Borrow / Credit Cards

How To Pay Off Credit Card Debt

Hattie Burgher  |  September 25, 2018

It's tempting to only pay the minimum your credit card requires, but here's how to escape the black hole of credit card debt in no time.

So you spent a little too much on take-out this month — or maybe you went a little overboard at that sale at HomeGoods. Whatever it was that made you whip out your card and spend more than you should have, the problem remains: You now have credit card debt.

Like me, you may be tempted to make only the minimum payments your credit card requires, but as you’ve probably found, that’s not really the best strategy. Why?

2 Reasons to Pay More Than the Minimum

Reason No. 1: Credit card interest is the worst. The average credit card interest rate is north of 15%, and adding that your your debt month after month adds up so quickly. Bottom line: You won’t be chipping away at your debt if you’re only making the minimum payments.

Reason No. 2: Your credit card balance may be dragging down your credit score. Your debt load compared to credit available is a big factor when it comes to calculating your credit score. Dumping that debt so that your credit utilization is lower can only mean good things for your credit.

Here’s what you can do to escape the black hole of credit card debt:

Target One Card at a Time

The first step to getting out of credit card debt is to tackle one card at a time. You can do this one of two ways: The avalanche method or the snowball method.

Using the avalanche method, you check to see which card has the highest interest rate and you focus on paying that debt first, while also making minimum payments on your other cards.

Or you can go for the smallest balance first while also continuing to make minimum payments on your other cards, which is called the snowball method. This may not be the most cost-effective way to get out of debt, but those small victories can do wonders for your motivation to keep chipping away at your debt.

Consider a Balance Transfer

If you need some breathing room so you can pay down your debt without having to worry about interest piling up for a few months, you should consider a balance transfer.

A balance transfer lets you move credit card debt from one card to another. The goal is that the card receiving the balance would have a lower interest rate — ideally 0% — and you’d pay off the balance before that no-interest period ends (which is usually anywhere from six to 18 months). Ideally you would pay off your debt balance before you lose that low interest rate, which will get you out of debt faster because your payments are no longer also going toward interest — every penny is headed straight to reducing your debt.

Reevaluate Your Budget

The harsh reality is: You’re going to need to reassess your spending habits to free up some money to put toward your debts, and as your friends we’ll tell you the harsh truth: That may mean no more weekly manicure or daily stops to graze the aisles of Target.

Go buy a fancy journal and maybe some gel pens while you’re at it (can you tell I’m a ’90s baby?). Take said fancy journal and categorize your monthly spending for things like groceries, transportation, rent, entertainment, etc. Look for areas where you could cut back (re: your daily Starbucks run). Maybe you see you spend a little too much on Uber, or maybe you realize you should start packing your lunch instead of buying it everyday. Whatever money you start to free up, put that toward your debts.

With your great budgeting skills and drive to succeed, your credit card debt will be erased in no time.

Join us on your financial journey. The HerMoney Facebook group is a judgment-free zone to chat about everything. And we want you there!


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