Debt Consolidation Loans

6 Easy Ways to Pay Down Credit Card Debt

If you own a credit card, there is a 65% chance you are a paying member of the “revolvers” club. As cool as the name may sound, this is not a club you want to be part of. According to a study published by the Federal Reserve Bank of Boston, only 35% of credit card users are “convenience users.” These are consumers who pay their credit card balance in full every month and have $0 credit card debt. Revolvers, on the other hand, have an average credit card debt of $15,700. As a group, they have a total credit card debt of $980 million.

If you are a “revolver,” what can you do to become a “convenience user?” Yeah, I know. We need to do something about the club’s name.

Here are 6 easy ways to reduce your credit card debt.

1. Pay Two Minimum Payments a Month

Having specific goals and staying consistent is the key to all successful debt reduction plans. Let’s say you’re an average revolver. In other words, you owe $15,000 in credit card debt and you have a 15% APR. Your minimum payment would be a whopping $600 a month. Sorry, but it will take you 13 years and 7 months to repay it.

Pay double your current minimum payment, $1,200, and stick with it. Congratulations. You will pay your debt in just 1 year and 2 months and you’ll save $5,311.43 in interest payments.

2. Transfer Your Debt to a 0% APR Credit Card

Consider switching your credit card debt to a 0% APR balance transfer card. If you have $15,000 in debt and an average 15% APR, you could save $1,940 in interest during just 12 months of 0% APR. Combine a 0% APR balance transfer with an aggressive repayment plan, and you could repay your entire credit card debt in less than a year.

Remember balance transfers are not always free. The APR may be 0% but APRs don’t include balance transfer fees, which can be as high as 5%. There are balance transfer credit cards, such as Slate, that don’t charge transfer fees, but these are rare. This doesn’t mean you shouldn’t transfer your credit balance. Just make sure you take into account these fees when calculating the pros and cons of a balance transfer.

3. Pay the Credit Card with the Highest Interest Rate First

Write down the interest rate of every credit card account with a balance. Identify the account with the highest APR. Make minimum payments on all the other accounts and sink pour every dollar you can spare into paying the account with the highest APR. This method is called the debt avalanche method. If you don’t qualify for a 0% APR balance transfer card, this is the fastest way to reduce your credit debt.

Let’s say you have three credit card accounts:

#1 has a balance of $5,000 and a 13% APR
#2 has a balance of $8,000 and a 20% APR
#3 has a balance of $2,000 and a 12% APR

If you can afford to make $800 in monthly payments and follow the debt avalanche method, you will pay $2,226.38 in interest and be debt-free in 1 year and 11 months.

4. Debt Snowball Method

Another method is to start pay as much as you can on your smallest debt while making minimum payments on the other ones. Once it’s paid, go on to then next smallest debt until you are debt free. This method was popularized by David Ramsey and is called the debt snowball method. It has the advantage of providing quick wins, which encourages the change in behavior required to stick with a debt repayment plan.

How does the debt snowball method perform?

Using the same example above, you would pay $2,785.61 in interest and take 2 years to be debt-free. In other words, “revolvers” who use the debt snowball method to pay off their debt will pay an additional $559 in interest and take a month more to be debt free than those who start with the highest-interest accounts.

Although the debt avalanche method is clearly the rational way to pay off debt, humans are not always that rational. A study by a team of Kellogg School researchers found that people with large credit card balances are more likely to pay down their entire debt when they follow the debt snowball method. Yep. As any casino manager will tell you, the lure of small wins is powerful. And yes, casino gamblers are generally not good at math either.

Really, it doesn’t matter which method you use, as long as you stick with your payments until you are debt-free. Sure. $559 in extra interest is a chunk of change, but it’s less than a single month of credit card payments. Just $26.14 more a month when spread over the entire loan term.

5. Request an APR Reduction

You may think it’s unlikely that a credit card company will voluntarily reduce their APR, but it’s far from rare. In fact, if your credit score is good, your chances of scoring a rate reduction are excellent. The credit card industry is a competitive market and credit card companies know it is much more expensive to lure a new client than to keep a good client happy.

This is how you do it:

  1. Find out what your credit score is. Check for free at SuperMoney’s offer engine
  2. Gather the following data about your credit card account: how long you’ve owned the card, your credit card limit, how much you owe on the card, and how many times you’ve made a late payment.
  3. Estimate the best APR you are likely to qualify for. Be realistic.
  4. Call your credit card company and follow this script by filling the blanks with your data.

Hi, my name is __________. I have been a loyal customer for ___ years and I haven’t made a late payment in the last __ months (or ever). My credit score is excellent/good/fair and I receive several offers in the mail for other credit cards. I need a lower APR or I will cancel my card and transfer my balance to another company.

If the operator refuses to lower your rate, ask to speak to a supervisor and repeat. You may be surprised by how much money a 5-minute call can save you.

For example, if you owe $15,000 in credit card debt, you make monthly payments of $800, and your APR is 20%, you will pay $3,136.19 in interest. Reduce your interest rate to 15% APR, the national average in 2016 and you will save $936.33 in interest and pay off your debt a month earlier.

6. Nuclear Threat Option: Debt Settlement

All the previous debt reduction methods assume you either had decent credit or you can afford to make more than the minimum payments on your debts. But what if your credit is not great and you can’t afford to make minimum payments?

In that case, you may need to go straight to DEFCON 2 and negotiate a debt settlement with your credit card company. In case you were wondering, DEFCON 1 is bankruptcy. Credit card companies are very aware of two facts:

  • Bankruptcy is always an option for consumers overwhelmed by crushing debt
  • Unsecured loans, such as credit card debt, can be discharged (removed) with bankruptcy

Negotiating a settlement with your credit card company requires you to stop making minimum payments. Instead, deposit all you can afford into a settlement account. Consider this account as a war chest with which to negotiate a reduction on your debt balance. If you continue making minimum payments, the credit card company has no incentive to grant you a settlement. Credit card companies have no problem with debtors taking years, if not decades, to repay their loans. Of course, failing to make minimum payments and negotiating a settlement will most likely hurt your credit.

Although you can negotiate a settlement by yourself, many find a professional debt relief companies provide better results. Debt relief firms understand the protocols used by credit card companies and what requirements a debtor must meet to qualify for debt reduction. These companies do charge for their services, but fees are only due once an account is settled and they are paid from the savings generated by the settlement. Click here for a free consultation with a debt relief specialist.

Click here for a detailed guide on how to pay off credit card debt.


  • If you carry a revolving balance on your credit card, don’t feel bad. You are certainly not alone. About 65% of credit card users are revolvers.
  • If your budget allows it, make larger monthly payments on your credit card debt. And for heaven’s sake, start with the account with the highest interest rate.
  • If your credit is good, ask for a rate reduction.
  • If you can barely afford to make minimum payments, consider negotiating a settlement with your credit card company.

Regardless of what method you decide to choose to pay off your credit card debt, stop looking for excuses. Start now and stick with it.

Frequently asked questions about paying off credit card debt

If you’re concerned about having to pay down credit card debt, you’re not alone. Almost half of Americans carry a credit card balance. The average balance owed by each credit card owner is $3,573, according to a recent Gallup report.

Given the high interest rates credit cards charge – current rates are around 16% – the monthly payments may be a hit to your bank account every month. So how much would it cost you in interest, if you only make minimum payments on your credit card debt?  If you make just the minimum monthly payment on $3,573 (interest + 1% of principal) , it will take you nearly 20 years to repay your debt. Not to mention the $4,224 in interest payments.

Why Pay Down Credit Card Debt? What Are the Benefits?

Given such sobering statistics, it makes sense to repay your credit card as soon as possible. Paying down credit card debt has two primary advantages.

  • It saves money on interest payments
  • It can improve you credit score.  The total amount you owe is a big factor in your credit score. It is arrived at through the credit utilization ratio, which is the amount of credit you are using vis-à-vis how much you have available. That ratio makes up 30% of a credit score. Lowering the utilization ratio – which paying down debt will do – could improve your credit score.

Credit scores are important. Without a good credit score, you’ll find it very difficult to get a home mortgage or an auto loan. Also, employers and landlords increasingly look at them to determine your financial reliability.

What Are Some Strategies to Pay Down Credit Card Debt?

Take heart. There are many strategies to pay down credit card debt. Here are six.

  • Cut your monthly expenses. Even if you’re deeply in debt, trimming back monthly expenses would allow you to pay more on your credit cards per month and reduce your debt load faster. Can you take lunches to work instead of going to restaurants? Carpool to work, or take public transport? Brew your morning coffee instead of hitting Starbucks? Eat out less often?
  • Take advantage of lower interest rate cards. Right now, interest rates are very low, and they’ve fallen recently. You might be getting offers on lower interest rate credit cards to entice you into opening a new card. Some cards also offer teaser rates that are good for a short period of time.

Look carefully at the fine print, but putting some (or all!) of your debt on a card that is offering 12% interest will result in less payment per month than keeping it at 16%. This method is particularly effective if you can transfer it to a balance transfer credit card with a 0% APR introductory rate.

  • Use savings to pay down your debt. We know, we know. Everyone needs savings as a cushion. But the fact of the matter is, credit card debt is costing you 16% APR a year. You are getting far less than that in any savings account. One way of looking at it is that every dollar you have in the bank is losing 16 cents a year for as long as you have credit card debt. Paying off credit card debt is an excellent investment. You can also consider liquidating savings held in stocks or a 401K.
  • Renegotiate your interest rate. Contacting your bank to renegotiate your current interest rate down is a smart option. A lower interest rate equals a lower monthly payment. Especially in times of low and falling interest rates, it is worth a shot. Be sure to prepare talking points about how this would benefit both you (lesser payments) and the bank (you won’t have to declare bankruptcy).
  • Declare bankruptcy. Bankruptcy is an option, but frankly not a good one. A bankruptcy will stay on your credit report for 10 years. Not only that,  bankruptcy itself costs money. You have to hire attorneys and file paperwork. Bankruptcy may also require you to liquidate some or all of your assets.
  • Negotiate a debt reduction plan. This involves contacting the banks and asking them to settle the debt for less than what you owe. If you have had to miss payments, are simply unable to pay, or considering bankruptcy, your bank may be considering selling it to a debt collection agency. The amount your bank may receive could be just $0.20 or less per $1.00 owed. It may, therefore, it may be worth it to your bank to let you pay the debt for less than you owe. That way it can recoup more than what it would get from a collection agency.

There are some risks to this. First, if you have multiple creditors, it is possible not all of them will settle. This may leave you paying some while having to settle fixed amounts with others, which could financially overextend you yet again. Debt reduction will also have a negative impact on your credit score, but late payments and “not paid in full” accounts will stay for seven years on your credit report instead of 10.

Do You Qualify for a Debt Reduction Plan?

Debt reduction companies determine eligibility by looking at your financial situation. They will ask questions, such as: is the debt due to financial hardship? Was your credit card debt load caused by medical bills, job loss, or divorce? Situations like these can explain the existence of legitimate financial hardship, rather than a person looking for a quick fix for frivolous and irresponsible spending.

The second issue is whether the debtor has sufficient resources to put a debt reduction plan into effect. Although a debt settlement will reduce how much you owe, you still need to be able to pay off a lump sum. Debt reduction companies will likely look at both your monthly income and assets to determine how much you can afford to put toward lump-sum payments.

Should You Attempt to Reduce Debt Yourself or Not?

Doing it yourself is always an option. However, some people may benefit from getting help. Here are two factors to consider.

  • First, how much do you owe? Debts of $7,500 or less are sufficiently manageable that it might be possible to renegotiate it yourself.
  • Second, how comfortable are you at negotiating? How much time do you have to spend on negotiating? Remember, banks do not have to respond favorably, and it might take considerable negotiation (as well as considerable time and effort) for a settlement to be reached.

When does it make sense to pay off credit card debt with a loan?

There are very few situations when taking on additional debt to pay off credit card debt makes sense. If you’re not careful, you can find yourself moving debt from one bank’s pile to another bank’s pile and have nothing but loan origination fees to show for it. For instance, if your credit score is in the dog house and you can’t afford the minimum payments on your credit card debt, it is unlikely you will find a loan with favorable terms. Instead, you may need to consider debt relief options, such as debt settlement, consumer credit counseling, or even bankruptcy.

However, there are three reasons you should definitely consider paying off credit card debt with a personal loan:

  • To lower your interest rates
  • To consolidate payments
  • And to lower your monthly payments

What if you don’t qualify for a debt consolidation loan?

If your credit card is shot or you simply don’t have the income to make minimum payments on your debt, paying off your credit card debt with a loan is not a good idea. You may need a more aggressive approach, such as consumer credit counselingdebt settlement, or bankruptcy.

Benefits of Having a debt settlement company help you

Debt settlement firms are well-versed in how to negotiate settlements and have extensive business knowledge. If you have significant debt, the amount you pay a debt settlement company could be outweighed by the savings they are able to gain for you. Unlike bankruptcy attorneys, debt relief firms don’t charge upfront fees for their services.

What to Look for While Hiring a Company

If you are considering using a debt settlement company, it is very important to pick one that reliable and experienced.

By law, debt settlement agencies cannot charge any fee upfront for debt settlement services, per the Federal Trade Commission in 2010. Never engage a firm that tries to charge you upfront for debt settlement services.

Inquire into how they do charge for their services. Some may charge a monthly maintenance fee. Avoid them. Leading firms have performance-based fees. This is the best way to go since you only pay if the company is successful in lowering your overall debt.

Federal and state regulators issue cautions about debt settlement agencies that promise relief to consumers but end up taking their money and not providing any help. Choose firms that ensure all their debt arbitrators are certified by the International Association of Professional Debt Arbitrators (IAPDA) and that are members of the American Fair Credit Council (AFCC). These associations hold their members accountable to following the best practices of the industry.

SuperMoney’s company profiles and user reviews provide information to assist you in finding the best debt settlement companies.