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Credit Cards

How to Pay Off Credit Card Debt in 12 Simple Steps

When you’ve been struggling to get ahead for years, there’s no greater joy than the financial freedom you’ll find in eliminating credit card debt. Taking the steps to learn how to pay off credit card debt starts a process that will save you thousands of dollars over time.

As you make progress paying down your credit card debt, your credit score will improve. This strengthens your buying power and helps qualify you for better credit cards with lower interest rates and more benefits.

Read on to learn 12 simple steps to help you discover how to pay off credit card debt.

Build a Complete Picture of Your Finances

Before you can begin paying off your debt, you must first make an honest assessment of your situation. You need a clear picture of how much you own, especially when outstanding balances may show different interest rates.

Don’t worry if you’ve made rookie credit card mistakes. With dedication and commitment, you can pay off your credit card debt and move forward with financial stability.

You can put together a spreadsheet that itemizes each credit card’s balance and interest rate, or you can literally write it out by hand.  The key is to get a complete picture of your credit card debt.

It can be easy to lose track of mounting balances when using credit cards to cover expenses like emergency auto repairs or medical expenses. One of the reasons many people drag their heels on learning how to pay off credit card debt is the effort required to analyze credit accounts and build a complete picture of their financial status.

Focus on Paying Off One Debt at a Time

It’s critical to limit your payoffs to one credit account at a time — while still making your minimum payments on all your open accounts, of course. After your minimum is met, any extra cash you apply to your chosen balance will have a significant impact.

Focusing your payoff efforts on a single account accomplishes two things.

First, you gain confidence that your debt can be eliminated as you see the balance decrease. That psychological impact is a big deal because if you aren’t noticing progress, it will be hard to stick with it.

Second, if you pay off the credit card with the highest interest rate first, then you’re maximizing your savings on interest expense.  The savings on interest can be put back into paying down credit card debt and help you get out of the hole that much faster.

Monitor Your Credit Report

Your credit report is a useful tool to show where you stand financially so you can plan how to pay off credit card debt reliably. Credit reports contain open and closed credit accounts, payment history, credit activity and usage, and recent credit-related inquiries.

Your credit report allows you to see what lenders see.  So it can be a vital part of improving your credit score.

Not only that, but as you lower your debt and raise your credit score, you’ll qualify for the best credit cards.  That means as you pay down old credit cards, you might be able to qualify for newer ones with better terms and then migrate your credit card debt to those to save on interest.

In a best case scenario, as you pay off credit card debt, you might be able to qualify for cash back credit cards.  If you then start using one of those for purchases while paying down other cards, then you can earn cash back.  And if you want to really be on top of your game, you could then use the cash back to pay down more debt.

Negotiate Better Interest Rates

Once you’ve made progress raising your credit score and establishing payment history, your credit card companies may allow you to negotiate better interest rates. Even a small reduction in interest can ultimately save you hundreds of dollars as you work to pay off your credit card debt.

Transfer Balances to Consolidate Debt at Lower Interest

At the start, most of your credit card payment is applied to the monthly interest rather than the principle. High-interest rates can cost consumers substantially more money and make it take far longer to pay off the debt. While the ratio of interest to principle within each payment is high at the beginning, as the balance drops over time, more of the payment is applied to the principle.

Talk to your credit card companies and learn your options for a balance transfer credit card. This allows you to consolidate your debt on a credit line with temporary zero interest, where your payment is applied to the balance.

Track Your Expenses

While planning how to pay off credit card debt, you must make a detailed list of all your fixed and flexible expenses. This gives you an accurate idea of how much you can afford to apply toward your payoff efforts each month.

Your rent or mortgage, auto insurance, and loan payments are considered fixed costs of everyday living. Payments that remain the same each month, such as student loan payments and memberships, are also fixed costs.

Flexible costs include variable expenses like food, fuel, utilities, recreation, and entertainment. Home or auto repairs and medical costs are considered necessary flexible spending. An effective payoff plan requires you to carefully monitor and consider each expense.

Build a Realistic Budget and Stick to It

We know your ultimate goal is paying off your credit card debt, but the extra money must come from somewhere. Unless a substantial windfall is on the horizon in the near future, you’ll need to budget your way to financial freedom.

Your budget can be particularly effective for flexible expenses.  Here are some CashBlog guides that you might find helpful:

A complete budget must also include funds for unexpected costs, like automotive repairs and medical care. After all that, you need to know exactly how much you can afford to use toward paying down your credit card debt.

Determine How to Pay Off Credit Card Debt with a Successful Strategy

Several strategies have proven successful in paying off credit card accounts. After evaluating your financial situation, determine which method is likely to me most successful for you.

Snowball Method

This strategy focuses on the credit card with the lowest balance first. In addition to making your minimum payments on time, the snowball method requires you to put extra money toward the principle balance.

Minimum payments do apply small amounts toward the principle, so it’s technically possible to pay off your credit card debt this way. It is not an efficient or expedient strategy, however. The bank makes money from your interest payments, so the longer you extend the schedule, the more money they make.

You are allowed to just make the minimum payments on your credit cards, but that doesn’t mean you should. Paying off your first credit account will give you confidence, which will help motivate you to keep making progress. With the money you save eliminating your lowest balance, you can move on to tackling the next lowest balance.

Avalanche Method

With the avalanche method, you start with the highest credit card balance and focus on paying it off first. You will save the most money on interest payments with this strategy.

Tn his method is ideal for those who can comfortably afford to make their monthly payments. You will also gain the motivation to continue paying off your credit card debts.

Debt Consolidation Method

Consider combining multiple high-interest credit lines under a single loan with a fixed monthly payment. This reduces the amount you pay in interest as long as you secure a lower rate than you’re paying on the credit cards.

This method comes with the added perk of boosting your credit score with on-time full monthly payments. However, you should be aware that an additional loan could derail or delay plans to secure a mortgage or other loan.

Chip Away at Credit Card Balances with Incremental Payments

As with many expansive tasks in life, the end goal can feel elusive, but it’s important to trust the process. You can break up your credit card debt into smaller, more manageable chunks and pay off just a portion of the balance.

These incremental changes will make a successful difference over time, chipping away at your outstanding credit card debt and helping you tackle the next block with confidence. While the process may start slowly, you should see your gains progressively grow over time.

Stop Using Your Credit Cards

Your credit accounts have likely helped you through some difficult situations in the past but choosing to eliminate your debt means you cannot continue adding to it. You’ve committed to making successful, life-impacting changes for your financial future, which means you can’t afford to use your plastic in a pinch.

It may be tempting to use your credit card just one more time but reaching the end goal of a zero balance requires you to stick to the plan. Remember that taking your credit card on vacation, to the casino, or to the auto shop is likely to lead to back into debt.

Use Your Goals to Stay Motivated

Other than lightening your financial load, you likely had some goals in mind when you chose to learn how to pay off credit card debt. Perhaps you want to purchase a home, but your debt-to-income ratio prevented you from qualifying for a mortgage. Maybe your credit card balances make it impossible to purchase a new car.

Use the goals you want to achieve to maintain your motivation to reduce credit card debt. Move forward with an eye toward the future and keep the momentum going.

Track Your Progress and Celebrate Milestones

While developing a strategy for how to pay off credit card debt, establish milestones so you can track your progress. Paying attention to your strategies and achievements will let you know if you need to change tactics and smooth the way to your end goal.

Making informed decisions about your path to financial freedom from credit card debt is vital to your future success. These choices are easier to make when you know exactly where you stand.


Paying off your credit card accounts can be difficult and time-consuming, but the reward is worth the trouble. Reducing your debt-to-income ratio improves your credit scores and eliminating your credit card debt leads to the financial freedom you’ve been working toward. With these 12 simple steps, you can systematically and effectively knock out your credit card debt and move on with a solid financial foundation.


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Amanda Browning

Amanda has more than a decade of writing experience that includes stints as a reporter and an editor of a newspaper.  She likes to dig down and get the facts and then share them with readers in a way that's easy to understand.

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