black woman with credit card looking discouraged

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If you’re struggling to pay off credit card debt, you’re definitely not alone. A recent report from Lending Tree showed that Americans owed a collective $804 billion on their credit cards at last count, and the average unpaid balance per borrower works out to $6,569.

Unfortunately, the average credit card interest rate or annual percentage rate (APR) was 14.54% as of the third quarter of 2021. This means the average consumer with credit card debt has a large percentage of their payment going to interest charges. It also means that, for consumers paying this rate or even higher, paying off credit card debt is more difficult (and costly) than it needs to be.

Fortunately, there are plenty of strategies you can use to manage debt and pay off your credit cards once and for all. So if you’re struggling with debt you can’t seem to pay off, consider one of the following debt repayment strategies that are proven to work.

Debt snowball method

The debt snowball method helps consumers pay off debt by helping them score psychological wins early on. With this strategy, participants list out all the debts they have from smallest to largest and then focus on the smaller debts early on.

To use the debt snowball, you would make the minimum payments on all your largest debts, then funnel any extra money you have toward your smallest debt each month. Over time, the smallest debt gets paid off, at which point you “snowball” the extra money you were paying toward the next smallest debt.

debt snowball cash money 100

With the debt snowball method, the smallest debts melt away over time, leaving only the bigger ones. Eventually, users are left paying off only their largest debt until they become entirely debt-free.

Example: Let’s say you have four credit cards with balances of $7,000, $4,000, $3,300 and $2,500. With the debt snowball, you would focus your biggest payment on the $2,500 balance first, followed by the $3,300 balance and then the $4,000 balance before focusing on paying off the $7,000 balance last.

All debt reduction strategies have positives and negatives — there’s no perfect solution. So here are the pros and cons of the debt snowball.

Pros:

  • Score psychological wins by paying off your small debts early on
  • Helps you reduce the number of bills you’re paying early in the process

Cons:

  • May result in higher total interest charges over time

Debt avalanche method

Unlike the debt snowball, the debt avalanche method helps consumers pay off debt in the most mathematically advantageous way possible. With this strategy, participants list out all the debts they have based on their interest rate and then focus on debts with the highest interest rates first.

To use the debt avalanche, you make the minimum payments on all your lowest interest debts, then funnel any extra money you have toward your debt with the highest APR. Over time, the debts with the highest interest rates get paid off, at which point you “avalanche” the money you were paying toward the debt with the next highest APR.

As you go, you’ll be paying off your debts with the highest interest rates, then the ones with lower interest rates, then one debt, then none. This strategy helps you save the most on interest since you tackle debts with the highest APR first.

Example: Let’s say you have four credit cards with APRs of 22.99%, 19.99%, 12.99% and 11.99%. With the debt avalanche, you would focus your biggest payment on the debt with the 22.99% rate first, followed by the 19.99% debt, then the 12.99% debt and the debt with the 11.99% APR last, regardless of the size of that debt.

Pros:

  • Save money on interest by tackling highest interest rate debts first

Cons:

  • You may wind up paying larger debts off first, which can be discouraging
  • Can take longer to reduce the number of payments you’re making each month

Debt consolidation

black woman with bills debt consolidation

Consumers can also use a debt consolidation loan, or a personal loan, to get out of debt. With this strategy, you borrow enough money to pay off all your credit cards, then begin making a single monthly payment toward your personal loan instead.

Personal loans can be a good choice for debt consolidation since they come with fixed interest rates, fixed monthly payments and a fixed repayment timeline. This means you know exactly how much you owe at any given time and exactly when you will become debt-free.

Example: Let’s say you owe $10,000 across four credit cards with relatively high APRs. If you took out a seven-year personal loan for that amount, you would use the loan funds to pay off all your credit cards and then put all your monthly payments toward paying down the one personal loan. If you qualify for a loan with a 6% interest rate, you would pay $146 per month for seven years (84 months) until you became debt-free. In the meantime, you would pay a total of $2,271 in interest charges.

Pros:

  • Simplify your finances with one monthly payment
  • Consolidate debt at a lower APR than you’re paying now
  • Know exactly when you’ll become debt-free
  • Many personal loans come with no annual fee and no hidden fees

Cons:

  • You need good credit to get a personal loan with the best rates and terms

Balance transfer credit cards

Another debt repayment strategy involves applying for a balance transfer credit card. Cards in this niche let you consolidate and pay down debt at a 0% APR for a limited time, usually up to 21 months. A balance transfer fee is required, but individuals who can pay off their debt during their card’s introductory period get the chance to save big on interest and make progress toward paying off their debt faster.

Example: Let’s say you owe $10,000 across four credit cards with relatively high APRs, and you apply for a balance transfer card that offers a 0% APR on balance transfers for 21 months in exchange for a 5% balance transfer fee. After you consolidate your debts, you’d owe $10,500, including the fee, but if you were able to pay $500 per month over 21 months, you could pay off this debt with $0 in interest charges.

Pros:

  • You can pay no interest on your debt for a significant amount of time
  • Most balance transfer cards don’t charge an annual fee

Cons:

  • You typically need good credit to qualify
  • You only get a 0% APR for a limited time, after which the standard variable APR applies

Other tips for paying down debt

woman with calculator and laptop budgeting getting out of debt

If you want to get out of debt, you need to be willing and able to change your lifestyle — at least for a while. Simple tips that can help you stay on track include:

Choose the right debt repayment method

Make sure the debt repayment strategy you use makes sense for your personality and your lifestyle. For example, don’t apply for a balance transfer credit card if you know you’ll be tempted to use it for purchases.

Avoid racking up new debt

If you keep using credit cards, you may never pay off your debt. While you’re in debt repayment mode, it helps to steer clear of credit cards and stick to cash or debit instead.

Look for easy ways to save

Take a closer look at your lifestyle to look for signs of wasted cash. Try shopping grocery sales, cooking more meals at home and avoiding places and situations that might entice you to overspend.

Start using a monthly budget

Write down your income in one column and all your regular bills and expenses in another, then see how they compare. A written budget can help you stay focused and on track with your goals, including your current debt repayment strategy.

Paying off debt is difficult but not impossible

Racking up debt is often a piece of cake, but paying it off can be downright painful. Fortunately, these debt relief methods can help you save money, pay off debt faster or both.

We hope one of the strategies in our guide can help you craft a plan that works — even if it takes a while. And if you’re worried about defaulting credit or falling short on your obligations, you can reach out to a credit counseling agency for help.

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