The Best Ways to Quickly Pay off Credit Card Debt

There’s the anxiety that comes from having the debt constantly hanging over you. There’s the stress of watching your paycheck disappear toward credit card payments and not knowing how you’ll handle the rest of your bills. And there’s the hopelessness of feeling like you’re doing everything you can and you’re still not making progress.

It can feel like a bottomless pit and you may be thinking that this debt will follow you to the death.

But there is hope, and there is a way out. Many people before you have been in credit card debt and found a way to pay it off, often much quicker than you might expect.

It takes the right mindset, the right strategy, and a healthy amount of discipline, but you can get to debt-free, and this guide will help you do it.

Here’s what we’re going to cover:

The first step toward getting debt-free
Debt snowball vs. debt avalanche: which repayment plan is best?
Other ways to speed up the repayment process
The ins and outs of debt consolidation strategies
Does credit counseling or bankruptcy ever make sense?
Beating debt … for good

The First Step to Debt Freedom: Identify the Root Cause

Once you’ve decided to make paying off your credit card debt a priority, it’s time to start creating a plan. But financial experts warn against immediately refinancing or increasing your monthly payment.

“You first have to understand the root cause of the debt,” says Ryan McPherson, Certified Financial Planner, a fee-only financial planner and the founder of Intelligent Worth in Atlanta, Ga. “Was it a single big expense? Were you underinsured? Have you been overspending month after month?”

This understanding, he says, is crucial to avoiding a slide back into debt.

“One of the worst things you can do,” McPherson says, “is consolidated your debt and then run your credit cards right back up again.”

There are two main reasons why people end up in credit card debt.

1. Chronic overspending

If you’re spending more than you make each month, you will wind up in debt sooner or later. And on top of that, continuing to spend like that will make it impossible to get out of debt, no matter how you choose to go about repayment.

Getting an accurate understanding of how much money is coming in each month and where it’s going, and then taking steps to get that spending under control, is essential to a good debt repayment plan.

Free tools like Mint and Personal Capital are a good place to start. They allow you to link your accounts and track your spending so you can see exactly where your money is going.

But if you want to take a more proactive approach, considering trying a more robust tool like  You Need a Budget. It costs $50 per year, but it offers a more structured program that allows you to take control of your money going forward, rather than just looking back at where it’s gone.

Either way, getting your spending under control is a necessary first step to paying off your credit card debt.

2. Not having an adequate emergency fund

Everyone has big expenses that they didn’t expect from time to time, and an emergency fund is often the difference between handling those expenses with savings or having to resort to a credit card.

An emergency fund is a money you keep in a savings account, waiting for the unexpected. Most financial experts recommend having three to six months’ worth of expenses set aside, which should be enough to handle both minor and major emergencies.

That kind of savings can be difficult to build though, and it’s often either because you don’t have enough income beyond your necessary expenses to save significantly or because you don’t have enough control over your spending.

If it’s an income issue, you might consider negotiating a raise or taking on a side hustle so that you have more money coming in.

If it’s a spending issue, it comes back to taking control, reducing expenses, and finding a way to build up at least some savings that prevents you from having to resort back to credit cards when the next unexpected expense comes up.

Gretchen Caldwell, a fee-only financial planner and the president of Pure Planning in San Francisco,  suggests building at least a $2,000 emergency fund, even if you have high-interest credit card debt. That money will help prevent you sliding back into credit card debt when the next unexpected expense comes up, allowing you to make real, consistent progress.

8 Ways to Pay off Credit Card Debt

#1: Debt Snowball and Debt Avalanche

Once you have your spending under control and you have a realistic amount of money you can put toward your credit card debt each month, it’s time to create a repayment plan.

There are two main schools of thought here, with each approach having its own pros and cons. Here’s how they work.

How it works: Debt snowball

The debt snowball has been popularized by Dave Ramsey and is probably the most well-known debt repayment strategy. It works like this:

Make a list of all your credit card debts, including the outstanding balance, interest rate, and minimum monthly payment for each.
Order them by outstanding balance, with the smallest balance at the top of the list.
Automate the minimum monthly payment on all credit cards so that you are consistently making on-time payments.
Direct all extra payments toward the credit card with the smallest balance. Automate those extra payments if possible.
Once that credit card is paid off, take all the money you were putting toward that card each month and apply it to the credit card with the next lowest balance.
Repeat steps 4 and 5 until all your credit cards are paid off.
There are two big advantages to this approach.

The first is the snowball effect. By continually adding the payment you were making on the card you just paid off to your payment on the next card, you are accelerating your progress as you move along.

For example, let’s say you have three cards, each with a $50 minimum monthly payment. And let’s say that you can afford to pay an extra $100 each month toward your debt.

Under this method, you would put $150 per month toward the credit card with the lowest balance, and $50 per month toward the other two. Once the first credit card was paid off, you would put $200 per month toward the credit card with the next lowest balance ($50 + $150) and $50 toward the third credit card. Once the second credit card was paid off, you would put $250 per month toward the last credit card.

Your total monthly payment remains the same, but the amount you’re putting toward each card is increasing. This strategy dramatically speeds up your repayment, saving you time and money.

The second advantage is all about motivation. By prioritizing the credit cards with lower balances, you’re able to pay individual debts off more quickly, making your progress more obvious and potentially making it easier to stick to your repayment plan.

Dan Kellermeyer, a fee-only financial planner and the founder of New Heights Financial Planning in Sioux Falls, S.D., paid off $20,000 in credit card debt himself using the debt snowball and now recommends this approach to his clients.

“If you do the math, the debt avalanche saves you more money,” he says, “but it doesn’t matter if you can’t stick with it. With the debt snowball you get those quick wins, and psychologically that does a lot more for you.”

In general, a debt snowball is a good approach for anyone who is motivated by the idea of paying individual debts off quickly and who has debts with small enough balances that they can be paid off quickly.

It’s generally not the best approach for anyone who only has large balances, since there is no quick win to be had, or for anyone who is more motivated maximizing the financial efficiency of their payments.

For those people, the second approach may be preferable.

How it works: Debt avalanche

The debt avalanche works exactly the same as the debt snowball, but with a small tweak.

Instead of paying off your credit cards in order of outstanding balance, you pay them off in order of interest rate, with the highest interest rate credit cards being prioritized first.

For example, let’s say that you have one credit card with a $1,000 balance and a 10% interest rate and a second credit card with a $10,000 balance and a 20% interest rate.

Using the debt snowball strategy, you would prioritize the credit card with the $1,000 balance, hopefully paying it off quickly before moving onto the card with the $10,000 balance.

But using the debt avalanche strategy, you would prioritize the credit card with the $10,000 balance first because it has the higher interest rate (20% compared to 10%).

This approach saves you money because you’re prioritizing the credit cards that are costing you the most. You can run the numbers for yourself here, but you’ll spend less and get out of debt sooner using the debt avalanche approach.

The downside is that if your highest interest rate credit cards are also the cards with the highest balance, it may be a long time before you actually pay off any of your individual debts. For some people, that can make it hard to stay motivated and stick to your plan.

If you’re the kind of person who is motivated by numbers and likes knowing that every dollar is working as hard as it possibly can, the debt avalanche is the approach for you.

#2: Find new sources of income

Reducing your spending and choosing a repayment strategy aren’t the only ways to accelerate your credit card repayment.

Justin Waller, a Certified Financial Planner, a fee-only financial planner and the founder of Waller Financial Coaching in Chico, Calif., encourages his clients to find ways to increase their income and to compartmentalize it so that specific income sources are dedicated to debt repayment.

For example, Waller suggests getting a side gig like driving for Uber or Lyft and using all the income from that side gig to pay off debt.

Or, if you’re paid every two weeks, there are two months every year in which you receive three paychecks. If you use those extra paychecks to pay off debt, you can knock off huge chunks all at once and significantly speed up your path to being debt-free.

The same can be done with bonuses and tax refunds. Waller even has a friend who is a stay-at-home mom and has started charging her friends to watch their kids in the afternoons. For the other parents it’s cheaper than daycare, and for her, it’s a way to make some extra money that can be used to accelerate her financial goals.

The point is that there are a lot of ways to get creative, and sometimes figuring out how to earn even a little more money can make it a lot easier to pay your credit cards off quickly.

#3: Using a balance transfer to pay off credit card debt

One of the harshest parts of credit card debt is that the interest rates can be incredibly high. Double-digit interest rates are the norm, with many cards charging 20% or more.

That’s a hefty price to pay for the privilege of borrowing money, which is why debt consolidation is a popular strategy. By replacing your credit card debt with a new loan at a lower interest rate, you can potentially save yourself a lot of money and pay your credit cards off even sooner.

But not all debt consolidation strategies are created equal, and many of them come with a long list of potential pitfalls.

Here’s an overview of the major credit card debt consolidation strategies you should consider, along with the pros and cons of each.

Balance transfer

To entice you to become a customer, certain credit card companies offer promotional 0% interest rate periods when you open a new card and transfer your balance over from another card.

Typically these promotional periods last anywhere from 12 to 18 months, though in some cases it’s as long as 21 months. And while some charge you 3 percent of the balance in order to complete the transfer, there are plenty of cards that allow you to do it for free.

This can be a great deal. After all, if you can turn a 20% interest rate or more into a 0% interest rate, there’s the potential to save a lot of money and for each extra payment, you make to go a lot further toward wiping out your debt.

But as appealing as they seem on the surface, balance transfers come with a number of drawbacks.

First, you have to have good credit. Most of these credit cards require a credit score of at least 700 in order to qualify.

Second, you may not be able to transfer your entire balance to a single card. Most cards set a maximum transfer, and if your total debt is greater than that, you may have to open multiple promotional cards in order to get the full benefit.

Third, your interest rate will increase after the promotional period. If you can’t pay off the entire balance before that period is up, you may end up spending more than you would have with other options.

Fourth, and most important, balance transfers can be a trap that leads to more debt. Kellermeyer found this out the hard way when he was first trying to manage his increasing credit card debt.

“The problem was that I didn’t address my spending behavior before I used those balance transfer offers,” he says. “So I would max out one card, open up a new one with the balance transfer offer, keep the old one open, and end up maxing it out again anyway.”

The key to using the balance transfer effectively is first getting a solid handle on your budget, figuring out how much you can realistically afford to put toward your debt each month, and running the numbers to make sure you can pay off the debt before the 0% promotional period ends.

If you can do all of that, and if you have a good credit score, a balance transfer might be the fastest and least expensive way to pay off your credit card debt. But if you haven’t already addressed your underlying spending habits, this approach may hurt more than it helps.

You can find a list of credit cards currently offering 0% balance transfer promotions here.

#4: Using a personal loan to pay off credit card debt

If you can’t qualify for the 0% balance transfer cards, or if you don’t like the idea of using yet another credit card, or if you’d like a fixed interest rate over a longer period of time, you might want to consider consolidating your credit card debt with a personal loan.

Personal loans are unsecured loans typically offered with two- to seven-year terms. Interest rates vary depending on your credit history, with the lowest rates currently around 5% for people with excellent credit but can easily get rise to over 35% for people with poor credit. Rates fluctuate all the time, so check out LendingTree’s personal loan comparison tool to compare current rates for many lenders.

According to McPherson, a personal loan can be a good option for anyone who understands exactly how they got into credit card debt in the first place and is confident that they will be able to stay out of debt going forward.

But, like the balance transfer approach, if you haven’t already addressed the underlying spending issues, McPherson cautions that a personal loan is just a Band-Aid and won’t prevent you from maxing out your credit card again.

The key to finding a good personal loan is shopping around. You can contact multiple lenders and get pre-qualified without hurting your credit score, giving you plenty of opportunities to find the best deal available to you.

McPherson suggests starting with any bank with whom you already have a relationship, especially if it’s a local credit union. Their familiarity with you may make them more likely to lend at favorable terms, especially if you’ve been a good customer.

McPherson cautions about paying attention to all fees, and not just the interest rate. Make sure there are no prepayment penalties, that the fees to open the loan aren’t too onerous, and that there aren’t any fees on the back end to close the loan.

But in the right situation, you can find a personal loan that significantly reduces your interest rate and gives you more time to pay off the debt than you would get from a balance transfer.

#5: Using a Home equity loan/HELOC to pay off credit card debt

Both home equity loans and home equity lines of credit offer the opportunity to borrow against the equity you’ve built in your home and use the money to pay off your credit card debt.

Your borrowing limit is determined by your home’s current appraised value, the balance remaining on your mortgage, and the lender’s loan-to-value requirements. Many lenders will limit your total borrowing capacity to 85 percent of your home’s value, according to the FTC, though some will offer more depending on your credit history, income, and other assets and debts.

The main benefit of these loans is the fact that they are secured by your home, and you can therefore typically get a lower interest rate than you would with a personal loan. The interest payments may also be tax deductible since it’s a form of mortgage interest.

The downside is that you have to actually have equity in your home for these options to work, and there are often upfront closing costs that can diminish the benefit of the lower interest rate. And since they are secured by your home, the bank can take your house if you end up defaulting on the loan.

#6: Using a 401(k) loan to pay down credit card debt

Many 401(k)s offer the ability to borrow from your account balance with little to no credit requirements. These loans typically offer lower interest rates, and you pay the interest back into your own account, which is preferable to paying the interest to a credit card company.

The biggest issue is simply that you are taking valuable resources away from your future self in order to fund your current habits. And because these loans are so easy to get, doing it once can make it even more likely that you’ll do it again.

“Once you start tapping into your 401(k), in a way that’s like opening up a financial Pandora’s box,” says McPherson. “Because there’s no underwriting process and because you’re not securing it with your house, you’re more likely to do it again in the future.”

If you are out of other options and if you have a solid handle on your spending with a repayment plan in place, a 401(k) loan may help you pay off your credit card debt quicker and cheaper. But in general, the options above are preferable.

#7: When to consider credit counseling

If you’re in a really deep hole and you can’t find a way to make progress, the idea of quick relief probably sounds pretty appealing.

Credit counseling and bankruptcy are two options that promise quick relief in different ways. Here’s a quick overview of each.

When considering this option, it’s important to distinguish between debt relief companies and true credit counseling.

Debt relief companies typically promise to negotiate, settle, and otherwise erase or reduce your credit card debt for a fee. And the consensus among financial planners is that these companies should usually be avoided since they charge a lot for inconsistent results.

True credit counseling companies, on the other hand, offer guidance through the process of building a budget, creating a debt repayment plan, and executing that plan over time. And these services can be valuable if you know how to find one that genuinely has your interests at heart.

Multiple financial planners recommended the National Foundation for Credit Counseling and Clearpoint as nonprofit organizations that do good work. Waller also suggested looking into the Association for Financial Counseling and Planning Education to find a professional who specializes in credit counseling.

Real guidance through the debt repayment process can be invaluable. But if something sounds too good to be true, it probably is.

#8: When to file bankruptcy to get out of debt

There are two types of bankruptcy. Chapter 7 bankruptcy allows you to wipe the slate clean, while Chapter 13 bankruptcy allows you to create a court-approved repayment plan that may allow some of your credit card debt to be discharged.

Both can offer relief, but they also come at a significant cost. According to MyFICO, Chapter 7 bankruptcy remains on your credit report for 10 years and might require you to sell personal property, while a Chapter 13 bankruptcy remains on your credit report for seven years. That’s a long period of time during which it will be difficult to qualify for any form of credit.

Kellermeyer cautions against jumping into bankruptcy without really examining your situation and the other options available to you. Could you move in with your parents? Could you downsize your home? Could you reduce your discretionary expenses and stick to a repayment plan without bankruptcy?

If you truly have no assets, little income, big debts, and no realistic way out within the next 10 years or so, bankruptcy might make sense. But it should generally be a last resort after all other options have been exhausted.

5 Good Reasons to Pay Off Your Credit Card Debt Quickly

Before getting into the tips and tricks for how to pay off your credit card debt, it’s worth asking why paying it off is even a worthwhile goal.

Here are four good reasons.

1. You’ll improve your credit score

A good credit score means better terms when applying for a mortgage, auto loan, and other types of credit, and it can even help you get a job, rent an apartment, and secure lower insurance premiums.

And while there are multiple factors that go into your credit score, there are two that affect it the most:

Payment history – Consistent, on-time payments lead to a better score.
Credit utilization rate – This is the percentage of credit available to you that you are actually using. If you have a $5,000 balance on a credit card with a $10,000 limit, that’s a 50 percent utilization rate. Lower rates are better, with rates under 20 percent preferable.
Nearly two-thirds (65%) of your credit score is determined by those two factors, and paying off your credit card debt quickly will positively impact both of them.

First, you’ll have to make on-time payments in order to make consistent progress and avoid late fees and extra interest charges.

Second, paying off your debt decreases the amount of credit you are actually using, which leads to a lower utilization rate.

Quite simply, paying off your credit card debt quickly is one of the best ways to increase your credit score.

2. You’ll save money in the long run

The quicker you pay off your credit card debt, the less money you’ll end up spending on interest.

Let’s say that you owe $10,000 on one credit card with an 18% interest rate and a $300 minimum monthly payment. It will take 47 months to pay off and cost you $3,967.21 in interest if you only make the minimum payment (and don’t take on any more debt).

But if you can afford to put just $100 more per month toward that debt, you’ll pay it off in 17 months and only pay $1,339.25 in interest. That’s 30 months sooner and a $2,627.96 savings.

To put it another way, every extra dollar you put toward your credit card debt is equivalent to earning an immediate and guaranteed investment return equal to your interest rate. Given that long-term returns from the stock market are generally expected to be 7 to 8 percent, and that those returns are not guaranteed, a double-digit return on your credit card debt is pretty attractive.

3. Less debt means more cash on hand

Once you’re debt-free, the money you were previously putting toward credit cards every month is available for all your other goals.

FInancial goals like building an emergency fund and saving for retirement become a lot more achievable. Life goals like traveling the world, changing careers, or starting a business become a lot more realistic.

Credit card debt makes it hard to achieve the things that really matter to you. Paying it off opens up those things to you.

4. You’ll be under much less stress

Not to be understated, you’ll sleep better at night once you’ve paid off your debt and no longer have it hanging over you every minute of the day.

The elimination of that daily anxiety can make a huge difference in the quality of your life, from your enjoyment of everyday activities to the quality of your relationships, to your ability to try new things and take positive risks.

5. You’ll create good financial habits

Paying off your credit card debt will require you to create good new financial habits, and those habits won’t disappear once you’re debt-free. They will stick with you, making it even easier for you to achieve your other financial goals once your debt is behind you.

Beating Debt … for Good

Getting out and staying out of credit card debt won’t be easy, but it is possible. Here’s a step-by-step process you can follow to beat your credit card debt for good:

Determine the root cause of your credit card debt. Is it chronic overspending? Was it a big one-time expense? Understanding the root cause will help you choose the right plan going forward.
Take control of your spending. No matter what, paying off your credit card debt and staying out of debt in the future will require you to spend less than you earn and manage your money purposefully. Apps like You Need a Budget and Mint can help you take control.
Create a realistic monthly repayment amount. Determine how much you can realistically afford to put toward your credit card debt each month, above the minimum payments. You can aim to increase this over time, but don’t overshoot at the start or you’ll find yourself right back in a hole.
Choose a repayment strategy. Are you a debt snowball or debt avalanche kind of person? They both work, so choose the one that you think you can stick with.
Consider debt consolidation. If you have a solid repayment plan in place, consolidating your debt at a lower interest rate can help you pay it off quicker. Consider whether this is the right approach for you and if so, move forward with the application process.
Celebrate wins and milestones along the way. This may be a long process, so make sure to track your progress and celebrate along the way. You deserve to feel good about the work you’re putting in.
Keep your good habits beyond debt-free. Once your debt is paid off, use the habits you’ve created to help you work toward more enjoyable goals, whether it’s traveling more, saving for retirement, or anything else that’s important to you.

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