If you’re struggling with credit card debt, you’re not alone. Getting out of credit card debt can seem overwhelming, but there are several effective strategies that may make you feel more confident. Let’s look at some ways to help pay off your credit card debt and avoid taking on more than you can handle.
What is credit card debt?
Your credit card debt is made up of 3 types of charges: purchases, interest and fees.
Your purchases are the charges added to your balance when you pay for something with your credit card.
Interest is the cost of borrowing money. If you don’t pay off your balance in full by the statement due date, you’ll owe interest on the amount you carry over.
Interest is based on your card’s annual percentage rate (APR), and it’s added to your balance. If you continue to carry a balance, you'll incur interest on both your new purchases and any unpaid interest from previous months.
Credit card interest can add up quickly. But remember, if you pay off your statement balance in full by the due date, you won’t receive any interest charges.
Fees can include annual fees and charges for certain activities, such as a late payment, international transaction or cash advance.
What are strategies to help pay off credit card debt?
There’s more than one way to help reduce and eliminate your credit card debt. The right choice for you will depend on your financial goals, your total debt and your credit score.
Review your spending
When making a plan to pay off credit card debt, it’s important to start by reviewing your finances. Look at your daily and monthly spending to identify areas you can cut back, freeing up extra money to help pay down your credit card balances more quickly. Consider using a budgeting app to help you see how much you have available to pay off your debt and stay on track with your payments.
The debt snowball method
One popular option is the debt snowball method. This straightforward strategy helps you build momentum by helping you eliminate the number of debts you have more quickly, making it easier to stay motivated and on track.
Here’s how it works:
- Rank your debts by size. Start by listing all your debts from the smallest to the largest balance.
- Pay extra toward the smallest debt. Any extra money you have each month should go toward paying off the smallest debt first. Once this debt is paid off, you can cross it off your list.
- Move to the next debt. After eliminating the smallest debt, move on to the next smallest one, applying the same strategy. The money you were using to pay off the first debt now goes toward the second one, creating the “snowball” effect.
By the time you reach your larger debts, you’ll have more funds available each month to pay your remaining debts down faster. Remember to continue making the minimum payments on all your accounts to avoid hefty late fees.
The debt avalanche method
If high interest rates are making it difficult to pay down your debts, the debt avalanche method might be a better option than the debt snowball method. This strategy focuses on minimizing the total interest you pay overtime.
Here’s how it works:
- Rank your debts by interest rate. Start by listing all your debts in order from the highest to the lowest interest rate.
- Pay extra toward the highest-interest rate debt. Direct any extra money toward paying off the debt with the highest interest rate first. This will reduce the overall amount of interest it accrues and ideally save you money in the long run.
- Move to the next debt. Once the highest-interest-rate debt is paid off, apply the same strategy to the debt with the next highest interest rate. Continue this process until all your debts are eliminated.
This method can be particularly effective for those concerned about the long-term costs of their debt and are seeking to reduce the overall interest they pay.
Consider Balance Transfer credit cards
Some credit cards allow you to transfer your existing credit card debt to a brand new card, consolidating your debts into a single payment. Newly approved Balance Transfer credit cards often come with a 0% or low introductory APR offer, meaning you may pay no or very little interest on the balance for a set period. This may allow you to focus on paying down the balance without accruing a lot of interest. Make sure to keep track of when your promotional period ends, however, because once it does, your APR will rise to the standard Balance Transfer APR. Be aware that your card’s standard Balance Transfer APR may differ from the standard purchase APR. If you’re a Citi cardmember, a Citi Balance Transfer allows you to move an unpaid balance from a non-Citi account to an existing Citi credit card. The balance you transfer will then become a part of your Citi card’s monthly revolving balance.
Credit card consolidation loans
Credit card consolidation loans are another option if you find yourself juggling debt across too many accounts. These personal loans let you combine your credit card debts into a single loan with a set repayment schedule, often with a fixed interest rate. That means you’ll know exactly when your debt will be paid off, and the interest rate won’t change based on market conditions. However, your exact interest rate and repayment schedule will depend on your credit score and how much debt you’re consolidating.
Take control of your credit card debt
Staying on top of your credit card debt may seem intimidating, but with just a few changes to your budget and habits, you may feel more empowered to tackle it. Once you’ve paid off your debt, make sure you have a plan in place to help keep your debt under control moving forward.
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.
