Getting rid of credit card debt can provide great relief. Carrying debt is stressful, and loans with high interest rates can put pressure on your finances. But it’s possible to pay off your credit card debt - you just need a solid plan.
To help you overcome the balance, we’ll discuss how to build the foundation you need to get rid of your debt and share some tactics you can use now to succeed. We will also describe strategies that may be appropriate for people who are feeling financially strong, as well as some techniques for people who are having a more difficult time. Let's start.
Control Your Budget
Basic financial stability is an important part of paying off debt. Getting there is easier said than done, but making an appropriate estimate is an important step. One way or another, you need to find a way to keep your income above your monthly expenses. When you are in that position, you benefit in two ways:
You can avoid adding to your debt.
You can enter that “extra” money to pay off the balance of the loan.
You have two main options for generating more money than you need to spend: increase your income or lower your monthly expenses.
Your income, expenses, and budget depend on a variety of factors, including your employment, family circumstances, and health. Creating a monthly budget that fits your needs is the first step to becoming debt free.
Use the Snowball Method or the Debt Channel
You can definitely pay it off when paying off debt - not a bad idea to throw extra money on your credit card bills. But with a little planning, you can gain confidence while increasing your chances of success. Two popular debt repayment methods are:
Snowball Debt: Pay off the loan with the smallest balance first.
Debt channels: Prefer cards with the highest interest rates.
Snowball Debt
Snowball debt is a strategy that helps you build momentum as you get rid of credit card debt. To use this approach:
Make a list of all your credit card debts. Then order according to the size of your balance, from the smallest to the largest.
Pay the required minimum payment on all your credit cards each month.
If you have extra money, pay to the card with the smallest balance.
Repeat each month until you pay the smallest balance. Celebrate that victory!
See the new smallest balance - that’s your new target. Pay extra money for this balance, including the amount you used for the balance you already paid.
Repeat as needed.
Over time, the amount you pay for each balance becomes larger, as you pay the minimum payment plus the amount you normally pay for other cards. Your payments are “snowballs” until you are debt free. Debt snowballs are a psychologically beneficial strategy because they provide an increase in confidence every time you pay off debt, creating a series of quick wins. And since you start with the smallest debt, it doesn’t take too long to earn the first win.
Debt Channels
Debt loss helps you minimize the amount of interest you will pay while you write off your debt. Instead of prioritizing balance, you will focus on interest rates:
Make a list of all your credit card debts, and sort them by interest rate. The card with the highest rate should be at the top of your list.
Continue to make the minimum payment required on each balance.
If you have extra money available, pay the balance with the highest interest rate.
Repeat every month until you pay off the card with that high interest rate. Celebrate that victory!
Shift your focus to balance with the next highest interest rate. Put extra money on this debt, including what you normally pay for the balance you just paid.
Repeat as needed.
If your balance is on the larger side, you probably won’t build momentum quickly with a debt avalanche. However, this approach will help you save on interest costs for the rest of your life as you will get rid of the most expensive debt first.
Snowball Debt vs. Debt Channels
The main purpose is to pay off your debts. While it may make mathematical sense to use a debt avalanche, it doesn’t make sense unless you’re actually paying off debt. If you feel hopeless and lose motivation (or see it in your future), try a debt snowball.
If you want to see how these two strategies compare to your debt, run the amount yourself. It is very difficult to create a table that shows how to pay your credit card payments (and additional payments).
Combine at a Lower Interest Rate
High interest rates make it difficult to attract. Even if you work hard to make payments, it may be in vain when you see interest charges increase to your balance each month. Minimizing the cost of those benefits can help you save money in the long run - and get out of debt quickly.
0% Balance Transfer
Credit card issuers sometimes offer promotional balance transfers at an annual percentage rate (APR) of 0%. You can use the promotion to transfer your debt to a new card and (temporarily) avoid interest charges. Make sure you know how much interest rate you will pay when the promotion ends, if you are still working on the balance. Also, keep an eye out for any balance transfer fees that could reduce the interest of transferring your debt. For a list of the most competitive deals, check out our list of the best balance transfer cards.
Debt Consolidation Loan
If you are unlucky with a 0%offer, a debt consolidation loan can help. If you can get a personal loan with a lower interest rate than a loan on your credit card, you can save on interest every month.
Don’t take cover once you have a lower interest rate - it’s very important to continue to pay the balance aggressively, which may mean paying more than your new loan minimum.
See some of the best lenders for debt consolidation loans to get started.
Negotiate with the Lender
It may be possible to earn a lower interest rate without transferring your balance. If you are unsure of getting an agreement for a consolidation loan at an attractive rate, try negotiating with your current card issuer.
Contact your card issuer and ask them to lower your interest rate. To increase your chances, state why the card issuer might benefit from working with you: timely payment history, long -term relationships, or your better credit score. You can also mention recent difficulties, such as job loss or unexpected medical expenses.
By using this strategy, one phone call can save a huge amount of money. Cutting rates on your credit card means more monthly payments will reduce your balance. With a smaller balance (and a lower rate at which it will increase), debt repayment becomes easier.
Use the solutions described above to go as far as possible in your debt repayment journey. The options below can only be used as a last resort, as they have the potential to worsen the situation. But sometimes, it makes sense to take desperate action.
If you have a large amount of equity in your home, you may be able to consolidate your credit card debt by using a home equity loan. However, taking out a home equity credit loan jeopardizes your home
Use Credit Counseling Services
If you want to seek the help of a professional, a nonprofit credit counseling service may be able to help you control your debt. These organizations offer guidance and education. They can also arrange a debt management plan, where you make monthly payments through credit counseling services that lead to a lot of debt. You may also benefit from price reductions or fee waivers.
Advantage
Lower monthly payment
Help from a professional credit counselor
Minimize damage to your credit score (if you follow a payment)
Single monthly payment
Cons
Payments reduce cash flow to your balance
Potential for predatory or exploitative agencies
Ready to get started? Researchers at The Balance have reviewed many services to identify some of the best credit counseling agencies to get started.
Look at Debt Settlement
If there is no realistic method to pay off your credit card, you can consider debt settlement. You and your lender can agree on an amount (less than the amount you currently owe) that will satisfy the lender.5 As part of the agreement, your lender cannot seek to collect the debt or bring legal action against you after you pay the agreed amount.
You can pay off your debts with a lump sum payment or a series of payments. Either way, make sure you put everything in writing so that the agreement is clear. Debt settlement is something you can try on your own, or you can pay a debt settlement company to guide you through the process and negotiate on your behalf.
Avoid debt settlement companies that charge upfront fees or make big promises. No one can guarantee that your creditors will agree to your proposal, and it is unlikely that you will receive money in dollars.
Debt settlement can provide an affordable solution that puts debt behind you, so you know you won’t fight forever However, debt settlement can damage your credit score. Also, if you stop making payments on your credit card balance while exploring debt settlement, that balance will continue to increase due to late payments and interest charges.
Bottom line
Credit card debt is toxic, and can be imagined when spending large balances. But once you pay off your credit card, all that money will be available for more important things. You’ll be able to plan and save for future purposes, and you’ll feel less stress each month when your bills will be due. It may be a long road, but it must be traveled.
