Two Ways to Pay Off Credit Card Debt

Different denominations of US currency and credit cards, close-up
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Paying back your credit card debt isn't as easy as getting into credit card debt. But, it can be done. With a plan, dedication, and discipline, you can achieve a life free of credit card debt.

How Much Can You Pay?

The first thing you should do is figure out how much you can afford to pay on your credit card debt. If you have a monthly budget, use it to figure out how much money you have left over If not, now's a good time to start one.

How to Make a Budget has instructions and a printable worksheet to help you make a budget.

Start by adding up all your net monthly income from all sources.

Add up all your monthly expenses, including the minimum payments on all your credit cards and loans.

Subtract your expenses from your income. The number you get is your net income - what you can afford to send to your creditors every month. Read 81 Ways to Get Money for Debt for ways to generate more money to put toward your debt.

Now that you know how much you can spend paying back your credit cards, the next step is to figure out the order you want to pay your credit cards.

Two Payback Methods

Here are the two best methods for paying off your credit cards.

  1. Highest interest rate first. Paying off the credit card with highest interest rate will save you money in the long run, especially if the highest interest rate credit card also happens to be the card with the highest balance.

    When the highest interest rate card also has the highest balance, it will take the longest to pay off. It's easy to lose motivation paying off your debt when it takes too long. That's why the "lowest balance first" method might be a better choice.
  1. Lowest balance first. There are immediate tangible benefits to paying off the credit card with the lowest balance first. The first balances are easier and quicker to pay off. When you finally pay off a bill, the feeling of accomplishment is motivation to keep you going.

Pick the method you're going to use to pay off your credit cards.

Then write your debts down in the order you're going to pay them - either from highest interest rate to lowest interest rate OR from lowest balance to highest balance. Write down the interest rate, balance, minimum payment. Then, allocate your available payment to paying off the credit card on the top of the list. You'll send the minimum payment to all your other credit cards.

Once you've completely repaid the first credit card, cross it off the list and focus on the next card on the list. As before, pay your entire net income to that card. Keep doing this process until all the cards have been paid off.

You can use this Debt Payment Worksheet to make your debt payment plan. It includes a sample debt payment plan and enough space for you to write in 12 accounts.

You can also use an online credit card payoff calculator to help you put together a plan to pay off your credit card debt. Check out this list of the best credit card repayment calculators.