How to pay off credit card debt

Key takeaways

Having a strategy paying off your credit card debt helps save you time and money.
Pay off credit cards with a high interest rate first to minimize the amount of interest you accrue.
Look into consolidation options, like a home equity line of credit (HELOC) or a balance transfer credit card.

If you're struggling with credit card debt, it can feel like you'll never get your finances back on track — but you're not alone. In fact, Nearly three in 10 (28%) Americans say they are likely to go into or worsen their credit card debt this year, with 9% saying it's very likely for them.

So how do you tackle that credit card debt? There are other options besides just making minimum payments every month. You need a plan to help you get your balances to zero and avoid making just the minimum payments each month. Having a strategy can save you time and money — and get you closer to living a debt-free life.

Follow these steps to learn how to pay off credit card debt and make a plan that will work for you.

1. Get the full picture

Before you can think about a payment strategy, you need to have a clear picture of the credit card debt you have. That way, you can better understand your situation and develop a plan that makes sense for your needs.

Start by making a list of all your debts. Gather the information you have on your balances and make sure you record the following for each:

Name of credit card account
Remaining balance
Interest rate
Minimum payment
Payment due date

You'll be surprised how much financial stress you can eliminate just by getting organized and creating a debt repayment plan. Once you have all the information in front of you, you can start to make decisions on how to pay off each of your debts.

2. Calculate your budget for credit card debt repayment

A clear look at your budget will reveal how much you have available for debt repayment each month. To find this amount, subtract your essential monthly expenses (mortgage/rent, utilities, groceries, car payments, student loan payments, health insurance, etc.) from your monthly net income (your pay after taxes and deductions are taken out). What's left over is your "disposable" income — in theory, the maximum amount you could put toward your debt each month.

Still, we live in the real world. Spending all your disposable income on debt repayment is a lot to ask. Instead, look for ways to cut back on fun activities or other non-essential expenses and put that money toward monthly payments to pay off credit card debt. That could mean cutting back on dining out, canceling your Spotify subscription, or making similar sacrifices. Once your debt is more manageable, you can always add those back.

When you're done cutting expenses, you'll have a rough idea of what you could be putting toward your credit card debt each month.

3. Prioritize your highest-interest debt

You should focus on paying off credit cards with a high interest rate first. The longer you hold on to high-interest debt, the more interest you rack up. By paying off your high-interest debt first, you'll minimize the amount of interest you accrue and save money in the long run.

Here are the four key steps to take:

Go back to your list of debts and organize them from highest interest rate to lowest.
Calculate the total minimum payments of all your debts.
Subtract that number from your disposable income.
Use the remainder to make an extra payment toward your highest-interest debt.

Let's say you have $800 available to put toward credit card debt each month and your debts list looks like the following:

Name of loan	Cash-back credit card	Travel credit card
Remaining balance	$15,000	$8,500
Interest rate	17.00%	15.00%
Minimum payment	$300	$170
Payment due date	1st of every month	15th of every month

The total minimum payments of all your debt ($300 + $170) is $470. That leaves you with $330 remaining from your $800 budget. Put that $330 toward the cash-back credit card. So this month, you will have paid $630 toward the cash-back credit card and $170 toward the travel credit card.

Repeat this exercise each month, making sure you update the remaining balance and minimum payment figures as you continue to pay down your debts. Eventually you'll completely pay off your highest-interest credit card; then you can focus on the next-highest credit card until you're totally debt-free.

4. Open a balance transfer credit card

One option for consolidating your credit card debt is opening a balance transfer credit card. A balance transfer credit card allows you to pay off your balance without racking up high interest rate charges. If you pay off your balance before the intro period ends, you'll avoid paying interest altogether.

With a balance transfer credit card, you take your current credit card balance and transfer it to a different card to take advantage of a lower interest rate. Some cards offer an introductory 0% APR and a low interest rate after that.

Make sure you read the fine print! Be aware that you may be charged a balance transfer fee for moving balances from other cards and you can only transfer balances up to the credit limit on the card. Also, a good or excellent credit score may be required for a balance transfer credit card.

5. Look into consolidation options

What if you could consolidate all your debts into a single payment with a set end date and a lower interest rate, all at the same time?

A home equity line of credit (HELOC) could do just that.

Let's go back to the example above. You can apply for a HELOC in the amount of $23,500 to instantly pay off all of your high-interest rate credit card debt. In exchange, you would now have one $23,500 line of credit or loan serviced through a single monthly payment.

And then there's the potential interest savings. HELOC rates are generally in the 4%-8% range. Interest rates vary from person to person depending on the prime rate, your credit history, and loan amount.

Reminder: HELOCs use your home as collateral, so make sure you're confident you can keep up with repayment before opening one.

Consolidating can provide peace of mind. By making the full payment due each month, you will pay off your debt by the loan's end date.

6. Contact credit card counseling, if needed

If you're having trouble keeping up with your minimum monthly payments, consider looking into credit counseling. The National Foundation for Credit Counseling (NFCC) is a nonprofit whose trained debt counselors could negotiate lower interest rates for you and consolidate your debt into one monthly payment. Having some extra guidance could improve your chances of success and get you out of debt faster than if you were going it alone. Be aware you may need to pay a startup fee and/or monthly fee for letting the agency manage your debt and you will not be able to charge your enrolled credit cards while working with the credit counseling agency. Also, a credit counseling agency cannot help you reduce the principal amount you owe, so if you have a large amount of debt, you may want to consider another option, like debt settlement.

You're made ready for less financial stress

Being in credit card debt is stressful. Getting organized and creating a repayment plan (and sticking to it) can help. Then, once you've freed yourself from credit card debt, work to develop better credit habits so you don't find yourself back in the same situation again.

Review the credit card options from Citizens to determine which card makes sense for your financial situation and goals.

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