Paying Off Credit Card Debt

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Paying Off Credit Card Debt

While credit card debt can be intimidating, there’s always a way out if you’re committed to the process. There are a few methods that are effective and no matter what strategy works best for you, tackling debt is done the same way: One Step at a Time. Read through each of these methods to find the solution that best fits your budget and helps you achieve your goals.

The Avalanche Method

With this debt elimination strategy, also known as debt stacking, you’ll pay off your accounts in order from the highest interest rate to the lowest. Here’s how it works:

Pay the minimum balance on all your debts.
Put as much extra money towards the debt with the highest interest rate.
Once that debt is paid off, move to the account with the next highest interest rate, and keep going until all your debt is paid off.

The Snowball Method

With the debt snowball, you’ll pay off your debts in order from the smallest balance to the largest. Here’s how it works:

Pay the minimum balance on all your debts.
Put as much money extra as you can towards your debt with the smallest balance.
Once you have paid off that debt, redirect those extra payments to the next smallest debt. Continue this process until you’re debt free.

Debt Consolidation Method

Consolidating your debt can let you combine several higher-interest accounts into one with a lower rate, so you can pay down your debt faster without increasing payment amounts. Here are two common ways to consolidate debt:

Take advantage of a low balance transfer rate to move debt off high-interest cards. Be aware that balance transfer fees are often 3–5 percent, but the savings from the lower interest rate may be greater than the transfer fee.
If you have equity in your home, you may be able to use it to pay down card debt. A home equity line of credit may offer a lower rate than what your cards charge. Be aware that closing costs often apply, but an extra benefit is that home equity interest payments are often tax-deductible.