How to pay off your credit cards fast: 6 simple tips
March 22, 2021
If you are struggling with credit card debt, you are not alone. According to a 2019 report, the average credit card balance for Americans is $6,194. Unfortunately, looming credit card debt can accrue interest fast and end up taking years to pay off if you do not make your payments right away.
In fact, a recent survey found that 77% of the participants feel anxiety about their financial situation. Most people can agree that carrying less debt helps alleviate that anxiety.
While paying down credit card debt can be overwhelming and frustrating, reducing your total credit card debt sooner than later can be the quickest way to greater financial health. Here are six simple ways you can pay off your credit card debt fast.
1. Create a debt repayment plan
The first step to managing your credit card debt is customizing your debt repayment plan. By doing this, you will be able to create an actionable plan that will help you stay on top of your debt and your payments. If you have a mountain of debt, having a debt repayment plan will also help break up your payments into smaller, more attainable goals and make managing your debt less daunting.
To get started, we suggest making a list of all of your credit cards and the total balances owed, then noting the interest rates and minimum payments for each. Make a plan for how much money you can allocate toward paying more than the minimum payment(s) each month (we’ll talk more about this below). Be sure to add reasonable but challenging payoff dates for each credit card. It does not matter if you use pen and paper, spreadsheets or debt payoff apps, just make sure you stick to your plan.
2. Start paying off credit card debt right away
Once you have a payoff plan, start tackling your credit card debt immediately. Waiting will only allow more interest to accrue on the balance(s) owed making the overall amount you will end up paying significantly higher than the original debt owed. Most consumers take over a year to pay off their credit card debt, so create and start your plan now.
One important thing to remember is, once you start paying off your credit cards, you need to stop using them. It may seem too obvious to mention; however, you will want to keep yourself from making additional credit card purchases so that you can stick to the payoff timeline you created in your plan. Some ways to help with this include removing the credit cards from your wallet or even shredding them entirely.
3. Target one credit card at a time
If you have multiple credit card balances, focus on paying off one credit card at a time so that the process is more manageable. Do not forget to continue to pay the minimum monthly balance on all of your cards, but consider putting more of your funds each month toward the credit card with the highest interest rate to work on paying off that one first.
The credit card debt with the highest interest rate is costing you the most relative to the initial credit card balance. To pay off your credit card debt fast, a good strategy is to sort the credit cards by interest rate. Focus on paying off the credit card with the highest interest rate, then once you have paid it off, move on to the credit card with the next highest rate, and so on.
4. Pay more than the minimum balance
It can be easy to fall into the trap of only making the minimum payment(s), but it will take you many years to pay off the debt and you will end up paying significantly more than the amount(s) you initially borrowed. For example, if you owe $3,000 on a credit card with an 18% annual percentage rate (APR), and your minimum payment is 3% of the balance or $25, it would take you nearly 14 years to pay off the credit card debt if you only paid the minimum balance each month. If that is not bad enough, you will end up paying about $2,700 in interest—almost doubling the amount you owed originally ($5,700 total).
Another benefit of reducing your credit card debt is that it reduces your credit utilization ratio. This is the percentage of the total revolving balances (usually credit cards and store lines of credit) that you owe compared to your total credit limit. This accounts for 30% of your credit score, and any credit utilization ratio over 30% is likely to have a negative impact on your credit rating.
5. Consider a debt consolidation loan
Debt consolidation loans are personal loans used to combine multiple debts, such as credit card debts, high-interest loans and medical bills, into an account with one monthly payment and one lender. If you’re having a hard time managing multiple credit card debts and payments, a debt consolidation loan may be an easier way to manage your debt repayment plan.
You’ll want to consider consolidating the credit cards that you want to pay off first (again, consider choosing the one with the highest interest rate). Once you know the total of those balances, you can then figure out how much you want to borrow and what the length of the loan should be.
6. Speak with a credit counselor
If you’re still feeling overwhelmed with your debt repayments and struggling to find a way to pay off your debt quickly, consider speaking with a credit counselor. A credit counselor can help you figure out what programs are available to help manage your debts or help come up with a repayment plan that you're comfortable with.
Frequently asked questions about credit card debt
Although we have outlined some of the best methods on how to pay off your credit card debt fast, there are still many questions that credit card owners have related to their debt. We’ve answered a few of the most frequently asked questions when it comes to credit card debt below.
- Is it better to pay off credit card debt all at once? In most cases, paying off credit card debt all at once or as quickly as possible is best—it will save you money in interest and also help keep your credit in good shape. If you’ve acquired extra cash or have the money to pay off your credit card balance in full, it’s usually best to go this route.
- How can I avoid running into credit card debt in the future? After you’ve paid off your credit cards, you’ll want to avoid acquiring more debt (or at least acquire less of it). There are a few best practices you can follow:
- Only make purchases that you can afford;
- Pay off your credit card balance in full each month;
- Always pay your credit card bills on time;
- Avoid cash advances on your credit card; and
- Understand your credit card terms.
- Will my credit card debt affect my credit score? Having debt can have a direct impact on your credit score. In fact, the amount of debt you have is one of the biggest factors that determines your credit score, as your level of debt accounts for 30% of your credit score, also known as your “credit utilization rate”. Carrying a lot of debt, especially credit card debt, hurts your credit score and potentially your ability to get approved for new credit cards, loans and higher credit limits.
When it comes to paying off your credit cards, the sooner you create a repayment plan and tackle your payments, the better. By managing your credit cards and paying off debt quickly, you can save money, avoid paying high interest rates and decrease the risk of hurting your credit score. Once you have paid off your debt, consider whether you’d like to close your credit card or not. If you’d like to keep your credit cards open, create a plan for how to not acquire more credit card debt in the future—your credit, finances and stress levels will thank you for it.
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Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona.
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