Credit Card Debt: 5 Ways to Pay It Off

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There are a lot of ways to pay off credit card debt—from simply paying more than your minimum every month to using a strategy like the snowball method. The best approach for you depends on how severe your debt is, what your interest rates are like, and how much you can realistically afford to pay.

Did you know that in just the second quarter of 2021 alone, consumer credit card debt grew by $17 billion? It’s true, many Americans are struggling with credit card debt now more than they ever have before. With many Americans unemployed, struggling to make ends meet as consumer prices rise and wages stay stagnant, it’s no wonder why people are charging more things to their credit cards in order to keep food on the table. 

If you’re struggling with credit card debt, it can feel like trying to dig your way out from underneath a mountain with no idea how to get out of credit card debt. There’s no one-size-fits-all solution, but you do have options. In this article, we’ll walk you through 5 ways that you can pay off your credit card debt. Read on to gain key insights into the best ways that you can pay off debt and improve your financial outlook. 

What Is Credit Card Debt?

Before getting into how to pay off credit card debt, let’s start by explaining what it is. 

When you use a credit card, you’re essentially taking out a small short-term loan. The terms of that loan dictate that it must be paid off by the end of the month every month. So, for example, if you put $900 on your credit card to cover gas, groceries, and going out, you’ve basically taken out a $900 loan for that month’s expenses that you’ll need to pay back before your due date—usually, that’s listed on your online credit card portal or on the email or physical statement you get from your credit card company. 

Credit card debt starts to accumulate when you don’t pay off your balance each month. Even if you do pay the minimum payment (usually a small portion of the amount that you owe, like $30 or $50), your remaining balance will start to accrue interest. Let’s say that you owe $500 on your credit card and you pay down $100. That remaining $400 will still accrue interest. If your interest rate is 15%, you’ll owe $460 on your next bill from your remaining balance plus interest. 

What makes it even harder for many credit card owners is that interest compounds. That means that the next time interest is applied to your balance, it’ll be applied to that $460 total, not to the $400 principal amount. It’s easy to see why many Americans fall so quickly into debt, especially when many people opt to pay the minimum rather than the full amount they may owe. 

How Much Credit Card Debt Does the Average American Have?

According to Transunion, as of the second quarter of 2021, the average bank credit card balance was $4,817. The average American carries around $90,000 in debt, including all forms of debt from credit cards to student loans and mortgages. 

The amount of credit card debt a person is likely to carry depends on a few different demographics: 

  • On average, individuals with college degrees carry an average of $8,200 in credit card debt.
  • People who did not go to college have an average of $4,700 in credit card debt. 
  • Gen X has the highest amount of total debt—around $140,000 per person. 
  • Gen Z has the lowest total debt at just $16,000. 

Along with student debt and mortgage debt, credit card debt remains one of the biggest sources of debt for many Americans

How Much Credit Card Debt Is Too Much?

A little credit card debt can be useful as a way to make purchases you need but otherwise couldn’t make. However, if you start to notice one of the following signs, it’s likely that you have too much credit card debt. 

  • You’re only paying the minimum. If you only pay the minimum payment each month, your credit card debt will continue to increase as interest is applied to your balance. If you continue to do this month after month, you may wind up in more debt than you can handle.
  • Your credit utilization rate is high. Credit utilization is the ratio of the total amount of your lines of credit that you’re currently using. For example, if your credit card has a $5000 limit, and you’ve currently used $4000, you have a high credit utilization rate. Many experts say that it’s smart to keep your credit utilization under 30% when possible. 
  • You use credit cards to pay off other credit cards. This can be a dangerous cycle. If you’re using multiple credit cards to pay each other off, that’s a sign that you’ve bitten off more than you can chew. 
  • Your debt-to-income ratio is high. Another important ratio to keep an eye on is your debt-to-income ratio—that’s the amount that you currently owe compared to the amount of money you’re bringing in. If your debt payments are a large (or the largest) portion of your income each month, your credit card debt is likely too high. 

Ultimately, no matter how much credit card debt you have, those payments and accruing interest can be a significant burden on your financial life. Next, let’s take a look at ways that you can pay off your debt. 

How to Pay Off Credit Card Debt

Below are some of the best tips and tricks for tackling your credit card debt. Keep in mind that there’s no simple solution—ultimately, the only way to pay off credit card debt is to actually pay it down over time. But these tricks can help make it manageable. 

Paying more than the minimum

It can be tempting to just pay the minimum on your balance, rather than paying off the full amount that you owe each month. Once you make the payment, it seems that the debt just goes away… until next month, when you’re reminded of the amount you actually owe. 

If you’ve been paying the minimum and your balance has been growing, consider this a sign that it’s time to stop. If you can’t pay off the entire balance right away, that’s totally okay—just start by paying more than the absolute minimum, whatever amount that may be. 

The snowball method

So you’ve started paying more than the minimum—good! However, you may now want to focus on the exact way that you approach your debt. There are two popular methods: snowball and avalanche. In the snowball method, you tackle your smallest debt first. Start by completely paying off credit card debt with the smallest total balance. Then, once that’s paid off, take that money and start paying off the next smallest. Continue this until every card is completely paid off. Be sure that you continue to make minimum payments on all your other cards to avoid being charged late fees. 

The avalanche method

In the avalanche method, you start by paying off credit card debt with the highest interest rate. High interest rates can be seriously punishing, so tackling the card with the biggest rate first will have the most effect on your finances in the long run. Plus, you’ll be avoiding paying interest on the highest amounts long-term.

Note: The point here is to pay off the balance with the highest interest rate, not the highest balance. Attempting to pay off the highest balance first means that the interest on all your other balances is still accruing, meaning you’ll owe more in the long term. 

Consolidating with a personal loan

Sometimes your debt may simply be more than you can realistically handle, especially given that credit cards often have high interest rates. One way to find credit card debt relief is to take out a personal loan with a better interest rate, then use the cash from the loan to pay off credit card debt. 

Personal loans often have better terms and much more manageable interest rates than credit cards. They are offered through banks and credit unions and can be an effective way to turn mountains of credit card debt into a single, more easy-to-tackle monthly payment. If you’re in a ton of debt, consider consolidating credit card debts from different sources under one personal loan. 

Building a better budget

Lastly, budgeting is always a helpful addition to any repayment strategy. Knowing exactly how much you’ll pay toward your debt each month makes it easier to organize your finances around your monthly debt payments. Plus, you’ll get a good sense of how long you’ll be paying off debt. 

Mint makes budgeting easy. By downloading the Mint app, you can build intuitive monthly budgets that are easy to follow, plus track your spending, income, and net worth—all in one convenient location. 

How to Negotiate Credit Card Debt

In some cases, your credit card company may be willing to negotiate your debt. For example, they may waive past late fees, cut your interest rate, or even allow you to settle by making an offer that’s less than the total debt that you currently owe. 

It doesn’t hurt to try—if you’re in a lot of debt, consider calling your credit card company and discussing what your options might be. Negotiating may just get you a better deal. And, worst-case scenario, they’ll just say no. 

What Happens If You Don’t Pay Off Credit Card Debt?

If you don’t pay off credit card debt, your balance will simply continue to grow, making it harder for you to ever escape a cycle of debt. Not only does this hurt your finances by requiring you to spend a large portion of your monthly income on debt repayment. It could also seriously damage your credit score, making it harder to take out loans and get new credit cards in the future. 

What Happens to Credit Card Debt When You Die?

When you die, credit card debt is passed on to your spouse or heirs. It doesn’t simply go away, so it’s a good idea to focus on repaying your debt while you’re alive. 

Achieve Financial Freedom By Paying Off Credit Cards

Now that you have a few strategies you can use to pay down your credit cards in the way that’s best for you, it’s time to start actually doing it. By focusing on paying off your credit cards now, you can set yourself up for a better, less stressful financial future. While you might have to clamp down a bit on spending now, it’ll pay off in the long run when your discretionary income isn’t getting eaten up by credit card bills. 

Once you have an idea of which debt repayment strategy you want to try, use Mint to help you create a budget that allows you to allocate more funds to pay down your credit cards.


Federal Reserve Bank of New York | Q2 2021 Transunion Credit Industry Insights Report

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