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How to Pay Off Credit Card Debt in Four Steps

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How to Pay Off Credit Card Debt in 4 Steps

Depending on the amount you can explore depending on the amount, you could try a DIY technique such as debt snowball or consolidation, or consider debt relief.

By Sean Pyles Senior Writer | Personal finance, financial debt Sean Pyles leads podcasting at NerdWallet as the producer and host of the NerdWallet’s “Smart Money” podcast. In “Smart Money,” Sean talks with Nerds across the NerdWallet Content team to answer listeners’ personal finance questions. With a focus on thoughtful and practical money tips, Sean provides real-world guidance that will help people improve their financial lives. In addition to answering listeners’ financial concerns on “Smart Money,” Sean also interviews guests outside of NerdWallet and produces special segments that explore subjects such as the racial gap in wealth, how to start investing and the history of college loans.

Before Sean was the host of podcasts at NerdWallet He also covered issues concerning consumer debt. His work has appeared throughout the media including USA Today, The New York Times as well as other publications. When when he’s not writing about personal finances, Sean can be found digging around his garden, going on runs and taking his dog on long walks. Sean is located at Ocean Shores, Washington.

as well as Tiffany Curtis Lead Writer | Health and Wellness Tiffany Lashai Curtis is a head writer for the core personal finance team at NerdWallet. She was previously the health writer at Livestrong.com as well as a freelance journalist for magazines like Refinery29, Business Insider and MTV News, where she concentrated on problems that affect marginalized communities. As a wellness facilitator, she has led conversations for groups like Planned Parenthood and Harvard University. She is located in Philadelphia.

January 25, 2023

Edited by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring debt and money management 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 positions such as copy desk chief and team leader for design and editing. Her previous experience includes news and copy editing for various Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor’s in mass communication and journalism from Iowa’s University of Iowa.

Many or all of the products featured here are from our partners who compensate us. This influences which products we review as well as the place and way the product is featured on the page. But this doesn’t affect our assessments. Our opinions are our own. Here’s a list and .

If you’re wondering how to cut down on your credit card debt Be aware that you’ll have plenty of company. Credit card balances increased 15% between 2021 and 2022 this was the biggest increase in over 20 years in a November 2022 report from the Federal Reserve Bank of New York. [0] The Federal Reserve Bank of NY’s Center for Microeconomic Data . . Accessed Nov 15, 2022.

In September 2022, there was a median amount revolving credit card debt owed for each U.S. household with credit card debt is $7,486 , according to .

Successfully requires a hands-on approach, from determining your best method of payment to contacting your creditors to negotiate rates. This article will help you reduce your credit card debt in four steps.

1. Find a payment strategy or two

If you’re determined to get rid of that credit card balance, consider these suggestions to get to your goal faster. A clear repayment plan and plan of action will keep you and you and your debt from credit cardsunder control.

Pay more than minimum

Credit card issuers pay you a percentage, typically 2% of the balance. Remember, though: Banks earn their money from what they pay in interest each period of billing, therefore the longer you take to settle, the greater they make. The amount of credit card interest paying is increasing as a result of Federal Reserve rate hikes and growing amounts of credit card debt with revolving terms. It is estimated that U.S. households that carry credit card debt will pay an average of $1,380 in credit interest this year, according to the study.

Look on your credit card bill for a “Minimum payment Warning,” which will have a table showing how long it would be to pay off your balance if only paid minimums and the amount of interest you’d pay.

Debt snowball

The process of paying off the debt you owe uses your sense of accomplishment as motivation. You prioritize your debts by amount, then focus on eliminating the one with the lowest amount first. After you’ve paid it off, you roll that payment into the amount you’re paying towards the next smallest, and then on. Like a snowball rolling down a hill, you’ll gradually make bigger and bigger payments until you’ve paid off your debt.

Debt avalanche

Like the snowball technique it starts by the list of your debts. But instead of paying off the card with your lowest balance, first you then pay off the card with the highest interest rate. It can be a faster and less expensive method than the snowball method.

Automate

Automating your payment is a quick method to ensure that your debts are being paid, so that you don’t rack up additional costs in late fees. If you’re using a debt snowball or debt avalanche approach, however, you will have to be a bit more hands-on to make sure you’re contributing exactly what you’re looking for on each bank account.

Are you worried about the economy?

Manage your finances in the face of rising prices, market volatility , and concerns about recession.

2. Consider debt consolidation

If you have a good credit score but your debt payments seem overwhelming, consider into one account. This way, you only have only one payment per month to pay down the remaining balance.

A 0% balance transfer credit card

It might seem counterintuitive to apply for a credit card when your primary goal is to get rid of debt from credit cards but it could to save money over the long term. Choose a credit card that has a long 0% introductory period, ideally 15 to 18 monthsand then move all your outstanding credit card debts to that one account. It will be a single monthly payment, and you won’t pay interest.

Personal loans

Similarly, you can take out a fixed-rate to settle your debt. While you’ll need make payments for interest charges, the 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

Contact your creditors to discuss the situation. Credit card companies may offer to discuss terms for payment or even offer a discount, particularly when you’re a frequent customer with a track record of making payments.

If your lender has a hardship program, it may provide relief when circumstances beyond your control like unemployment or illness impact your ability to pay. And even if you aren’t 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 say their pay hasn’t been increasing enough over the past 12 months to keep up with the rate of inflation.

Whether you negotiate with your issuer or agree to the conditions of a hardship program or a hardship program, either could lead to more affordable rates of interest or waived fees, based on your issuer.

The small adjustments could suffice to allow you to get a handle on your debt The worst that can happen is they refuse to accept.

4. Get help with debt relief

If the total amount you owe exceeds what you’re able to pay each month , and you’re trying to get out of debt, it could be time to take more drastic steps. Think about, for instance, a debt management plan.

Debt management plan

They are made with the help of the help of . Counselors negotiate new terms with your creditors . They also help you consolidate debt from your credit cards. Then, you’ll pay the counseling firm an agreed-upon monthly fee. Your credit accounts may be shut down, and you might have to forgo new ones for a certain period of time.

Bankruptcy

Filing for wipes out the unsecured debt like credit cards, but with consequence. It can assist you in restructuring your debts into a repayment plan over three to five years. This may be best if you own assets you would like to retain. The bankruptcy will remain on your credit report for up 10-years, but your credit score will be more likely to bounce back in the months after declaring bankruptcy. Certain debts, like and tax debts, generally can’t be erased in bankruptcy.

Debt settlement

Under debt settlement, a creditor will accept less than the amount that you have to pay. Although it might sound like a good deal, it’s not an choice for everyone. Most often, you contract an agency for debt settlement to bargain against your debtors on your behalf. Find out more information about and the risks you take.

The authors’ bios: Sean Pyles is the host and executive producer for the NerdWallet’s Smart Money podcast. His writing has appeared throughout the pages of The New York Times, USA Today and elsewhere.

Tiffany Lashai Curtis is a leading writer for the team for personal finance. She has over 5 years of experience in reporting on issues that affect marginalized communities.

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