There are a few strategies you can use if you ever need to get out of credit card debt. What technique you use depends on your situation, so let’s take a deeper look into how these methods apply to your finances.
Understanding credit card debt
Credit card debt typically accumulates interest whenever you do not pay off the entirety of your credit card’s statement balance on or before its due date each month. Even if you pay a large portion of that balance, the card will accumulate interest and the amount you owe will grow. If you only pay the minimum amount on your credit card balance, this will cause your credit card debt to increase at a faster rate than when paying a larger portion of the balance.
7 Strategies to pay off credit card debt
There’s more than one way to reduce and eliminate your credit card debt. Understanding the different strategies first may help guide you into choosing the right one for you. Whichever strategy you choose, make sure it’s one that will keep you motivated to stay on track in reducing your credit card debt.
1. Plan out a debt payoff schedule
The simplest strategy to start paying off credit card debt is to list the debts you owe and create a schedule for paying them off. Sometimes, organizing your debts on a schedule can be enough to see that paying them off is manageable over a reasonable period.
Another benefit of planning a debt payoff schedule is that you can use this organized list to help you with alternative debt payment strategies. For some, seeing the amount of debt they have to pay off isn’t enough, in which case the schedule you’ve made can be used in tandem with other debt solutions.
2. Try the debt snowball method
The debt snowball method is an efficient technique used to tackle debt quickly and simply.
With this method, you make the minimum payments on all your debts on time and, with any extra funds, you pay off your smallest debt first. Then, you move onto the next smallest debt and pay it off until all your debts are paid off in full. That way, you gain momentum in your payments and your larger credit card debts can become easier to manage.
3. Try the debt avalanche method
If you find that the interest on your debts is increasing too quickly for the debt snowball method to solve, you may want to try the debt avalanche method.
This may be a great method to use if you have any debt that is growing too quickly due to a high interest rate.
To follow the debt avalanche method, pay off your debt with the highest interest rate first, then move on to the debt that has the next highest interest rate, and so on. With this approach, although you focus on paying off the debt with the highest interest rate first, you still need to make the minimum payments by the due date on all your other debts..
4. Consider balance transfer credit cards
A great way that you may be able to pause interest rates on your credit card debt is to transfer credit card debt to a balance transfer credit card. These credit cards allow you to move a balance from a previous card onto a new card while offering introductory benefits that may make paying off debt with them easier.
The Citi® Diamond Preferred® Card is one example of a balance transfer credit card. This card may be a great option if you already have a debt payoff solution in place and want to use a balance transfer card to get a better handle on your interest rates.
5. Credit card consolidation loan
If you find yourself with multiple credit cards with balances that are difficult to track, you may want to try merging these credit card debts using a credit card consolidation loan.
A credit card consolidation allows you to integrate your existing credit card debts into a single loan, ideally with a lower interest rate than any of the interest rates applied to those existing debts. That way, you can focus on repaying one loan instead of trying to manage several credit card balances.
6. Pay more than the minimum
Another simple solution to handling credit card debt is to pay higher than your minimum monthly payment on your credit card balances. A good strategy is to steadily increase the amount you pay on your balances each month to try to reduce your debt at a faster rate.
This strategy may work well for anyone who may have fewer credit cards but higher balances. As you’ll still have to make your minimum payments, paying off more than the minimum may help decrease your current debts as well as reduce your chance of having unmanageable debt. Remember, any interest on the debt will cause the debt to increase over time, so the more quickly you can pay it down, the better.
7. Review your spending
If you’re focused on paying off credit card debt, you may have forgotten that you can get your budget under control for added financial flexibility. Reviewing your daily and monthly spending and seeing where you can cut out expenses can go a long way in giving you extra money to pay down your credit card balances.
How to avoid future credit card debt
Once you’ve paid off your credit card debt, you should do everything you can to avoid accruing debt in the future. Whether that means more restrictive budgeting or paying off your balances faster, you’ll need to devise a plan going forward so that you can manage your debt properly.
If you continue to use credit cards, make sure to understand the terms. That way, you know when your minimum payments are due each month and the interest charges that can apply to transactions made with the cards.
Disclosure:This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
