Credit card debt can go from zero to thousands with one quick swipe. Or it can build slowly like rising water — a nice dinner here, some retail therapy there. Before you know it, your balance is uncomfortably high. You’re not alone. Almost half of American households carry credit card debt. Of those consumers, the average balance is $6,501, according to recent Experian® data.
If you’ve vowed to pay off your credit card balance, you’re making a smart financial move. Doing so can save you money on interest, build your credit history, and help you achieve other financial goals. Here, learn the top tips and strategies for getting it done, from the snowball strategy to hardship plans to the boring but effective debt-focused budget.
What Is a Realistic Payoff Schedule?
If you’ve been carrying a balance on one or more cards, it may take longer than you’d like to pay off the debt. Determine how long you need to become debt-free while still covering your monthly bills comfortably.
You’ll want to consider these facts:
• A longer payoff term can allow you to continue to save and invest while paying down debt.
• A shorter payoff term can save you a considerable amount in interest.
Worth noting before moving on to tactics: If there’s no scenario in which you can cover your living expenses and pay off your credit card debt in five years, the standard payoff strategies may not be enough. It may be time to consider applying for credit card debt forgiveness.
7 Credit Card Payoff Strategies and Tips
There are numerous ways to tackle debt and pay off credit cards. The approaches below may work best when you mix and match several to create your own custom debt payoff plan.
1. Create a Debt-Focused Budget
Achieving financial goals usually starts with a budget. Making a budget is designed to help you discover extra cash you can put toward your credit card bill.
• First, make a list of your monthly bills that reflect the “musts” of your life. Along with your rent or mortgage, phone, gas, food, and other required living expenses, include your credit card payment and other minimum debt expenditures. You can leave the amount blank for now. This is your “Needs” column.
• Next, look at your “wants.” These are things that you can survive without — restaurant meals, new clothes, gym membership, travel — but that often make life better. Which items can you do without temporarily so you can put their cost toward your credit card bill? The idea is to trim spending so you can pay down your debt.
It’s OK if your budget isn’t the same from month to month — flexibility is good. While you’re at it, build the following into your budget:
• Look ahead for unavoidable big purchases (that upcoming destination wedding) and occasional bills (annual home insurance premiums, for instance, or holiday gift shopping).
• Leave some wiggle room for unexpected expenses. You might need to dip into your emergency savings for this kind of cost, but it’s good to have a cushion in your budget (say, for a rent increase).
• Recognize that your credit card payment may be lower some months to accommodate the fluctuating costs noted above. Just always pay at least the minimum payment.
Your new budget should prioritize your credit card payment on par with other bills and above nonessential treats. One way to make budgeting easier on yourself is to download a financial insights app, which pulls all of your financial information into one place.
2. Zero-Interest Credit Card
The frustrating thing about credit cards is how interest can take up more and more of your balance. Zero-interest credit cards, also known as 0% APR cards, allow card holders to make payments with no interest on transfers and purchases for a set period of time. The promotional period on a new credit card can usually last from 12 to 21 billing cycles, long enough to make a large dent in the card’s principal balance.
Consolidating your credit card debt on one zero interest card serves to simplify your monthly bills while also saving you money on interest payments. The key here, of course, is to avoid racking up even more credit card debt.
One drawback to these cards is that you often need a FICO® Score of 670 or above to qualify. And once the promo period expires, the interest rate can climb to 29% or higher. In an ideal world, you’ll want to achieve your payoff goal before the rate rises.
A credit card interest calculator can give you an idea of how much your current interest rate affects your total balance.
3. The Snowball, the Avalanche, and the Snowflake
The snowball and avalanche debt repayment strategies take slightly different approaches to paying down debt. Both involve maintaining the minimum payment on all but one card.
• The debt snowball method focuses on the debt with the lowest balance first, regardless of interest rate, putting extra toward that payment each month until it’s paid off.
Then, that entire monthly payment is added to the next payment — on top of the minimum you were already paying. Rinse and repeat with the next card. It’s easy to see how this method can quickly get the snowball rolling.
• The debt avalanche is based on the same philosophy but targets the highest-interest payment first. Getting out from under the highest debt can save a lot of money in the long run. Just like the snowball method, applying that entire payment to the next highest interest debt can lead to quick results.
• The third snow-related strategy, the debt snowflake, emphasizes putting every extra scrap of cash toward debt repayment. If you have extra money to throw at your debt, even $20, that can still make a difference in your overall amount owed. So this method encourages you to chip away at debt with any small amounts available.
4. Make More Money
Sure, increasing your income is easier said than done. But if you have the time to spare, it can make paying down debt a whole lot easier. Here are the top ways that people can bring in more cash:
• Start a side hustle (or monetize an existing hobby)
• Get a part-time job (on top of your current job). Two shifts a week can help you bring in another $500 to $1,000 per month.
• Sell your stuff. Reselling clothes, books, old electronics, and jewelry can help bring in cash.
• Negotiate a raise. In some cases, labor shortages may give workers extra leverage to ask for more.
5. Negotiate with Your Credit Card Company
If your large credit card balance is the result of unemployment, medical bills (yours or a loved one’s), or another financial setback, inform your credit card company. You may be able to negotiate a lower interest rate, lower fees and penalties, or a fixed payment schedule.
Hardship plans have no direct effect on your credit rating. However, the credit card company may send a note to the credit bureaus informing them that you’re participating in the program.
One point to be aware of: Your credit card issuer may also close or suspend your credit card while you’re paying off the balance. This can leave you without a means to pay for purchases and could also ding your credit score.
6. Change Your Spending Habits
Changing how you spend your money is key to paying down debt — and to avoid racking up more in the future. You can approach this in two ways: as a temporary measure while you pay off your cards or a permanent downsizing of your lifestyle.
• The advantage of the temporary approach is that people are generally more willing to give things up when it’s for a limited time. For instance, can you suspend your gym membership during the warmer months when you can work out outdoors? Perhaps you can challenge yourself to cook at home for 30 days to save on restaurants. Or you might go without paid streaming services for six months.
String enough of those small sacrifices together to cover a year or two, and see how quickly you might be able to increase your credit card payments. That in turn can make your payoff term shrink.
• Downsizing your lifestyle for the long term has its own appeal, even for people who aren’t paying down debt. Living below your means is key to accumulating wealth. How exactly you accomplish that isn’t important. For instance, you can frequent cheaper restaurants, reduce the number of times you go out each month, or merely avoid ordering alcohol and dessert. The bottom line is to save money, avoid debt, and enjoy the financial freedom that results.
7. Personal Loan
Similar to a zero-interest credit card, a personal loan is a form of debt consolidation. Personal loans tend to have lower interest rates than credit cards, saving you money. And if you’re carrying a balance on multiple credit cards, a personal loan can allow you to simplify your debt with one fixed monthly payment.
Personal loans can be a great option for people with good to excellent credit. That’s because your interest rate is determined largely by your credit score and history. You can typically borrow between $1,000 and $100,000, and use the money for just about any purpose, from paying off debt to funding travel or a home renovation.
You will usually find fixed-rate personal loans, though some variable-rate ones are available as well. Terms usually run from two to seven years for personal loans.
The Takeaway
Credit card debt can sneak up on you. If you’re carrying a balance on one or more cards, there are numerous ways to approach paying down your debt. You might start with a new budget that prioritizes your credit card payment along with your other monthly bills, and trim your spending accordingly. You could then combine a broad payoff strategy (the snowball, the avalanche) with other tips and tactics (zero-interest credit cards) to minimize your interest payments and shorten your payoff term. And remember: You’re not alone, and you can do this!
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
FAQ
How to pay off a huge credit card bill?
There are a variety of ways to pay off a large credit card bill. These include making (and sticking to) a budget, trying the debt avalanche or snowball method, applying for a zero-interest balance transfer card, or taking out a personal loan.
How to get rid of $30,000 credit card debt?
To pay off a $30,000 credit card debt, it’s wise to create a smart budget, look into cutting your expenses, develop a repayment plan, and see about consolidating your debt. If these don’t seem likely to lead to getting rid of your debt, you might talk to a certified credit counselor and/or consider a debt management plan.
What is the best tip to pay off credit cards?
The best tip for paying off credit card debt will depend on a variety of factors, such as how much debt you have vs. your available funds. For some people, the debt avalanche method of putting as much available cash toward the highest interest debt can be a smart move. For others, consolidating debt with a personal loan may be a good option.
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