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If you’re like most people, you have credit card debt. The average U.S. household, for instance, has more than $15,000 in credit card debt. Successfully paying off your credit card debt requires a hands-on approach, from determining your best payment strategy to contacting creditors to negotiate rates.
Here's how to pay off your credit card debt in four steps.
1. Find a payment strategy or two
If you really want to tackle your credit card debt, consider these methods to get you to your goal faster. Having a concrete repayment goal and strategy will help keep you, and your credit card debt, in check.
Pay more than minimum: Credit card issuers give you a handy monthly minimum payment, generally 2% to 3% of the balance, to make sure you’re making timely payments. However, banks make money off the interest they charge each pay period, so the longer it takes you to pay, the more money they make.
Debt snowball: The snowball method of paying down your debt uses your sense of accomplishment as motivation. You prioritize your loans by amount, focusing on the smallest one first. When you’ve paid off that loan, you roll that payment into the amount you’re contributing toward your next smallest loan, and so on. Like a snowball rolling down a hill, you’ll gradually make bigger and bigger payments, ultimately eliminating your debt.
Debt avalanche: Similar to the snowball approach, an avalanche approach swaps your priorities. Instead of paying off the card with the lowest balance first, you pay off the card with the highest interest. It tends to be a faster, and cheaper, method than snowballing.
Automate: Automating your payments is an easy way to make sure your debts are being paid so you avoid racking up additional costs in late fees. If you’re practicing a debt snowball or debt avalanche approach, however, you will have to be a little more hands on to make sure you’re contributing exactly what you want to each account.
2. Consider debt consolidation
If your credit is good but your debt payments feel overwhelming, consider consolidating them into one account. That way, you only have to make one payment each month to chip away at the balance.
0% balance transfer credit card: It might seem counterintuitive to apply for a credit card when your main goal is to get out of credit card debt, but 0% balance transfer cards can help save you money in the long run. Find a card that offers a long 0% introductory period — preferably 15 to 18 months — and transfer all of your outstanding credit card debt to that one account. You'll have one simple payment each month, and you won’t pay interest.
Personal loans: Similarly, you can take out a fixed-rate debt consolidation loan to pay off your debt. Though you will have to pay interest, interest rates for personal loans tend to be lower than for credit cards, which can still help you save some extra cash. Use a debt consolidation calculator to estimate your savings.
3. Work with your creditors
Reach out to your creditors to explain your situation. A credit card issuer may be willing to negotiate payment terms or offer a hardship program, especially if you’re a longtime customer with a good track record of payments.
If your issuer offers a hardship program, it may provide relief when circumstances beyond your control like unemployment or illness impact your ability to manage payments. Whether you negotiate with your issuer or accept the terms of a hardship program, either option could lead to more affordable interest rates or waived fees, depending on the issuer.
These small changes might be just enough to help you get a handle on your debt, and the worst that can happen is they say no.
4. Seek help
If the total amount you owe is more than you can pay each month and you’re really struggling to get your debt under control, it may be time to take some more serious steps. Consider debt relief options, such as bankruptcy or a debt management plan.
Debt management plan: Debt management plans are created with the help of a nonprofit credit counseling agency. Counselors negotiate new terms with your creditors and consolidate your credit card debt. You’ll then pay the counseling agency a fixed rate each month. Your credit accounts may be closed, and you may have to forgo new ones for a period of time.
Bankruptcy: Filing for Chapter 7 bankruptcy wipes out unsecured debt such as credit cards, but not without consequence. Chapter 13 bankruptcy can help you restructure your debts into a payment plan over 3 to 5 years and may be best if you have assets you want to retain. It can stay on your credit report for 7 to 10 years, though your credit score is likely to bounce back in the months after filing. Some debts, such as student loans and tax debt, typically can’t be erased in bankruptcy.
Debt settlement: Under debt settlement, a creditor agrees to accept less than the amount you owe. Even though it may sound like a good deal, it’s not an option for most people. Typically, you hire a debt settlement company to negotiate with your creditors on your behalf. Read more details on how debt settlement works and the risks you face.