4 strategies to pay off credit card debt faster
Read, 2 minutes
- To tackle credit card debt head on, it helps to first develop a plan and stick to it
- Focus on paying off high-interest-rate cards first or cards with the smallest balances
- When you pay more than the monthly minimum, you’ll pay less in interest overall
If you carry credit card balances month to month, paying off that debt fast might be easier than you think. The key is developing a good plan and sticking to it. These four strategies can help you decide which course to take to quickly pay off any credit card debt.
Target one debt at a time
Focus on high-interest debt
Check the interest rate section of your statements to see which credit card charges the highest interest rate, and concentrate on paying off that debt first.
Try the snowball method
With the snowball method, you pay off the card with the smallest balance first. Once you’ve repaid the balance in full, you take the money you were paying for that debt and use it to help pay down the next smallest balance.
Pay more than the minimum
Pay a bit extra each month if you can. Every dollar over the minimum payment goes toward your balance—and the smaller your balance, the less you have to pay in interest.
Consolidating your debt lets you combine several higher-interest balances into one with a lower rate, so you can pay down your debt faster without increasing payment amounts. Here are two common ways to consolidate debt:
Tap into your home equity
If you have equity in your home, you may be able to use it to pay down card debt. A home equity line of credit may offer a lower rate than what your cards charge. Be aware that closing costs often apply, but an extra benefit is that home equity interest payments are often tax-deductible.
If you do consolidate, keep in mind that it’s important to control your spending to avoid racking up new debt on top of the debt you’ve just consolidated.
Review your spending
Start by categorizing your monthly spending, for example: groceries, transportation, housing and entertainment. Your credit card statement can be a helpful tool; many issuers categorize your spending. Look for areas where you can cut back. Then take the money you’ve freed up and apply it to paying down your debt.
Pay with cash
One way to manage your overall debt is to consider purchasing things with cash. Using cash or a debit card can help you avoid overspending or making impulse purchases—plus you eliminate any extra fees that may apply when paying with plastic. You’ll also have a clear understanding of how much is going out vs. coming in every week or month.
Use financial windfalls
Commit raises, bonuses or other financial windfalls to debt reduction rather than adding these funds to your monthly spending pool. Using this “extra” money to chip away at your debt can help you reach repayment goals faster.