve a problem if we don’t know what we are up against.

Take the first step towards conquering debt by calculating how much you owe, and to whom. Go through your statements and tally up your credit card debts and other unpaid balances. Though it may feel like a huge bummer, facing it head-on is the first step to financial success!

2. Take a break from your credit cards

Credit cards provide convenient, easy access to…. more debt. Pledge to stop using your credit cards until you are debt-free and back in control. Focus on paying off existing debts instead of adding more. 

Credit cards provide convenient, easy access to…. more debt. Stop using your credit cards until you are debt-free and back in control. Put your credit cards in a box or envelope and store them out of sight on a closet shelf spot to prevent casual use. Log on to your credit card online and lock it so that it can’t be used without unlocking it (if your credit card issuer offers this feature.) You can always log back on to unlock it if you need to use it. Then, focus on paying off existing debts instead of adding to them. 

3. Figure out where your money is going

Create a budget to see where you stand and discover where every penny is going. 

Crafting a budget is an essential step in gaining clarity and peace of mind. You’ll have a better understanding of what money comes into the household and where it goes out. This will help guide decisions about future purchases too.

Sit down and make a list of your regular expenses, such as rent/mortgage, food, transportation, utilities, insurance, etc. Also, consider other categories like clothing, subscriptions, restaurants, personal care, miscellaneous, etc. that you might forget to include or possibly do not do as often. 

Keep in mind that some expenses, such as food costs, can vary month-to-month. Look at bank statements or credit card bills to better gauge how much you're spending. Check what you have spent over the last three months to get an average. 

Be sure to include bills you pay quarterly, every six months or annually, such as home or auto insurance. 

Once you know all of your expenses, add them up and subtract them from your income. If your spending exceeds your income, you have a more serious problem. Skip to steps 6 and 7 below. If your spending is within your income, this is when you can do the work to find extra money to put toward those debts.

4. Cut expenses and free up money

Once you jot it all down, take a look at your expenses and see where you can make some adjustments. Consider which expenses are necessary for day-to-day life - and trim any extra fat from the budget.

Consider eating out less often. Cut subscriptions you can live without. Also, think about going generic on certain products instead of name brands - it all adds up! This will help you breathe a bit easier.

5. Choose a method to crush your debts 

Once you determine how much debt you owe and what you can cut, try to decide the approach that works best for you to pay off your debts in a timely fashion. Consider the avalanche and snowball methods.

The avalanche method of paying off credit card debts

The avalanche method helps you decrease the amount you owe by prioritizing debts with higher interest rates. This can save a little bit of time and money. Getting rid of your most expensive debts as quickly as possible means you’ll lower your average interest rate over time. Paying less interest means you can get out of debt faster.

The snowball method of paying off credit card debts

The snowball method focuses on paying off the smallest balance first. Then you would focus on paying off the next smallest balance. 

This approach can be an effective way to reduce your credit card debts and other outstanding bills while gaining momentum. You’ll reach your first debt payoff in the shortest possible time. With a small win, you can unlock the inspiration to keep pushing forward.

6. Combine, consolidate and win the battle

Debt consolidation is taking one loan to pay off multiple smaller loans. If you have two or more unpaid balances such as credit card debts, you can combine them and make one payment. 

A debt consolidation loan can be beneficial for many reasons. It can simplify your finances by reducing the number of bills you pay. If you pay off higher interest debt with a lower interest loan, it can lower the total amount of interest you pay. Plus, you may be able to improve your credit score by paying off revolving debt and replacing it with an installment loan..

Though using this method can't guarantee you the lowest interest rate, it usually brings down the total required monthly payment. This can be a helpful strategy. Keep in mind that you might not save money on a lower interest if you take a long time to pay off the debt. 

Also, be aware that some people pay off their credit cards with a loan and then run the cards back up. If you don’t want to risk this happening, you might want to consider closing the credit cards  immediately after you pay them off with the loan. Either way, you need to have a larger plan to avoid repeating the debt situation.

7. Struggling? Here are two more strategies to pay off debt

If you're still finding it hard to pay off debts using the ideas given, it may be time to consider other pathways. Here are two other ways to reduce your credit card debts and other bills.

Debt management plan and credit counseling

If you’re keeping up with payments, but you’re at risk for falling behind, a debt management plan might be an option to consider. They are administered by credit counselors. Credit counselors can help you learn to budget and manage your finances. Most are non-profit organizations that can assist you in setting up a debt repayment plan. They can provide education and guidance to keep you on track.

A debt management plan is designed to pay off all of your debt in full over 3-5 years. You typically meet with a counselor and they help you figure out what your options are based on your current situation. They help negotiate with creditors for you and make a payment plan.

They can help you create a budget based on what you can pay. The counselors can also do the heavy lifting of negotiating with creditors on your behalf. This may result in lower interest rates and monthly payments.

DMPs usually cost a monthly fee, typically $40-60. Creditors often agree to waive fees, and sometimes lower the interest rate. Enrolled debts are reported as being in a DMP so there is temporary harm to your credit score but most people’s scores recover over the course of the plan. You have to agree not to use credit while you're in the DMP.  

Counselors can also guide you to make sure you are making sound financial decisions to address your debt more effectively. 

Debt resolution

If you are already behind on your bills, or if you know you can’t afford to repay all of your debts, you might want to consider resolving or settling your debt. Debt settlement is designed to close out your debts for less than the full amount owed. Anyone can attempt debt resolution on their own. You contact your creditor, explain your situation, offer an amount that’s less than you owe, and hope they accept it. 

For some consumers, it’s easier and more effective to let a reputable professional debt settlement company do the heavy lifting of negotiating with your creditors. With their experience, the process might be easier, less stressful, and more successful.  

If you’re keeping up with your payments, your creditors will assume that you can continue to do so. Debt resolution requires you to stop making your payments for a while if you haven’t already. The debts are reported as delinquent and/or in collections. Your credit score suffers, but most people who are good candidates for debt resolution are already in collections. In reality, there could be very little effect on your credit score once you get started. As soon as you settle your debts, your credit score will improve.

Frequently Asked Questions

What are the biggest debt payoff mistakes people make?

Avoiding help. Don’t let negative emotions or a feeling of shame cause you to hide from help. You can get free help from reputable companies online, or you can get professional help from a reputable debt settlement company or an accredited credit counselor. The smartest thing you can do is learn how to handle your money and create financial security for yourself. If you feel lost, reach out. At Freedom Debt Relief, our mission is to help you find the debt relief solution that’s right for you, even if it doesn’t include our services. If you are keeping up with your payments and don’t want a loan or debt settlement, but you can’t seem to get ahead, start by finding a nonprofit credit counselor or financial counselor. Two good places to check are the NFCC and the AFCPE®

No budget. To get a handle on your finances, you need to be clear about the money coming in and the money going out. Your budget gives you knowledge and power. With a budget you can make an informed choice about every dollar you spend. Without a budget, you’ll be stuck on guesswork that might or might not have success. 

Charging more. If you continue to use credit cards, your debt payoff will take longer. You might even chase your tail indefinitely. If you’re serious, and ready to get rid of your debt, close the credit card accounts. Keep one open for emergencies if you need to, but lock it so that it can’t be used impulsively. Use a debit card for everyday purchases.

How quickly can I pay off my credit card debt?

Your payoff time frame depends on how much debt you have and how much money you can dedicate to paying it off. Many people pay off credit card debt in a matter of months or just a couple of years. Once you determine how much you owe and what you can afford to pay back regularly, use a credit card calculator online to figure out how long payoff will take. 

What are 5 ways to pay down credit card debt?

  • The avalanche method that prioritizes paying off the debts with the highest interest rates first.

  • The snowball method that prioritizes paying off the smallest balance first.

  • A debt management plan, which takes 3-5 years and pays off all your debts in full.

  • A debt consolidation loan, which uses one loan to pay off multiple smaller debts.

  • Debt resolution, where your creditors agree to accept less than the full amount owed.