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How to Pay Off Credit Card Debt in 5 Easy Steps

November 8, 2019

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There’s more to paying off credit card debt than cutting back, earning more, and throwing every extra penny at your loans. (Although that can certainly help, too).

Here are five strategies that could make paying off your debt easier this year.

Use a payoff strategy

There are several popular methods for choosing which debt to pay off first if you want to speed up getting out of debt.

To start, make a list of all your current debts with each accounts’ balance and interest rate—you can get this information on your monthly statement. Also, find out if any of your loans have a prepayment penalty as that could impact your decision to pay off the loan early.

With both methods, you’ll continue making your minimum payments on all your accounts to avoid late payment fees and potentially hurting your credit score.

Now choose from one of these two ways helps you determine where to send extra money you’ve set aside for debt payments.

    • The avalanche method. The avalanche method could save you the most money overall as you’ll put extra payments toward the account with the highest interest rate. Once you pay that account off, move on to the account with the next highest rate. For example, if you have one credit card balance of $6,600 with 18.99% APR and another balance of $3,500 with 11.99% APR, you would payoff the one with the highest rate first.


    • The snowball method. The snowball method can help you build momentum and stay on the debt-payoff course. Order your accounts by the total balance due and focus on paying off the account with the lowest balance first. Keep the momentum up as you cross one account after another off your list. Using the example above, you would tackle the $3,500 balance first and when that is down to $0, move on to the $6,600 balance.

It’s hard to say which is best. Some studies show that the snowball method could lead to long-term success for more people, but if you’re very numbers-driven or find that the avalanche method could save you a lot of money, perhaps that’s the best for your situation.

Some people also supplement either approach with a “snowflake method.” In short, putting any unexpected income or savings toward a debt rather than spending it.

Make multiple payments each month

Many loans and credit cards may charge you interest daily and there’s a handy trick that could save you money over the lifetime of your loan. (If you don’t know how your lender calculates interest, look on your statement or give them a call.)

Rather than making one payment each month, pay half your bill halfway through the month. If you do, you’ll be saving all the daily interest that would have applied to that balance for the next couple of weeks.

Even better, make bi-weekly payments. If you make two payments a month, you’ll wind up making 24 payments each year. However, there are 56 weeks in a year and making bi-weekly payments leads to 26 total payments. It might not feel like a big difference, especially if your payments align with your paydays.

But consider a $10,000 loan with a 7% APR and 60 month (five year) term. Your monthly payments will be $198.01, or your bi-weekly payments will be $99.01. If you use the bi-weekly method, you’ll pay off the loan in 54 months and save $194.40 in interest.

Look for a calculator online that you can use to see the difference between monthly and bi-weekly payments.

Multiple payments could be especially helpful with loans or credit cards that have a high interest rate or a high balance (such as a mortgage) as they may accrue significant interest each day. However, no matter the type of loan, check with your loan servicer to see how it handles extra payments.

Consolidate your debt

Consolidating your debt could make it easier to manage your payments, save you money, and/or change your monthly payment.

Generally, it’s easiest to consolidate debts using an unsecured loan, such as a personal loan. Using this one new loan to pay off multiple loans will leave you with fewer payments to make each month, which could simplify your finances. For example, you might take a $10,000 personal loan and pay off three smaller debts with that sum.

The other benefits will vary depending on the terms of your loan.

    • If you qualify for a lower interest rate than your currently paying, you might be able to also save on interest each month. You could then put that savings toward paying off your loans sooner.


    • A personal loan with fixed-payment structure over a set period of time can help you put an end-point in sight to become debt-free.


    • If you’re struggling to afford your monthly payments, you might get a new loan with a longer term. It could lower your overall monthly payment amount, however note that it may also increase how much interest you wind up paying over the life of the loan.

You can also consolidate debts with a secured loan, such as a home equity loan (HEL) or home equity line of credit (HELOC). However, these often require an application that’s as involved as applying for a new mortgage. Secured loans tend to have lower rates than unsecured loans, but they come with another risk: your lender may be able to claim your property if you fall behind on the payments.

Refinance a loan

You may also be able to refinance debt to lower your interest rate or decrease your monthly payment. Similar to consolidation, when you refinance a loan, you’re taking out a new loan to replace your current loan. However, refinancing can also means changing the rate and length of your loan.

Generally, you use the same type of loan to refinance—e.g., you apply for a new auto loan to refinance your auto loan, or a new mortgage to replace your mortgage. You can also refinance student loans, swapping out old student loans (government and/or private loans) with a new private student loan.

Refinancing could be especially appealing if your credit has improved since you took out the original loan. It could be that you are now earn more money, have less debt, or have an improved credit score. All these things could help you qualify for more favorable terms when refinancing. It’s not all about you, though, the current market rates can also determine the rate you’re offered during refinancing.

Use a balance transfer credit card

If you have a credit card balance that you can’t quite strike in the next few months, you might consider a balance transfer if a few extra months would help you get it to zero. To be sure, proceed carefully—balance transfers often have transfer fees and high APRs once the promotion expires. 

For example, you might be able to get a card with 0% APR on balance transfers for the first 18 months. You could transfer other credit card debt to one of these cards and then pay off the balance over time without having to pay any interest. Some cards also let you “transfer” money into a checking account, which you could then use to pay off other loans.

Balance transfer credit cards can be risky, though. If you don’t pay off the debt before the end of the promotional period you might wind up carrying a balance that has a higher interest rate than you’re currently paying. You also might not get approved for a high enough credit limit to transfer much of your debt.

There’s no one-size-fits-all trick

Don’t be scared to try something completely different or mix-and-match ideas. Perhaps you use the avalanche method to knock out a few exceptionally high-rate loans, then switch to the snowball method to stay motivated. Or, you might not get approved for a great consolidation loan today, but you could try again with a different lender or after improving your credit.

In the end, learning the various methods, strategies, and tools is only part of the battle, though. You’ll still have to go through the (sometimes grueling) process and stick with it through the end. Hopefully, the strategies can make it a little easier.

We’d love to hear your debt payoff success story! Please email [email protected]

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Louis DeNicola is a freelance personal finance writer and credit enthusiast. You can find him on Twitter @is_lou.


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Louis DeNicola

Louis DeNicola

Louis DeNicola is a freelance finance writer based in Oakland, California. He specializes in consumer credit, personal finance, and small business finance, and loves helping people find ways to save money. In addition to Varo, Louis works with a variety of financial services firms, credit bureaus, and educational websites, including Credit Karma, Wirecutter, Funding Circle, and Experian.

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