How to Pay Off Credit Card Debt in 6 Easy Steps

Don’t lose hope if you’re mired in credit card debt. Follow these steps to get a handle on things and become debt-free.

Written by Ben Luthi / May 25, 2022

Quick Bites

  • Credit card debt can be financially crippling, but it’s important to be diligent about looking for ways to pay it off.
  • Research several different methods of paying off credit card debt to find the right approach for you.
  • Look for ways to increase your income to accelerate your payoff plan.
  • Make it a priority to change how you spend to avoid getting into debt again.

Credit card debt can be easy to rack up but hard to pay off. According to Experian, the average credit card balance is $7,412, including retailer cards.[1] If you’re looking for methods for paying off credit card debt, fortunately, there are many.

“When working on paying off your debt, you need two things: a budget and a goal. All too often people try to pay off their debt with what is left over,” says Jay Zigmont, a CFP and founder of the financial planning firm Live, Learn, Plan.

“The result is that they do not make any measurable progress,” Zigmont adds. “Start with getting on a budget and telling your money what you want it to do.”

Depending on your situation and your goals, here’s how to pay off credit card debt.

Inside this article

  1. 1. Get organized
  2. 2. Acknowledge the situation
  3. 3. Check products that can help
  4. 4. Consider other methods
  5. 5. Look for ways to make money
  6. 6. Keep card balances in check

Step 1: Get organized

Before you develop your strategy for paying off credit card debt, you’ll want to take stock of your situation. Log in to each of your credit card accounts and take the balance, minimum monthly payment and APR for each card and plug it into a spreadsheet.

You’ll also want to check your FICO credit score; use a free tool like Experian’s credit monitoring service and review your income and expenses to get an idea of how much you can afford to put toward your credit cards.

Knowing where you stand financially can provide you with the information you need to determine the best path forward.

Step 2: Acknowledge the gravity of the situation

Paying off credit card debt can be a daunting task, and you may wonder if it’s even possible. The important thing to remember is that if you stay on your current trajectory, you’ll likely end up in worse financial shape than if you were to use one of the strategies below.

Here’s a chart to help you understand how paying just the minimum on your credit cards can hurt you in the long run compared to a couple of other options. We’ll assume a combined balance of $10,000 with an average APR of 20% and a minimum payment of $200.

Method Monthly PaymentTime to Pay Off Interest Charges and Fees
Minimum payment $200 9 years, 1 month$11,680.19 [2]
Balance transfer (3% fee, 21 month promotion) $490 1 year, 9 months$300
Personal loan (9% interest rate, 3-year term) $318 3 years $1,447.90 [3]

Of course, your ability to pay will dictate which options you can pursue. And while the balance transfer card payment is higher, you could pay a lower amount if you need to. While that means you’ll still have a balance at the end of the promotional period, the card’s regular APR will apply only to the remaining balance, not the original balance.

Step 3: Review financial products that can help

You may or may not want to apply for another credit account to help you pay down your debt, but in some cases, it can help make your plan more effective and even save you money. Here are a few options to consider.

Balance transfer credit card

Balance transfer credit cards typically offer an introductory 0% APR promotion, allowing you to move your debt over to the new card and pay it off interest-free. Depending on the card, you may be able to get up to 21 months of no interest. These cards typically require that you have good credit or better, which starts at a FICO score of 670.[4]

In the right scenario, this option could save you hundreds or even thousands of dollars in interest. However, it’s still a credit card, so it can be tempting to just stick with the minimum payment. Also, there is usually an upfront fee of 3% to 5% of the transferred balance, so you’ll want to make sure your interest savings will be higher.[4]

Finally, credit card issuers don’t give you a credit limit until your account has been approved and opened, and there’s no guarantee that you’ll get a high enough limit to accommodate all of your debt.[5]

Consolidation loan

A consolidation loan is a personal loan that you use to combine all your high-interest debt into one debt. Personal loans won’t give you a 0% APR promotion, but they can offer a lower interest rate than what you’re paying right now.

They’ll also give you a structured repayment plan, which can be helpful if you’re concerned about getting caught in the minimum payment trap with a balance transfer card.

Personal loans are available for borrowers across the credit spectrum. But unless you have good or excellent credit, you may not qualify for a low enough interest rate to make it worth your while. Also, some lenders charge upfront origination fees, which can add to your costs.[6]

Home equity product

If you own your home and have a significant amount of equity, you may consider applying for a home equity loan or home equity line of credit (HELOC). A home equity loan is an installment loan, while a HELOC is a revolving line of credit, similar to a credit card.

Both of these options tend to charge lower interest rates, even if your credit isn’t perfect, because they’re secured by your home.[7] However, some home equity loans come with high upfront closing costs, and some HELOCs have some closing costs and annual fees.[8]

What’s more, if you end up defaulting on one of these loans, you could lose your home.[8]

401(k) loan

Some financial experts mention a 401(k) loan as a viable way to get out of credit card debt. These loans typically come with reasonable interest rates, and there’s typically no credit check when you apply, making it appealing for people with bad credit (and depending on your company, the interest you pay may go back into your account).

However, taking out a 401(k) loan can stunt the growth of your retirement fund, which can end up costing you more down the road. Additionally, if you leave your job or are terminated before you finish paying it off, the 401(k) provider may require you to pay back the remaining balance immediately.

If you can’t, it’ll be treated as an early withdrawal, and you’ll be assessed taxes and a penalty.[9] According to the National Bureau of Economic Research, 86% of borrowers who terminate employment end up defaulting on their 401(k) loan.[10]

Debt management plan

If your situation is dire, you may be able to get help from a credit counseling agency. Credit counselors can put you on a debt management plan, which lasts between three and five years. During this time, you’ll make one monthly payment to the agency, which will distribute the money to all of your credit card companies.[11]

One of the benefits of a debt management plan is that the credit counseling agency can negotiate lower interest rates and monthly payments with your creditors. However, you'll need to close your credit card accounts, and there are modest upfront and monthly fees you'll need to pay.[11]

If you miss a payment under a debt management plan, it could force you off the plan, leaving you to deal with your creditors on your own.[12]

Step 4: Consider other methods

Whether or not you use a financial product to help you pay down your debt, you may consider other approaches. Here’s how to pay off credit card debt faster than you are right now.

Debt avalanche method

The debt avalanche method involves paying just the minimum amount on all of your credit cards except for the one that has the highest interest rate. Determine how much extra you can pay toward your credit card debt and apply it to that card.

Once the card’s paid off, you’ll take the amount you were putting toward it every month—including the minimum payment and the extra payment—and you’ll add it to your payment on the card with the next-highest interest rate.

You’ll keep doing this until you’ve paid off all of your debt. Because you target your cards with the highest interest rates first, this method can help you save the most money in interest.

Debt snowball method

The debt snowball method works the same as the debt avalanche method, but instead of focusing on the cards with the highest interest rates, you’ll target the cards with the lowest balances.

This approach may not save you as much money, but if you’re struggling to stay motivated, it can help you keep your momentum by giving you wins early on as you pay off smaller balances.

“The debt avalanche is better from a math standpoint, while the debt snowball is better from a behavioral standpoint,” says Zigmont.

Step 5: Look for ways to make more money

If you’re having a hard time paying off credit card debt because of income restrictions, take an opportunity to research different ways you can make money to accelerate your payment plan. Options include:

  • Taking overtime at your current job

  • Asking for a raise

  • Cutting unnecessary deductions from your paycheck

  • Applying for another job that offers better pay

  • Using websites like Craigslist and Thumbtack to find odd jobs

  • Turning your talents into a side hustle (graphic design, writing, virtual assistant, social media marketing, etc.)

  • Selling belongings you no longer need

  • Decreasing your charitable giving (you can give more after your debt is no longer a burden)

Take some time to check out a variety of options to find the ones that are best suited for you, your time limitations and your skills.

Step 6: Keep credit card balances in check going forward

While you’re working to pay down credit card debt, it’s a good idea to stop using your cards. Otherwise, it can feel like you’re taking two steps forward and one step back.

It’s particularly important to avoid using your credit cards if you’ve consolidated your debt with another type of loan.

“It feels like you have paid off your debt, but all you have done is moved it,” says Zigmont. “And it is common to see people then build up their credit card debt again as they have not changed their spending behaviors.”

Once you’ve paid off all of your debt, you can return to using your cards with the goal of keeping your spending in check. You may do this by creating a budget and tracking your spending to ensure that you stick to the limitations you set for yourself. You can also ask your card issuers to lower your credit limits or even cancel your cards if you’re unsure if you can remain disciplined.

The important thing is that you take the steps that make the most sense to you and can help you avoid falling back into the hole you just got out of.

Article Sources
  1. “State of Credit 2021: Rise in Scores Despite Pandemic Challenges,” Experian, https://www.experian.com/blogs/insights/2021/09/state-of-credit-2021.
  2. “Personal Loan Calculator,” Experian, https://www.experian.com/blogs/ask-experian/personal-loan-calculator.
  3. “Credit Card,” WolframAlpha, https://www.wolframalpha.com/input?i=credit+card.
  4. “What 21-Month 0% Intro Apr Balance Transfer Credit Cards Are Out There?” Finder, https://www.finder.com/21-month-balance-transfer.
  5. “What Is a Credit Limit?” Capital One, https://www.capitalone.com/learn-grow/money-management/what-is-a-credit-limit.
  6. “What Is an Origination Fee on a Personal Loan?” OneMain Financial, https://www.onemainfinancial.com/resources/loan-basics/what-is-an-origination-fee-on-a-personal-loan.
  7. “How Does Home Equity Financing Compare With Credit Cards?” TD Bank, https://www.td.com/us/en/personal-banking/credit-card-vs-home-equity-financing.
  8. “Home Equity Loans and Home Equity Lines of Credit,” Federal Trade Commission, https://consumer.ftc.gov/articles/home-equity-loans-home-equity-lines-credit.
  9. “Does It Make Sense to Borrow From My 401(K) If I Need Cash?” Schwab, https://content.schwab.com/web/retail/public/book/excerpt-single-3.html.
  10. “Borrowing From 401(k)s,” National Bureau of Economic Challenges, https://www.nber.org/bah/2015no2/borrowing-401ks.
  11. “A Debt Management Plan: Is It Right for You?” Experian, https://www.experian.com/blogs/ask-experian/credit-education/debt-management-plan-is-it-right-for-you.
  12. “Managing a DMP,” StepChange, https://www.stepchange.org/debt-info/how-could-my-DMP-fail.aspx.

About the Author

Ben Luthi

Ben Luthi

Ben has been writing about money since 2013. He's been on staff at NerdWallet as a credit card writer and for Student Loan Hero, where he covered student loans and other personal finance topics. Ben's work has appeared in U.S. News, The New York Times, Experian, FICO, Credit Karma, Bankrate and more

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