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How to Pay Off Credit Card Debt in 4 Steps
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How to get out of Credit Card Debt in 4 Steps
Based on the amount, you may want to consider depending on your budget, you can try a DIY technique such as debt snowball or consolidation or consider debt relief.
by Sean Pyles Senior Writer | Personal finance and credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet's "Smart Money" podcast. On "Smart Money," Sean talks with Nerds from the NerdWallet Content team to answer the questions of listeners about their personal finances. With a focus on thoughtful and practical advice on money, Sean provides real-world guidance that can help consumers better their financial lives. Beyond answering listeners' money questions on "Smart Money," Sean also interviews guests outside of NerdWallet and creates special segments that explore subjects such as the racial gap in wealth as well as how to get started investing, and the history of college loans.
Before Sean was the host of podcasts at NerdWallet the company, he also wrote about topics related to consumer debt. His writing has been featured in USA Today, The New York Times as well as other publications. When Sean isn't writing about personal finances, Sean can be found digging around his garden, going for runs , and walking his dog for long walks. Sean is located within Ocean Shores, Washington.
and Tiffany Curtis Lead Writer | Health and wellness Tiffany Lashai Curtis is a chief writer for the financial team of NerdWallet. She was previously the health writer for Livestrong.com and a freelance journalist for magazines such as Refinery29, Business Insider and MTV News, where she was a specialist in issues that affect marginalized communities. As a wellness facilitator she has led conversations with organizations such as Planned Parenthood and Harvard University. She is based in Philadelphia.
Updated on Jan 25, 2023 9:36AM PST
Editor: Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, debt and money management Kathy Hinson leads the Core Personal Finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years with The Oregonian in Portland in roles including copy desk chief and team director of design and editing. Her previous experience includes news and copy editing at several Southern California newspapers, including the Los Angeles Times. She earned a bachelor's degree in journalism and mass communications in Iowa's University of Iowa.
Many or all of the products featured here are from our partners who compensate us. This affects the products we feature and where and how the product is featured on a page. But, it doesn't influence our evaluations. Our opinions are entirely our own. Here's a list and .
If you're wondering how to cut down on your credit card debt be aware that you're in plenty of company. The balances on credit cards increased by 15% between 2021 and 2022, the largest jump over the past 20 years in an November 2022 report by the Federal Reserve Bank of New York. [0] Federal Reserve Bank of New York's Center for Microeconomic Data . . Accessed November 15, 2022.
As of September 2022, an average of credit card debt for each U.S. household with credit card debt is $7,486 according to .
Achieving success requires a hands-on approach, from determining your best payment strategy to contacting creditors to negotiate rates. Here's how to lower your credit card debt in just four steps.
1. You can choose a payment plan or two
If you're determined to get rid of the debt on your credit cards, consider these suggestions to get closer to your goal. A clear repayment plan and plan of action will keep you -- as well as your credit card debt -- in check.
Pay more than minimum
Credit card issuers offer you a fee, usually 2% on the amount you have. Keep in mind that banks earn their money from the interest they charge each billing period, so the longer it takes to make payments, the higher they make. The average amount of interest on credit cards paying is increasing as a result of Federal Reserve rate hikes and growing amounts of credit card debt with revolving terms. It's believed that U.S. households that carry credit card debt will be paying an average of $1,380 in credit card interest this year, according to the study.
Check your credit card bill for an "Minimum payment Warning," which will include a table indicating how long it would be to pay off the balance if you paid only minimums -- and the amount of interest you'd pay.
Debt snowball
The process of paying off your debt uses your sense of accomplishment as motivation. The debts you have to pay off are prioritized by amount, then focus on clearing the most small one first. Once you've paid that, you roll that payment into the amount you're paying toward the next lowest, and the next one, and so on. As a snowball rolls down a hill, you'll gradually make larger and bigger payments and eventually pay off your debt.
Debt avalanche
Similar to the snowball approach it starts by the list of your outstanding debts. Instead in paying the card with your lowest balance, first you will pay off the card with the highest interest rate. It can be a faster, and cheaper, method than the snowball method.
Automate
Automating your payments is a simple method to ensure that your debts are being paid so you avoid racking up additional costs in late fees. If you're practicing the debt snowball or avalanche approach, however, you will have to be a bit more hands-on to make sure you're contributing exactly what you want for each account.
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2. Consider debt consolidation
If you have a good credit score however your debts seem overwhelming, consider into one account. That way, you only need only one payment per month to pay down the remaining balance.
A 0% balance transfer credit card
It's not a good idea to apply for a credit card when your main goal is to get rid of debt from credit cards however it could save cash in the end. Choose a credit card that has an extended 0% introductory period -- usually 15 to 18 months- and move all your outstanding credit card debt into that account. It will be a single monthly payment, and you'll never pay any interest.
Personal loans
Similarly, you can get a fixed-rate loan to pay off your debt. Although you'll have make payments for interest charges, interest rate for personal loans tend to be less than credit card interest rates, which can still allow you to save money. Use a to estimate your savings.
3. Work with your creditors
Reach out to your creditors to explain your circumstances. The credit card company might be willing to negotiate terms for payment or offer a , especially when you're a frequent customer with a good history of paying.
If your issuer offers a hardship program that can help you when circumstances beyond your control such as illnesses or unemployment impact the ability of you to manage your payments. Even if you're being affected by illness or unemployment and you're not experiencing any hardship, inflation is creating problems for many. According to NerdWallet's NerdWallet survey, 45percent of employed Americans say their pay hasn't been increasing enough over the past 12 months to keep up with the rate of inflation.
If you agree to negotiate with your issuer or agree to the conditions of a hardship program or hardship program, either one could result in more affordable interest rates or waived fees, subject to the issuer.
These small changes might suffice to get you the debt under control The worst thing that could happen is if they say no.
4. Seek help through debt relief
If the sum you owe exceeds what you're able to pay each month , and you're struggling to get the debt in check, then it could be time to consider taking more serious steps. You could consider, for example, an approach to managing debt.
Debt management plan
They are made with the help of a . Counselors negotiate terms with your creditors . They also consolidate your credit card debt. You'll then pay the counseling agency an agreed-upon monthly fee. The credit account you have may be closed, and you might have to stop making new credit cards for a certain period of time.
Bankruptcy
Filing for wipes will eliminate the unsecured debt, such as credit cards, however, not without consequences. can help you restructure your debts into a repayment plan that spans three to five years. This could be the best option if have assets that you wish to retain. It can stay on your credit report for 7 to 10 years, though your credit score is more likely to rebound in the months after declaring bankruptcy. Certain debts, including and tax debts, usually can't be erased in bankruptcy.
Debt settlement
In debt settlement, a creditor is willing to pay less than what you have to pay. Even though it may sound like a great deal, it's not an option for most people. Most often, you contract an agency for debt settlement to bargain for you with creditors. Read more details on and the risks you face.
Authors' Bios Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His writing has appeared in The New York Times, USA Today and elsewhere.
Tiffany Lashai Curtis is a lead writer on the personal finance team. She has over 5 years of experience in reporting on topics that affect communities that are marginalized.
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