How to Pay Off Credit Card Debt

8 Ways to Get Out of Debt, Once and (Hopefully) for All

A worried woman uses a calculator to add up her credit card debt
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Getting rid of credit card debt can provide immense relief. Carrying debt is stressful, and high-interest-rate loans can put a strain on your finances. But it’s possible to pay off your credit card debt—you just need a solid plan. 

To help you tackle your balances, we’ll cover how to build the foundation you need to eliminate your debt and share some tactics you can employ right now to succeed. We’ll also explain strategies that may be appropriate for people who are feeling financially strong, as well as a few techniques for people who are having a harder time. Let’s get started. 

Take Control of Your Budget

Basic financial stability is an essential part of paying off debt. Getting there is easier said than done, but making a budget that works is a critical step. One way or another, you need to find a way to make sure your income exceeds your monthly expenses. When you’re in that position, you benefit in two ways:

  1. You can avoid adding to your debt.
  2. You can put that “extra” money toward paying down loan balances.

You’ve got two main options for making 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 job, family situation, and health. Creating a monthly budget that works for your needs is the first step toward becoming debt-free. 

Use the Debt Snowball or Debt Avalanche Method

You can certainly wing it when paying off debt—it’s never a bad idea to throw extra money at your credit card bills. But with a bit of planning, you can gain confidence while improving your chances of success. Two popular debt payoff methods are:

  • Debt snowball: Pay off the loan with the smallest balance first.
  • Debt avalanche: Prioritize the card with the highest interest rate.

Debt Snowball

The debt snowball is a strategy that helps you build momentum as you eliminate credit card debt. To use this approach:

  1. Make a list of all your credit card debts. Then order it by the size of your balance, from smallest to largest. 
  2. Pay the required minimum payment on all of your credit cards each month.
  3. If you have any extra money available, pay it toward the card with the smallest balance.
  4. Repeat each month until you’ve paid off the smallest balance. Celebrate that win!
  5. Look at the new smallest balance—that’s your new target. Pay any extra money toward this balance, including the amount you used to put toward the balance you’ve already paid off. 
  6. Repeat as needed.

Over time, the amount you pay toward each balance gets larger, since you’re paying the minimum payment plus the amounts you used to pay toward other cards. Your payments “snowball” until you’re debt-free. The debt snowball is a psychologically rewarding strategy because it provides a boost of confidence each time you pay off a debt, creating a series of quick wins. And since you start with the smallest debt, it shouldn’t take too long to get that first win.

Debt Avalanche

The debt avalanche helps you minimize the total amount of interest you’ll pay as you eliminate your debt. Instead of prioritizing by balance, you’ll focus on the interest rates:

  1. Make a list of all your credit card debts, and order it by their interest rates. The card with the highest rate should be at the top of your list.
  2. Continue making the required minimum payment on each balance.
  3. If you have any extra money available, pay it toward the balance with the highest interest rate.
  4. Repeat each month until you’ve paid off that high-interest-rate card. Celebrate that win!
  5. Shift your focus to the balance with the next-highest interest rate. Put any extra money toward this debt, including what you used to pay toward the balance you just paid off.
  6. Repeat as needed.

If your balances are on the larger side, you might not build momentum quickly with the debt avalanche. However, this approach should help you save on interest costs over your lifetime because you’ll wipe out your most expensive debts first.

Debt Snowball vs. Debt Avalanche

The big-picture goal is to pay off your debts. While it might make mathematical sense to use the debt avalanche, it doesn’t make any sense unless you actually pay off debt. If you get discouraged and lose motivation (or see that in your future), try the debt snowball instead.

If you want to see how these two strategies compare for your debt, run the numbers yourself. It’s not terribly difficult to build a table showing how your credit card payments (and extra payments) work.

Consolidate at a Lower Interest Rate

High-interest rates make it hard to get traction. Even as you work hard to make your payments, it might feel futile when you see the interest charges piling onto your balance each month. Minimizing those interest costs can help you save money in the long run—and get out of debt faster.

0% Balance Transfers

Credit card issuers sometimes offer promotional balance transfers with a 0% annual percentage rate (APR). You can use those promotions to move your debt to a new card and (temporarily) avoid interest charges. Make sure you know what interest rate you’ll pay when the promotion expires, in case you’re still working on that balance. Also, keep an eye out for any balance transfer fees that could reduce the benefits of transferring your debt. For a list of the most competitive offerings, see our roundup of the best balance transfer cards.

Debt Consolidation Loans

If you don’t have any luck with 0% offers, a debt consolidation loan could help. If you can find a personal loan with an interest rate that’s lower than the one on your credit card, you can save on interest each month. 

Don’t coast once you have that lower interest rate—it’s critical to keep paying down the balance aggressively, which might mean paying more than the minimum on your new loan. 

Check out some of the best lenders for debt consolidation loans to get started.

Negotiate With Lenders

It might be possible to get a lower interest rate without moving your balance. If you’re not confident about getting approved 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 improve your chances, highlight why the card issuer might benefit from working with you: your history of on-time payments, your long-term relationship, or your improved credit score. You could also mention any recent hardships, such as a job loss or unexpected medical expenses.

Using this strategy, one phone call could save you a substantial amount of money. Cutting the rate on your credit card means more of each monthly payment goes toward reducing your balance. With a smaller balance (and a lower rate at which it’ll grow), paying off debt becomes easier.

Use the solutions described above to go as far as possible on your debt payoff journey. The options below should only be used as a last resort, because they could potentially make things worse. But sometimes, it makes sense to take desperate measures.

Consider a Loan From Your Retirement Account

Raiding your retirement savings to pay off debt is generally not recommended. Retirement accounts are often protected from creditors, so lenders typically can’t force you to withdraw those funds to pay off debt. Plus, time is an important factor when saving for retirement. Taking retirement plan loans and withdrawals can slow your progress toward retirement or require you to start from scratch.

But if you have no other options, using a loan from your retirement plan to pay off credit card debt could make sense—as long as both of the following statements are true:

  1. You’re paying extremely high rates on your debt.
  2. You’re confident that you will repay the loan.

Unfortunately, it’s hard to predict whether or not you’ll be able to repay the loan. Life brings surprises, and if you leave your job before paying off your 401(k) loan, you may need to pay taxes and penalties. You may also need to repay the loan in full.

Not all retirement accounts offer loans. An employer-sponsored plan like a 401(k), 403(b), or 457(b) may have a loan feature, but your employer decides whether or not to include that option. Individual retirement accounts like traditional or Roth IRAs do not offer loans. You might be able to take back contributions from a Roth IRA, but you’ll pay a 10% penalty if you’re under 59 ½. 

Think About a HELOC

If you have a substantial amount of equity in your home, you may be able to consolidate your credit card debt using a home equity loan. However, taking out a home equity line of credit (HELOC) puts your home at risk.

If you don’t pay a credit card company, the worst it can do is take you to court and get a judgment against you. But if you don’t keep up with HELOC payments, the bank can foreclose on your home, force you to move out, and sell the property to collect the amount you owe.

A HELOC might also end with a lump-sum or "balloon payment" that would reduce the benefits of consolidating, so be sure to include those expenses in your decision.

Use a Credit Counseling Service

If you’d like to enlist the help of a professional, a nonprofit credit counseling service may be able to help you take control of your debt. These organizations offer guidance and education. They can also arrange a debt management plan, in which you make one monthly payment through the credit counseling service that goes toward multiple debts. You might also benefit from lower rates or fee waivers.

Pros
  • Lower monthly payments

  • Help from a professional credit counselor

  • Minimize damage to your credit score (if you keep up with payments)

  • Single monthly payment

Cons
  • Fees reduce cash flow toward your balances

  • Potential for predatory or exploitative agencies

Ready to get started? Researchers at The Balance have reviewed numerous services to identify some of the best credit counseling agencies to start with. 

Look Into Debt Settlement

If there’s no realistic way to pay off your credit cards, you could consider debt settlement. You and your lender can agree on an amount (less than what you currently owe) that will satisfy the lender. As part of the agreement, your lender should not attempt to collect the debt or bring legal action against you after you’ve paid the agreed-upon amount.

You can settle your debt with a lump-sum payment or a series of payments. Either way, be sure to get everything in writing so the agreement is clear. Debt settlement is something you can attempt 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 grand promises. No one can guarantee that your creditors will agree to your proposal, and it’s not likely that you’ll settle for pennies on the dollar.

Debt settlement can provide an affordable solution that puts debt behind you, so you know you won’t struggle forever. However, debt settlement can hurt your credit score. Plus, if you stop making payments on your credit card balance while exploring debt settlement, that balance could keep growing due to late fees and interest charges. 

The Bottom Line

Credit card debt is toxic, and it can feel overwhelming to imagine ever paying off a large balance. But once you pay off your credit cards, all of that money will be available for more important things. You’ll be able to plan and save for future goals, and you’ll feel less pressure each month when your bills are due. It may be a long road, but it’s one worth taking.