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4 Best Ways to Pay Off Credit Card Debt

How to chip away at balances if you're falling behind on payments

spinner image cartoon credit card under attack from a cannon, tank, and missile to signify attacking credit card debt

With inflation still elevated, more Americans are struggling to pay their credit card bills, according to new data from the Federal Reserve Bank of New York. As of the first quarter of 2024, credit card balances stood at $1.12 trillion, up 13.1 percent from a year ago.

If you’ve run into trouble, you can choose a strategy to pay off your cards that fits your personality and situation best. First, you need to set up a simple budget that keeps you on track but leaves room to live your life. “Self-deprivation is not an ­effective budgeting strategy,” says Bruce McClary, spokes­person for the National Foundation for Credit Counseling.​

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Once you’ve calculated how much you can put toward credit card payments each month, list each one of your cards, its balance and its interest, or annual percentage rate (APR). “Writing down your debts is freeing,” says Cynthia Flannigan, director of financial planning at MainStreet Financial Planning in Los Gatos, California. “It’s no longer a nebulous, overwhelming amount, but one you have checked and can plan to pay off.” For purposes of illustration, let’s assume you have $200 monthly to spend on the following debts:​

  • $2,000 balance, 16 percent APR, minimum payment: $40​
  • $3,000 balance, 20 percent APR, minimum payment: $60​
  • $1,500 balance, 18 percent APR, minimum payment: $30​

The next step is to set up automatic payments to cover the minimum owed monthly on all but one card. On that last card, you’ll pay more than the minimum. Here are four ways to go about it.​

The avalanche

​How it works: You pay off your cards by putting extra money ­toward the card charging the highest interest rate first. Once that’s paid off, you tackle the card with the next-highest rate.​

​The math: Paying the minimum on the two lowest-rate cards, you pay the other $130 in your $200-a-month repayment budget toward the card with the 20 percent APR. Once that is paid off, you focus on the 18 percent APR card. When that debt is gone, you pay the full $200 toward the last card. Once you’re through, you’ve paid a total of $2,445 in interest.​

Consider it if … you want to pay the least possible interest, says Michelle Jones, chief external affairs officer at Money Management International. This also makes sense if your cards have vastly different interest rates.​

​Avoid it if … you have a lot of debts. It may be easier to pay off the smallest balances first so you have fewer cards to manage.​

The snowball

​​How it works: You pay off your smallest debt first, moving on to the next smallest, thus rewarding yourself with quick wins.​

​The math: You begin by paying $100 each month toward your $1,500 balance—the smallest of the three—and paying the remaining $100 to cover the minimum payments on the two other balances. When that first debt is paid off, you focus on the next smallest, and so on. Your total interest payment over time: $2,625.​

Consider it if … you have a lot of cards with small balances.​

​Avoid it if … you’re focused purely on the math and payoff speed.​

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The pain point

​How it works: You start with the card that is causing you the most pain, whatever the reason. “What bothered me was that I was maxed out on a card with a $10,000 limit,” says Lynnette Khalfani-Cox, who struggled with credit before becoming a money coach and author of Zero Debt: The Ultimate Guide to Financial Freedom. “For me to get psychological relief, I had to attack the card with the highest dollar balance.”​

​The math: The interest you pay depends on the order you choose.​

Consider it if … you’ll be thrilled to zero out a particular debt.​

​Avoid it if … Not a reason, but it may overlap with other strategies.​

The transfer

​How it works: You move your card balances to a new card with a low introductory interest rate.​

​The math: Let’s say you transfer the $6,500 balance on your three cards to a card with a 0 percent APR for 21 months. To pay off the card in full under the low rate, you’d need to pay $322 a month, not $200. Total expense: the $260 transfer fee (4 percent of your balance) charged by the new card.​

Consider it if … you have good credit and the cash to pay off the card during your introductory period. Qualifying for a balance transfer requires a credit score of roughly 670 or better, says Ted Rossman, a analyst. And once the initial rate ends, your APR could soar to nearly 30 percent, he points out.​

​Avoid it if … you tend to fall victim to temptation, says Jill Gianola, a financial planner in Worthington, Ohio. “You have to be disciplined to pay it down in the window of the lower rate,” she explains. “And you can’t be tempted to run it up again.”

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