How to pay off credit card debt in 7 steps

6 min read

Climbing out of the black hole that is credit card debt can feel insurmountable, especially if the total amount owed is high and you’re only making minimum payments each month.

The problem with credit card debt is that it can quickly spiral out of control. When you fail to pay off a balance in full, you not only start incurring interest charges, but also get charged interest on your unpaid interest. This is how you end up with the kind of credit card balances that feel impossible to pay off.

However, it is very possible to pay off your credit card debt in full—and you might be able to get it done faster than you realize. We’ve got a step-by-step plan to help you get out of credit card debt, as well as some tools to help you along your way.

7 Steps to Get Out of Debt

If you want to get out of credit card debt, you’re going to need a solid plan. Follow these steps to face down your debt, set up a payment plan and pay off your credit cards as quickly as possible.

1. Know how much you owe

The first step in paying down your credit card debt is knowing exactly how much you owe. Maybe you’ve been avoiding this number, or maybe you already have a pretty good idea of how much debt you’re facing. Either way, it’s time to look at your credit card balances and add up everything you’re going to need to pay off.

2. Check what you’re paying in interest

As you check your credit card balances, you should also check how much interest you’re being charged on each debt. This information is included in your monthly credit card statement. Once you know your credit card interest rates, rank your credit card debt from low interest to high interest. You’ll want that information when you decide which debt to tackle first.

3. Create a budget

Now that you know how much credit card debt you owe and how much interest each credit card is charging, it’s time to look at how much money you’re currently earning—and how much of that money can go towards debt repayment.

Yes, this means setting up a budget. If you don’t already have a budget, we’ve got a Home Budget Calculator to help you get started. There are also many popular budgeting apps that can help you organize your finances.

Ultimately, you’re going to want to know how much of your current income needs to go to basic life expenses such as housing and groceries, how much of your income should go towards discretionary expenses like dining out and entertainment, and how much money you have left over to put towards your debt.

4. Put as much money towards your debt as possible

Your goal, until your credit card debt is fully paid off, is to put as much money towards your debt as possible. Use your budget to guide you, and try to avoid those “just this once” temptations that push you over your budget. (If your budget allows you to have two restaurant meals per month, for example, don’t tell yourself that you’ll have three “just this once.”)

If you look for ways to either cut back on your spending or earn more money, you can put even more money towards your debt. Remember, every dollar you put towards your debt now will save you money in the long run, since you’ll spend less time paying interest on your credit card balances.

5. Use a debt calculator to learn how much money you can save

Want to know the real value of putting as much money towards your debt as possible? Use our credit card debt calculator to learn how much money you can save by increasing your debt payments.

Let’s say you have a $3,000 balance on a credit card with a 17% interest rate. If you put $100 towards that debt every month, you’d pay off your balance in 40 months and pay $934 in interest. If instead you pay $110 each month—just $10 more—you’ll eliminate that debt in 35 months and you’ll only pay $818 in interest. If you can put $200 towards the debt every month, you’ll get it paid off in only 17 months, paying a total of $396 in interest.

Run the debt calculator with your current credit card balances, interest rates and budgeted payments. Then ask yourself what would happen if you put just ten more dollars towards your debt every month.

6. Budget using the snowball or avalanche method 

There are two popular methods of paying off credit card debt: snowball and avalanche. Both methods involve making the minimum payments on all but one credit card so that you can use the bulk of your debt repayment funds to pay off a larger chunk of the balance on that one card . Once your first card is fully paid off, you’ll repeat the strategy with another credit card—and so on until all of your cards are paid off and you are debt free.

With the snowball method, you start by paying off the card with the smallest balance first. This method works because you quickly get the emotional boost of paying off a credit card in full, which motivates you to keep going.

The avalanche method, on the other hand, focuses on paying off the card with the highest interest rate first. This method works because you get the satisfaction of knowing that you are eliminating your high-interest debt as quickly as possible.

7. Don’t create new debt

As you work on paying off your credit cards, don’t create new debt. Stick to the budget you created and don’t charge new balances to your credit cards. This can be difficult, especially when you’re used to putting purchases on credit without thinking about it, but stay focused on your goal.

Yes, unexpected expenses may come up. Yes, you’re going to be tempted to spend a little extra money on yourself or your loved ones “just this once.” Don’t let holiday credit card debt or vacation spending derail your debt-repayment plan. Keep making those monthly payments and work on shrinking your credit card balances, not adding to them.

If you have credit card debt, consider these options

As you work towards paying off your credit card debt, here are a few options that can help reduce your interest rates, manage your monthly payments and get you that much closer to a debt-free life.

Open a balance transfer credit card

Balance transfer cards are the simplest way to consolidate debt and save thousands of dollars in interest payments. A balance transfer lets you transfer debt from one card to another, and balance transfer credit cards offer 0% introductory APRs to help you pay off your transferred debt interest free.

If you don’t pay off your debt before the 0% intro APR period runs out, you’ll have to start paying interest again. However, the top balance transfer credit cards typically offer a generous period of 0% APR, giving you plenty of time to put a dent in your credit card debt—or pay it off in full.

Take out a personal loan

Refinancing debt using a personal loan can be a great option. Personal loans often have significantly lower interest rates than credit cards, especially if you have good credit. This allows you to save money as you pay off your debt, and can even help you pay off your debt more quickly.

If you’re interested in learning more about personal loans, Bankrate can help you determine which personal loans you pre-qualify for.

Consider debt counseling

If all else fails, it’s time to ask for help. Debt management and credit counseling programs pair you with experienced professionals who have proven methods to help with credit card debt.

There are few reasons to consider a debt management strategy to eliminate substantial debt owed to credit card companies. Your debt management team might be able to help you contact your lenders and negotiate a lower interest rate on your debt. A debt management program can also help you consolidate several debts into one payment.

Look for a qualified non-profit debt management program accredited by the National Foundation for Credit Counseling. Avoid for-profit debt settlement services; these companies often charge you money to handle tasks you could do on your own.

The bottom line

No matter how much you owe, it is possible to pay off your credit card debt in full. Take a long, honest look at your spending habits. Set a realistic but strict budget. Consider using a balance transfer credit card or personal loan to consolidate debt and reduce your interest expenses. Avoid “just this once” spending temptations, and don’t get yourself into new debt as you pay off your old debt.

Keep making payments, tracking your balances and putting as much money towards your debt as possible, and you’ll be debt-free before you know it. Then you can start thinking about what you’ll do with all the money you’re no longer putting towards your debt!