pay off credit card debt

The average American household has almost $6000 worth of debt, and that’s not the kind of cash you can pay off overnight.

Even people with good credit often suffer the burden of credit card debt. And, due to the nature of compounding interest, the longer you wait to address it, the more difficult it will be.

Take a proactive approach and implement these strategies to pay off credit card debt quickly and easily.

1. Tackle the Small Amounts First

Popularized by Dave Ramsey, this approach is also sometimes called the “the snowball method.”

It’s less financially-minded than the other strategies described here, but sometimes that’s not the issue. The psychological burden of debt can be just as crippling as the financial reality.

That’s where the snowball method comes in.

The idea is to get momentum in paying your debt. Start with the smallest amount and pay it off completely. You’ll feel better about yourself and your situation once you have made concrete progress.

Then it’s just a matter of carrying that momentum on to the next smallest debt. Just like rolling a snowball down a hill – it gets bigger as you go.

If you’re struggling to stay motivated, this is your best bet.

2. Always Pay Your Minimums

You should always pay your minimum balance whether or not you’re deep in credit card debt for one simple reason: late fees.

Racking up multiple late fees is killer. They are often in excess of $30 each. If you have several accounts that you’re unable to pay, you could be adding an additional $100 or more to your debt – on top of the interest accrued.

Late fees aren’t just bad for your wallet, they’re bad for your mental health. It’s discouraging to see credit card debt rising – especially when you’re not getting anything in return.

Of course, ideally, you’d be able to pay your credit card off every month in full. Then it wouldn’t matter what the interest rate on your card is. Realistically, however, that’s not always possible.

That’s why your first priority should always be to pay your minimum on every balance. It’s not the fastest way to get yourself out of debt, but it is the foundation to success.

Once you’ve got the minimums covered, devote the rest of your allocated budget to one debt in particular. Pay it down and pay it off – that’s one less minimum to pay!

3. Eliminate High Interest Rate Debts

This is the classic advice for dealing with credit card debt.

And for good reason.

The absurdly high interest rates of today can turn a $10,000 debt into a $16,000 debt in just a few months. Ultimately, you can pay many times your initial debt if you let interest get away from you.

Naturally, it follows that you should eliminate high interest rate credit card debt first. It’s the best strategy for paying the least in the long run.

It’s tough to approach though. High-dollar amounts are intimidating.

Use the other strategies listed here to help tackle these debts. You’ll feel enormous relief once you’re out from under it.

4. Consider Trying a Balance Transfer

A balance transfer is a form of debt consolidation wherein you move debt to a card or account with a lower interest rate.

If you owe ten grand on a card with a 20% interest rate, for example, you should inquire at financial institutions about the possibility of a balance transfer. They can effectively “buy your debt” by paying off the balance immediately. You owe the new people ten grand, still, but they’ll offer you a lower interest rate.

It doesn’t solve your ultimate problem of credit card debt, but it does give you some leeway. Interest stacks up fast, especially on big dollar amounts. A lower interest rate will give you some breathing room.

Similar to a balance transfer is true debt consolidation. If you have credit card debt on several cards, all with varying interest rates, you can consolidate all that debt into one place.

Oftentimes this is accomplished by getting a loan to pay off all your debt. Then you owe money to just one debtor instead of several. If you manage to secure a lower interest rate, you’re saving money as well as a headache.

5. Learn Budgeting

Many people have difficulty paying off credit card debt because it seems impossible to find the money to do it.

After all, if you had the money, you wouldn’t have needed to use a credit card in the first place, right?

The first step to budgeting is to examine where all of your money goes. For a month, track every penny you spend in a spreadsheet.

You’d be surprised at how much of that is on unnecessary items: eating out, impulse purchases, bad habits like cigarettes.

By strictly controlling your spending, you’ll find more money to use toward debt – which will give you more money to spend in the future.

Check out YNAB – they’re the ultimate authority on budgeting.

It’s important to note that budgeting doesn’t mean you can’t have fun anymore. You just have to plan ahead for your fun!

6. Use Cash Instead

Another interesting psychology trick is to use cash instead of cards. It turns out, you’re willing to spend more money when using a card than using cash.

It has to do with perceived value. We know what cash is worth – it has the number right on it! Additionally, green pieces of paper with portraits on them means money. It’s built into our cultural psyche.

But that little plastic card? That has only an abstract connection to money. It’s much easier to hand someone your card than it is to hand them four $20s for a car wash and wax.

Start carrying cash and make all your small purchases with it!

Credit Card Debt Is Not Insurmountable

Even if your debt feels overwhelming – remember that there are always options.

You’ve heard it before, but: the journey of a thousand miles starts with a single step.

Get working on that debt as soon as possible! It’ll save you money and sanity.