Credit card debt is a struggle in the best of times and can feel impossible in the worst.
It’s also a problem that many Americans face. In fact, total outstanding credit card debt is currently at all-time highs despite reaching multi-year lows after Covid stimulus put more cash in most people’s pockets.
The average household income in the U.S. is around $80,000, and the average credit card debt is over $6,800, according to LendingTree. That means you’d need to pay a month’s worth of salary to pay off your credit card. And that’s not counting student loan debt, car payments, mortgages, and other similar debts.
And unlike a lot of financial strategies, credit card debt is uniquely personal.
Getting out of credit card debt isn’t just a matter of crunching the right numbers, you also have to decide where you can afford to make cuts in your day-to-day life as well as what payments or expenses to prioritize.
Chin up, though. It’s not all doom and gloom. It’s a solvable problem, but the first step is taking a cold hard look at your finances. Each of the strategies we’re presenting here requires an awareness of your income, your monthly expenditures, and your discretionary spending.
If you don’t know your numbers, start there. Get up to speed on your monthly payments, your income, and where your money is going. Become hyper-aware of your spending habits. This is a powerful tool in a world where many people have two or three monthly subscriptions they don’t even know about.
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The 4 Best Ways to Get Out of Credit Card Debt
There are many ways to work your way out of debt, but finding the right one for you is what matters. The following list of the best ways to get out of credit card debt focuses on practical and effective methods of freeing yourself from the sticky web of credit card debt.
All of these will take patience. Both with how long the process can take and yourself. Unexpected expenses happen, and sometimes there’s nothing you can do about it other than adding back to the debt pile you’re working so hard to pay down. The important thing, again, is to find a plan that works best for your situation and stick it out.
1. Snowball payment method
The snowball method is all about momentum and the psychological boost of small victories. Famed financial guru, Dave Ramsey, popularized the snowball method. While some in the finance business argue against his ideas, this method helps people climb out of crippling debt over time.
The method works by paying only the minimum monthly payment on all your credit cards, except for the one with the smallest balance. You go all in on that one. Pay as much as you can afford each month, and make extra payments when you can. The goal is to take an aggressive approach to one card. When that card is paid off, pat yourself on the back, then move on to the next card. This time, however, whatever you were paying on the first card gets “snowballed” into the new card.
For example, you have three cards with minimum payments of $25, and you’ve been making an additional $25 payment on the card with the lowest balance. So you’re paying $100 each month toward credit cards (three minimum payments of $25, plus an additional $25). When that first card is paid off, you take that $50 you’ve been paying and put it into the next card. Now you have two cards with $25 minimum payments, but you’re putting an additional $50 into the lowest balance card. You’re still paying $100 each month toward credit cards, but now you’re putting $75 toward one of them.
A better (although less rewarding) twist on the snowball method is to direct the extra payments toward the card with the highest interest rate instead of the smallest balance. It may take a little longer to cut down on the number of cards you’re making payments on, but this method prioritizes the debt that is actually costing you the most money.
2. Get a side gig
If you look into your income and expenses and realize your cash flow is negative, a side gig could be the right move. There are plenty of people who are digging into a deeper hole of debt without realizing it. If you’re one of them, you might be stuck in a situation that doesn’t allow you to eliminate costs quickly.
Freelancing on the side, whether driving, writing, tutoring, or providing other skills as a service, can help you make up the gap in your cash flow until you can adjust your lifestyle accordingly.
3. Personal loan
If you know paying back your debts is going to be a long-term game, paying high interest the entire time can hurt. Explore your options to consolidate your debt through a personal loan, and you may be able to reduce your interest rate across your debts and save lots of money.
It might not feel like it when you are still looking at a mountain of debt, but reducing interest rates can put thousands of dollars back in your pocket, depending on how much debt you start with. Just read the fine print carefully, and be sure to work with a trustworthy lender. Personal loans can have variable interest rates that could make your situation worse if you aren’t cautious.
It’s also important to remember that if you take a personal loan (or a HELOC, or any kind of consolidation loan), you need to stay disciplined and avoid spending (or overspending) on your credit cards.
Otherwise, you run the risk of finding yourself in even worse shape, with a large consolidation loan and credit card balances that are building back up.
4. Consolidate debt at 0%
Next is a short-term strategy. Many credit cards offer a zero percent introductory rate for balance transfers. This can be a valuable way to reduce the amount of interest you will pay on your debt, but it can also lull you into a false sense of comfort.
Each introductory rate period has a set length. Most will expire in 12 to 24 months. Unless you are positive you can and will pay off the card within that time, this is not the method for you. You already need to pay a transfer fee, and you will incur a higher interest rate when the introductory rate expires. The only way this works is if you pay your card off in time.
Plus, opening new credit cards repeatedly can gradually lower your credit and hurt you in the long run.
Which Option Is Best?
Of these methods, the snowball payment method is one of the slower options, but it’s also the most sustainable. It’s most suitable for situations where you’ve been overspending and you’re making cuts to your expenses as well.
Finding more income through a side gig or extra hours is the fastest way to eliminate debt entirely, but you do need to examine your budget to avoid getting back into trouble.
The personal loan requires the most discipline, as you need to make wholesale changes to your spending habits to avoid running card balances up, but it can also be the most practical if your balances are overwhelming and you can find a lender to work with.
Finally, the zero-interest promotional rate is best suited for when you’ve encountered large one-time expenses and already have a plan to pay off the balance.
If you’re still feeling overwhelmed at the prospect of tackling credit card debt, you may want to consider contacting an organization like Money Management International, which offers credit counseling and help with debt repayment plans.
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*This post has been updated from a previously published version.
