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How to Pay Off Credit Card Debt in 4 Steps
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How to Pay Off Credit Card In 4 Steps
Depending on the amount you may want to try depending on the amount, you could try a DIY method like debt snowball or consolidation, or consider debt relief.
By Sean Pyles Senior Writer | Personal finances, debt Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet's "Smart Money" podcast. The show "Smart Money" Sean talks with Nerds across the NerdWallet Content team to answer listeners' personal finance questions. With a focus on shrewd and practical advice on money, Sean provides real-world guidance that can help consumers better in their finances. Beyond answering listeners' money concerns on "Smart Money," Sean also interviews guests outside of NerdWallet and produces special segments on topics such as the racial gap in wealth, how to start investing and the background for student loans.
Before Sean was the host of podcasts at NerdWallet the company, he also wrote about topics that dealt with consumer debt. His work has appeared throughout the media including USA Today, The New York Times and elsewhere. When he's not writing about personal finances, Sean can be found digging around his garden, going on runs and taking 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 head writer for the financial team of NerdWallet. She was previously the health writer for Livestrong.com as well as a freelancer for various publications such as Refinery29, Business Insider and MTV News, where she focused on the issues that affect communities with marginalized populations. As a wellness facilitator, she has led conversations for organizations like Planned Parenthood and Harvard University. She is based in Philadelphia.
Updated on Jan 25, 2023 at 9:36AM PST
Edited by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring financial management and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. In the past, she worked for 18 years working at The Oregonian in Portland in roles including copy desk chief and team director of design and editing. Previous experience included news and copy editing for many Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in mass communications and journalism in the University of Iowa.
Many or all of the products we feature are provided by our partners who pay us. This impacts the types of products we review and where and how the product is featured on the page. But, it doesn't affect our assessments. Our opinions are entirely our own. Here is a list of and .
If you're wondering how to lower your credit card debt Be aware that you're getting plenty of company. Credit card balances grew by 15% between 2021 and 2022 this was the biggest increase in more than 20 years, according to a November 2022 report from the Federal Reserve Bank of New York. [0] Federal Reserve Bank of New York's Center for Microeconomic Data . . Accessed on November 15, 2022.
As of September 2022, the average amount of revolving credit card debt owed for each U.S. household with credit card debt was $7,486 according to .
Achieving success requires a hands-on approach, from determining your best method of payment to contacting your creditors to discuss rates. This article will help you reduce your credit card debt in four steps.
1. Find a payment strategy or two
If you are determined to get rid of that credit card balance, consider these suggestions to get to your goal faster. Having a concrete repayment goal and strategy will help keep you as well as the credit card balance- in check.
Pay more than the minimum
Credit card issuers pay you a percentage, typically 2% on the amount you have. Remember, though: Banks earn money from their interest charges per period of billing, therefore the longer it takes you to settle, the greater they earn. The amount of interest on credit cards that is being paid has been increasing because of Federal Reserve rate hikes and the increasing amount of credit card debt with revolving terms. It's believed that U.S. households that carry credit card debt will pay an average of $1,380 credit card interest this year according to the study.
Examine your credit card bill for an "Minimum payment Warning," which will have a table showing how long it will be to pay off your balance if only made minimum payments -- and the amount of interest you'd be paying.
Debt snowball
The process of paying down the debt you owe uses your sense of accomplishment as motivation. You prioritize your debts by amount, then focus on eliminating the smallest one first. After you've paid it off the debt, you can roll that amount into the amount you're paying towards the next lowest and so on. Similar to a snowball that rolls down an hill, you'll slowly pay more and more until you've paid off your debt.
Debt avalanche
As with the snowball approach It starts by the listing of your debts. But instead taking care to pay off the credit card that has the lowest balance first, you then pay off the card with the highest interest rate. It could be a faster and more affordable approach than the snowball technique.
Automate
Automating your payment is a quick method to ensure that your debts are paid so you avoid racking up late fees. If you're using the debt snowball or avalanche strategy you'll need to be a little more hands-on to make sure you're contributing the exact amount you'd like to for each account.
Worried About the Economy?
Manage your finances in the market's rising costs as well as economic uncertainty and worries about recession.
2. Consider debt consolidation
If you have a good credit score but your debt payments feel overwhelming, you might consider transferring them to one account. This way, you only need to make one payment each month to reduce the balance.
Credit card with 0% balance transfer card
It may seem odd to apply for credit cards when your primary goal is to get out of credit card debt, but can help save you money in the long run. Look for a card with an extended 0% introductory period, ideally 15 to 18 months -and then move all your outstanding credit card debt to that one account. There will be one payment each month, and you'll never pay any interest.
Personal loans
Similar to that, you can also take out a fixed-rate to settle your debt. While you'll need be paying interest on the loan, interest rate for personal loans tend to be lower than those for credit cards but they will aid in saving money. Utilize a calculator to estimate your savings.
3. Make contact with your creditors
Contact your creditors to explain your situation. Credit card companies might have the ability to bargain terms for payment or even offer a discount , especially when you're a frequent customer with a good track record of payments.
If your issuer has a hardship program, it may provide relief in the event that circumstances outside your control like sickness or unemployment affect your ability to pay. Even if you're not being affected by illness or unemployment and you're not experiencing any hardship, inflation is creating difficulties for many. As per the NerdWallet survey, 44% of employed Americans claim their wages haven't been increasing enough over the past year to keep up with inflation.
Whether you bargain with your lender or accept the conditions of a hardship program or a hardship program, either can result in lower interest rates or waived fees dependent on the issuer.
These minor changes could be just enough to help you get control of your debt and the worst thing that could happen is if they decide to say no.
4. Seek help through debt relief
If the total amount you owe is greater than you're able to pay each month and you're really struggling to get out of debt, it could be time to take some more drastic steps. Think about, for instance, the debt management program.
Debt management plan
These are developed with the assistance of a . Counselors negotiate new conditions with your creditors and consolidate your credit card debt. You'll then pay the counseling agency a fixed rate each month. Credit accounts could be closed, and you may have to give up new accounts for a period of time.
Bankruptcy
Filing for wipes out the unsecured debt, such as credit cards, but with consequence. It can assist you in restructuring your debts into a repayment plan that spans three to five years. It could be the best option if own assets that you would like to keep. It can stay at the top of your credit score for 7 to 10 years, however your credit score is more likely to improve within the time frame following declaring bankruptcy. Certain debts, like and tax debts, usually can't be erased in bankruptcy.
Debt settlement
A debt settlement creditor will accept less than the amount you owe. Even though it may sound like a great deal, it's not an option for the majority of people. Typically, you hire an agency for debt settlement to bargain for you with creditors. Read more details on and the risks you take.
About the authors: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.
Tiffany Lashai Curtis is a lead writer on the personal finance team. She has more than five years of experience in reporting on the issues that impact marginalized communities.
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