Credit card debt management
The responsible road
Pay a bit more
Paying more than the minimum can help you become debt-free a lot faster and ultimately lessen the amount you owe.
Pay on time, every time
Regular payments help you work toward eliminating debt and show that you are responsible with credit.
Transfer your balance
Transferring your balance to a card with a lower APR can help you save on interest in the long term, but be sure to look into transfer fees.
Watch your wallet
If you don’t need something, don’t buy it. Plan for big-ticket items and stick to your everyday budget.
The debt ditch
Pay the bare minimum
Paying the minimum may make your debt seem more manageable in the short term, but the less you pay now, the longer it takes to pay off, and the more you pay
in interest.
Make late payments
Late payments can hurt your credit score. Plus, missing payments can lead to fees and penalties and may even raise your interest rate.
Ignore the terms
Pay attention to rate increases and other conditions of your card agreement so you’re not surprised by interest rate changes or fees.
Shop till you drop
Maxing out your card may cause your interest rates to increase and affect your credit.
Two essentials to consider:
What “paying the minimum” means
Paying more can lead to significant savings. For example, if you have a $5,000 balance on a card with 13% interest, you could save more than $4,000 in interest by paying a fixed $175 a month, instead of the minimum:
| Minimum payment* | Higher payment |
Payment amount | $100 (first month) | $175 |
Years to repay | 23+ | 3 |
Total interest | $5,359 | $1,016 |
*Assumes minimum payment as 2%
Source: Bankrate
What happens to your credit
Keeping your credit score high makes it cheaper to borrow. But maxing out your cards or ignoring payments can hurt your score. Here’s how:*
| Potential effect on a 680 score | Potential effect on a 780 score |
Maxed-out card | 10–30 point decrease | 25–45 point decrease |
30-day late payment | 60–80 point decrease | 90–110 point decrease |
*Assumes certain conditions
Source: FICO®
Take action
Make payments manageable
Managing credit card debt starts with incorporating that debt into a workable budget. The National Foundation for Credit Counseling (NFCC) recommends that your personal debt, excluding mortgage or rent, not exceed 20% of your monthly income.
Create a plan
If payments are out of control or you just feel overwhelmed, you might want to work with a credit counselor. The NFCC is a good resource.
Find a card for you
Find a card that meets your needs and lifestyle. Some cards give you cash back on everyday expenses, such as gas and groceries, while others can help you earn toward larger purchases, such as travel and electronics.
