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(image: https://www.cashone.com/blog/Uploads/same-day-payday-loan.jpg)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 can explore a DIY method like debt snowball or consolidation, or even look into debt relief.
by Sean Pyles Senior Writer | Personal financial and credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet's "Smart Money" podcast. The show "Smart Money," Sean talks with Nerds from NerdWallet's NerdWallet Content team to answer the questions of listeners about their personal finances. With a focus on shrewd and practical money tips, Sean provides real-world guidance to help people improve the financial situation of their lives. Beyond answering listeners' money concerns on "Smart Money," Sean also interviews guests outside of NerdWallet and creates special segments to explore topics like the racial inequality gap as well as how to get started investing, and the history of student loans.
Before Sean took over podcasting at NerdWallet, he covered topics that dealt with consumer debt. His writing has been featured on USA Today, The New York Times as well as other publications. When Sean isn't writing about personal finances, Sean can be found working in the garden, taking walks, or taking his dog for long walks. He is based 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. Her previous position was as the health writer at Livestrong.com and freelance writer for publications like Refinery29, Business Insider and MTV News, where she focused on issues that affect marginalized communities. Being a facilitator of wellness she's led health-related discussions with organizations such as Planned Parenthood and Harvard University. She is located in Philadelphia.
Updated January 25, 2023 9:36AM PST
Editor: Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, managing money and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. Previously, she spent 18 years working at The Oregonian in Portland in roles including copy desk chief and team director of design and editing. Previous experience included copy and news 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.
The majority or all of the products we feature are from our partners who compensate us. This impacts the types of products we feature and the location and manner in which the product is featured on the page. However, this does not influence our evaluations. Our views are entirely ours. Here is a list of and .
If you're trying to figure out how to cut down on your credit card debt, know that you have plenty of options. Credit card balances grew by 15% in 2021 which is the highest increase in over 20 years in the report released in November 2022 by the Federal Reserve Bank of New York. [0] The Federal Reserve Bank of NY's Center for Microeconomic Data . . Accessed November 15, 2022.
In September 2022, there was a median amount revolving credit card debt owed by a U.S. household with credit card debt was $7,486 according to .
Successfully requires a hands-on approach starting with deciding on the best method of payment to contacting your creditors to discuss rates. Learn how to reduce your credit card debt in just four steps.
1. Find a payment strategy or two
If you really want to get rid of your credit card debt, consider these suggestions to get to your goal faster. Having a concrete repayment goal and strategy will help keep you and you and your debt from credit cardsin check.
Pay more than the minimum
Credit card issuers pay you a percentage, typically 2percent on the amount you have. Be aware that banks earn money from what they pay in interest every billing cycle, so the longer it takes to pay, the more money they make. The amount of credit card interest that is being paid has been increasing due to Federal Reserve rate hikes and increasing amounts of revolving credit card debt. It is estimated the U.S. households that carry credit card debt will pay an average of $1,380 in credit card interest this year, according to the study.
Look on your credit card bill for an "Minimum Payment Warning," which will have a table showing how long it would take to pay off your balance if you only made minimum payments -- and the amount of interest you'd be paying.
Debt snowball
The process of paying off your debt uses your sense of accomplishment as motivation. You prioritize your debts by amount, and then concentrate on wiping out the one with the lowest amount first. Once you've paid that amount, you then roll it into the amount that you're making towards the next one, and the next one, and so on. As a snowball rolls down the hill, you'll eventually make larger and bigger payments and eventually pay off your debt.
Debt avalanche
Like the snowball approach it starts by listing your debts. Instead in paying the card that has the lowest balance first, you then pay off the credit card that has the highest interest rate. This is a quicker and more affordable approach than the snowball technique.
Automate
Automating your payments is an easy way to make sure your debts are being paid so you avoid racking more late fees. If you're using the debt snowball or avalanche approach, however, you will have to be more involved to ensure you're contributing exactly what you want in each account.
Are you worried about the economy?
Control your finances in the market's rising costs, economic uncertainty and worries about recession.
2. Consider debt consolidation
If your credit is good but your debt payments feel too much, think about putting them into one account. This way, you only need to pay one installment each month to reduce the balance.
A 0% balance transfer credit card
It may seem odd to apply for credit cards when your primary goal is to get out of credit card debt however, it can save cash in the end. Choose a credit card that has an extended 0% introductory period -- usually between 15 and 18 monthsyou can transfer all of your outstanding credit card debt to the one account. You'll have one simple monthly payment and you'll not have to pay interest.
Personal loans
Similar to that, you can also borrow a fixed rate loan to settle your debt. Although you'll have to pay interest, interest rates for personal loans tend to be less than credit card interest rates but they will allow you to save money. Use a to estimate your savings.
3. Work with your creditors
Reach out to your creditors to discuss your circumstances. A credit card issuer may be willing to negotiate terms for payment or provide a credit, particularly in the case of a loyal customer with a track record of payments.
If your issuer offers a hardship plan that can help you when circumstances beyond your control, such as illnesses or unemployment impact your ability to pay. And even if you aren't suffering from illness or unemployment the effects of inflation are causing financial hardship for many people. Based on the NerdWallet survey, 45% of employed Americans say their pay hasn't grown enough over the last year to keep up with the rate of inflation.
Whether you bargain with your lender or accept the terms of a hardship program or a hardship program, either could result in more affordable rates of interest or waived charges, subject to the issuer.
These small changes might suffice to get you the debt under control, and the worst that can happen is they refuse to accept.
4. Find help for debt relief
If the total amount you owe is more than you can pay every month and you're trying to bring the debt in check, then it might be time to take some more serious steps. Think about, for instance, the debt management program.
Debt management plan
These are developed with the assistance of the help of . Counselors negotiate terms with your creditors and reduce your debt on credit cards. Then, you'll pay the counseling firm a fixed rate each month. Your credit accounts may be closed, and you may have to forgo new ones for a time.
Bankruptcy
Filing for wipes wipes out unsecured debt such as credit cards, however, not without consequences. can help you restructure your debts to a payment plan over 3 to 5 years and could be the best option if have assets you want to keep. It can stay in your credit file for 7 to 10 years, however your credit score will be more likely to bounce back during the months following declaring bankruptcy. Some debts, such as and tax debts, generally can't be erased in bankruptcy.
Debt settlement
Under debt settlement, a creditor will accept less than what you are owed. While it sounds like a great deal, it's not an option for most people. Most often, you contract a debt settlement firm to deal for you with creditors. Read more details on and the dangers you are exposed to.
The authors' bios: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His writing has been featured in The New York Times, USA Today and elsewhere.
Tiffany Lashai Curtis is a senior writer on the personal finance team. She has more than 5 years of experience writing about topics that affect communities that are marginalized.
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