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How’s That ‘No Credit Card Debt’ Resolution Going? A Midyear Check-In

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How's That 'Pay Off Credit Card Debt' Resolution Going?

If you resolved to pay off your credit card debt this year, you have just under six months to go. That might sound daunting if you’re off schedule, but there’s still plenty of time to reach your goal. From prioritizing your high-interest debt to ceasing credit card use, we have five suggestions to get you back on track and debt-free before the ball drops on 2016.

1. Pay off your high-interest debt first

You’ll save money on interest if you prioritize the debt with the highest APR. Write down each of your debts, along with the minimum payments and interest rates. Arrange them in order of interest rate, make the minimum monthly payments on each debt and apply any additional payments to the first credit card on the list. Once that’s paid off, move on to the next one, and the next, until all of your cards have balances of $0.

2. Base your payment on your debt-free date

For an end-of-the-year payoff, divide your total balance by the number of months remaining in 2015 to get your monthly payment. You’ll do this each month until your self-imposed payoff deadline, as accrued interest means your payment amount will differ slightly each month.

If the payments are too large and you need to extend your debt-free date, divide your total balance by the remaining months until the new date. Think of this number as your “minimum payment” to pay off your debt by your goal date.

3. Apply any windfalls to your debt

Unexpected cash influxes — also known as “windfalls” — should be directed toward your credit card debt. Using windfalls to lower your balance will save you money in interest, as well as help you pay off debt faster. And because this money isn’t in your regular budget, using it for debt repayment will be relatively painless.

Nerd note: A windfall can be any amount of money that you weren’t expecting or haven’t included in your regular budget. Examples include: Refunds, rebates, gifts, profit from selling belongings, one-off freelance income and more.

4. Evaluate your tax withholding

Owing a large sum of money on April 15 is painful, but getting a sizable tax refund each year isn’t ideal, either. Instead, you should aim to only pay what you owe throughout the year.

Use the IRS tax-withholding calculator to see if you’re on track to overpay your taxes this year. If you are, you might want to increase your exemptions. This will allow you to keep more of your money now, instead of getting a refund when you file your taxes. You can use the additional funds to pay your debt balance down faster and reduce your interest charges.

5. Stop using your credit card

Making large debt payments is fruitless if you’re still charging. Instead, consider switching to a debit card for your daily purchases until your credit card balance is completely paid off. Then, you can re-evaluate and decide whether you can adopt responsible credit card habits, such as paying off your balance by the due date each month.

The bottom line

Use one or more of our debt payoff strategies to become debt free — or at least close to it — by the end of the year. Focus on your high-interest balances, create your own “minimum payments” by dividing your balance by the number of months left in the year, redirect windfalls, change your tax withholdings and switch to debit to get out of credit card debt for good and enter the new year without the burden of consumer debt.

Erin El Issa is a staff writer at NerdWallet, a personal finance website. Email: erin@nerdwallet.com. Twitter: @Erin_Lindsay17.


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