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6 ways to pay off credit card debt

Credit Cards » 6 Ways To Pay Off Credit Card Debt

Are you facing monstrous credit card balances? Unfortunately, there is no quick-fix solution to get out of debt, despite what solicitors or infomercials might have you believe.

There are some tried-and-true methods for paying down debt. However, it's staying committed to your financial goals, not necessarily how you go about it that really matters, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, a nonprofit organization.

Consider the following debt reduction techniques and determine which method motivates you most.

1. The "snowball" method.

"When it comes to paying off debt, we need to be more concerned with behavior modification than math," says Dave Ramsey, author of "Total Money Makeover" and host of a nationally syndicated radio show, "The Dave Ramsey Show." His solution is the "debt snowball" method, which involves paying off debts from smallest to largest, regardless of interest rate. "Pay off the first debt quickly, and it gets you fired up to do it again and again," he says.

Ramsey believes the "snowball" method is for every type of consumer. "The only time that you should pay off a larger debt sooner than a smaller one is when you owe the IRS, or if you are trying to stop a foreclosure," he says. "Other than that, everyone should focus on paying the smallest to the largest debt."

2. Pay the most expensive balance first.

If you are someone who is really motivated by numbers, you will realize the account that is doing you the most damage is the one with the highest interest rate, and you'll take great pleasure in paying that down, says Cunningham.

"Also, if the account with the highest interest is utilizing more than 30 percent of that credit line, focus on paying that one off first to get it under that threshold," she says. Doing so will improve your credit score since debt utilization, which is how much you owe compared to how much available credit you have, is an important factor in determining your score. The lower your utilization is, the better.

3. Do a balance transfer.

Cunningham says if you're considering doing a balance transfer, you should first get out your calculator. "There are certainly fees associated with transfers, so you want to make sure the lower interest rate offsets the fees. You can be a savvy consumer and make that tool work for you if you're very disciplined," she says.

That means you'll need to fight the temptation to use that newly cleared card, while also committing to paying off the balance you moved over in a timely manner, says Deatra Riley, financial education manager at CredAbility, a nonprofit credit counseling and education service. "Balance transfers are a waste of time if you do it with no plan of action," she says.

Riley recommends dividing the total amount owed by the number of months for which the zero interest rate applies, and making sure you can fit that monthly payoff amount into your budget.

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