How to Pay Off Credit Card Debt: 6 Steps to Get Started
Credit card debt can add up quickly. Between everyday purchases, unexpected expenses, holidays gift buying, and interest charges, you may look at your balance one day and wonder, “Where do I even start?”
The good news is that paying off credit card debt doesn’t have to begin with a perfect budget or a huge payment. It starts with understanding what you owe and creating a plan you can realistically stick with.
Here are six steps that can help.
Check out our Banzai coach to help you do the steps below: Get Out of Debt
1. Write Down Every Credit Card Balance
Before deciding how to pay off your debt, you need to see the full picture.
Make a list of each credit card and include:
Current balance
Interest rate
Minimum monthly payment
Payment due date
Seeing everything in one place can make it easier to decide which debt you want to tackle first.
And remember: knowing the number doesn’t make the debt worse. It gives you the information you need to start changing it.
2. Choose a Debt Payoff Strategy
Two of the most common approaches to paying down multiple debts are the debt snowball and debt avalanche methods.
With the debt snowball, you focus extra money on your smallest balance first while continuing to make at least the minimum payments on your other debts. Once that first debt is paid off, you roll that payment into the next smallest balance.
The advantage? You may see progress faster, which can provide motivation to keep going.
With the debt avalanche, you focus extra money on the debt with the highest interest rate first. Once it's paid off, you move to the debt with the next-highest rate.
This method can potentially reduce the amount of interest you pay over time.
There isn't one strategy that works best for everyone. The best plan is one you can consistently follow.
3. Look for Room in Your Monthly Budget
You don't necessarily have to find hundreds of extra dollars each month to make progress.
Review your spending and look for an amount you could consistently put toward your debt—even if you start small.
For example, if you find an additional $50 in your monthly budget, consider applying that $50 toward your targeted credit card in addition to the minimum payment.
Then, when that card is paid off, don't absorb that payment back into your spending. Roll it toward the next debt.
Small changes can build momentum.
4. Understand What Credit Card Interest Is Costing You
When you carry a credit card balance, a portion of your payment may go toward interest rather than reducing the amount you originally borrowed.
That's why the interest rate on each card matters.
If you're only making minimum payments, it can take significantly longer to pay off a balance and potentially cost considerably more in interest.
Take a closer look at your credit card statement. It generally includes information showing how long it could take to repay your balance if you make only minimum payments, along with other repayment information.
That number may help you understand why increasing your payment—even by a manageable amount—can make a difference.
5. Be Careful About Adding New Debt While Paying It Down
Paying $200 toward a credit card won't move you very far forward if you immediately charge another $200.
That doesn't mean you have to stop living your life while paying off debt. Instead, consider creating a realistic spending plan that accounts for everyday expenses while limiting new credit card purchases when possible.
Building even a small emergency fund can also help provide another option when an unexpected expense pops up.
6. Ask for Help Before You Feel Like You're in Over Your Head
You don't have to wait until you've missed payments or are experiencing financial hardship to ask for guidance.
Sometimes, simply sitting down with someone and looking at the numbers together can make your next step much clearer.
Signet Members Have Access to FREE Financial Counseling
If you're a Signet Federal Credit Union® member and aren't sure which debt to tackle first, start with Rochelle.
Rochelle is Signet's Certified Credit Union Financial Counselor and offers FREE one-on-one financial counseling to Signet members.
She can help you review your individual financial situation, work through budgeting and debt repayment strategies, understand your credit and create realistic financial goals.
There's no judgment and no expectation that you already have everything figured out. The purpose is education—helping you better understand your finances and the options available to you.
Ready to start working toward less debt?
Schedule your FREE financial counseling consultation with Rochelle today.
Start with a conversation. Start with a plan. Start with Signet.
Financial counseling is provided for educational and informational purposes and does not constitute legal, tax or investment advice. Individual financial circumstances and results may vary. Membership eligibility required. Federally Insured by NCUA.