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How to pay off credit card debt

Written by Mark London

Carrying too much credit card debt is a major threat to your financial security. High interest rates can cause debt to quickly accumulate beyond your ability to repay, and the potential damage to your credit score can make it harder to qualify for other loans, or even rent an apartment.

Fortunately, there are several ways to tackle debt and get your finances under control. Here are common strategies for paying off credit card debt.

  1. Pay off credit cards one at a time

  2. Refinance with a balance transfer or loan

  3. Read the fine print

Pay off credit cards one at a time

If you owe money on more than one card, you can pay off each card in sequence. One common approach is to start by paying off the card with the highest interest rate first to reduce your finance charges. After paying down that balance, move on to the card with the next highest rate. But remember: You’ll need to make the minimum payments on all your cards while focusing on one to pay down.

If rates on your cards aren’t substantially different, you might pay off the smallest debt first, as quickly as possible. Doing so can give some people a psychological boost, and help you move on to the larger balances.

Refinance with a balance transfer or loan

A more proactive approach to paying off credit card debt is to refinance – borrowing money at a lower rate to pay off all your credit cards, then developing a payment plan for your consolidated loan. Refinancing typically results in lower costs due to the lower interest rate.

There are three common refinancing approaches:

  • Consolidating debt on a balance transfer credit card 

  • A personal loan

  • Remortgage

One potential catch: to qualify for a loan or lower credit card rate, you’ll need a “good” or ideally “excellent” credit score. Read our guide on how to improve your credit score.

Read the fine print

While rebalancing your debts can offer potential advantages, each method comes with important considerations that you must understand:

  • Rates can change: 0% interest on a balance transfer card generally lasts for a limited time, and personal loans can have teaser rates that expire.

  • Watch out for fees: Balance transfers often carry a fee that’s a percentage of your balance or a fixed amount, whichever’s more.

A guide to short term borrowing