How to Pay Off Credit Card Debt

Being and staying motivated may be one of the most important steps to becoming free of credit card debt. To sustain you through what might be a lengthy process, you'll likely need some motivational goals. Some examples we’ve encountered include:

• Picture yourself as financially responsible—try shifting your mindset and creating a new sense of what you can achieve.
• Imagine using your income to achieve your financial dreams—or just something more exciting than paying off debt.
• Set a goal to save for a car, a house, or college for your kids.
• Consider how becoming debt-free will improve your credit score.

Experts point out one of the best things you can do for your credit score is to reduce revolving debt, of which credit card debt is the major component.^1,2 According to credit reporting agency Experian, your level of debt compared to how much is available to you accounts for 30% of your credit score.¹

The next step for many people is a commitment to stop adding to their debt. They may even put credit cards away for a time and use cash or debit cards. It’s also considered important to develop a monthly budget that helps you rein in spending so that you can boost your monthly "pay-down" number—the dollar amount available to reduce your credit card debt.³ For more on budgeting, read “Building Your Monthly Budget, One Step at a Time.”

There are three expert-recommended strategies for paying down debt whose names follow the theme of snow—snowball, avalanche, and snowflake.⁴ The first two are designed for cases where you owe debt on multiple credit cards. They share an approach in which each month you pay just the minimum due on all your credit cards except one, to which you pay the minimum plus the pay-down amount you budgeted for in the prior step.^5,6 When that credit card debt is paid off, you move to the next credit card, and so on.  

Snowball. This method aims to bring you quick wins to keep you motivated. It targets the credit card with the smallest debt first so that the payoff comes quick.^6,7 When you pay off the first credit card, you move to the card with the next-smallest balance and pay its minimum plus the total amount you had been paying on the first card. You'll have successes to celebrate, hopefully early on, and your pay-off speed accelerates as your available monthly payment “snowballs.” But it may not be the most cost-efficient manner of paying off credit card debt.

Avalanche. This is similar to the snowball method, except that in choosing the order of credit cards to pay off it targets the highest interest rate first instead of the lowest amount of debt. This is usually more cost-efficient because while you're paying off your credit card debt, you're still accruing interest charges. By paying off the credit card debt with the highest interest first, avalanche reduces the total amount of interest you pay while reducing your debt.^5,7

Snowflake. The secret to snowflake is that you set up its rules. The basic idea is that you use "found" money to pay down your debt.⁸ That could be the rainy day change jar you keep in your kitchen, $40 you found in a jacket pocket, or $200 you got for selling unneeded household goods. You could decide that all change you get back in cash purchases becomes the property of the pay-down fund. You could have a yard sale. You get the idea.

A 0% balance transfer credit card can be an important tool for people looking to pay off credit card debt that is all or mostly on one card. Some credit card products offer 0% interest for introductory periods between six and 18 months.⁹ However, most charge transfer fees of from 3% to 5% of the amount you transfer.^9,10 They also may have high variable interest rates once the introductory period ends.¹¹ Of course, that won’t apply if you’re able to fully pay the transferred balance before then. Zero-interest balance transfer cards typically require good to excellent credit scores.^9,12 You may want to do some math to compare the savings from paying no interest to the cost of the balance transfer fee.

When your debt is spread out across multiple credit cards, you may consider debt consolidation, which means taking out a personal loan to pay off several outstanding credit card balances. You may also need to have a good to excellent credit rating for this option; otherwise the interest rates could be high enough that a personal loan may not be worthwhile.¹³ While the average interest rate for a 24-month personal loan was 11.48% in Q2 of 2023, Experian reports personal loan interest rates can typically range anywhere from 6% to 36%.^14,15 If you can get a lower percentage rate than that of your credit cards, a personal loan is worth consideration. If you find that to meet the personal loan's payments you would need to stretch it out many more years, you may end up paying more interest.¹⁶

If you feel you will not be able to make at least the minimum payment due on all your cards, the Consumer Financial Protection Bureau (CFPB) recommends calling your card provider(s).¹⁶ Many financial institutions offer hardship programs that can temporarily lower your payments and suppress late fees. These programs may even come with a reduced interest rate and may prevent you from having your account canceled and reported to the credit bureaus.

If you've tried all the steps above and you're still struggling, it may be time to get help from a professional advisor. Experts suggest nonprofit credit counseling organizations with certified counselors. The government has a credit counseling requirement for individuals looking into the process of declaring bankruptcy. That should be an option only of last resort—you pay for it with a heavily damaged credit rating, and the record of your bankruptcy stays on your credit report for up to 10 years.¹⁷

There are many well-established ways to pay off credit card debt, all of which are known to work if you can maintain your motivation and discipline. In other words, willpower can make this happen! Almost any combination of the tools and strategies offered here will help you achieve the goal of paying off your credit card debt—if you stick to it.

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