Whether it's due to an education, car, medical emergency or home repair, almost everyone carries some amount of debt in their lifetime. For some people, debt is approached with careful planning, while for others, debt can accumulate faster than expected. The good news is that no matter how much debt you have, paying off your credit card can be manageable with the right approach.
The most important step to achieving this goal is a plan. If you don't plot out the steps in detail, your efforts to pay down your credit cards will be unorganized and maybe even duplicated. Begin by tracking every dollar you spend for a full month. This will be your baseline. Now put your credit card repayment plan into action.
Step 1: Add up what you owe on all credit cards.
Use a spreadsheet, a piece of paper or an online budgeting tool to get started. List all your credit cards and the current balances, with a total balance at the bottom. Add in columns for the interest fee and due date for each card.
Step 2: Stop adding to your debt.
When it comes to credit card debt and interest fees, making the minimum credit card payment isn't going to be enough. Take a long, hard look at your recent charges and try to find out where you can cut back on nonessential spending. Getting out of credit card debt isn't easy but making a few life changes can make a credit card repayment plan a whole lot simpler.
Step 3: Tally up your essential monthly expenses.
Once you've made your cuts on nonessential spending, you can organize your necessary expenses like food, shelter and gas. Add those together and make a note of the total.
Step 4: Determine what you can pay toward your debt.
Add up your income—including your main job, freelance gigs, child support and any other sources—and deduct the living expenses you tallied in Step 3. Strive to put a large portion of whatever is leftover toward paying off credit card debt. Consistency is key, so try to pay a set amount each month and pay a little extra when you can.
Step 5: Strategize your payoff plan.
There are a couple of ways to pay down credit cards, but many people opt to start with the lowest debt first (the Debt Snowball method). Achieving that goal could give you the motivation you need to tackle the others. Put as much money toward the credit card with the lowest debt while paying only the minimum payment on the others. Once that first debt is paid off, apply that payment amount to the next debt (add it to the existing minimum payment) to get it paid off faster.
Others prefer to start with the credit card that charges the highest interest fees (the Debt Avalanche method). This method will save you more money in the long run. Once you’ve paid down the credit card with the highest interest rate, apply that payment amount to the debt with the next highest interest rate. Ultimately, it's up to you to decide which method will keep you inspired.
Step 6. Search for deals.
A credit card with a balance transfer offer could be a great option to help you reduce or even consolidate credit card debt. Compare balance transfer fees, interest rates and annual fees. Read the fine print to make sure you understand all the terms. If you find one that makes sense and has a lower interest rate than your current card, apply and make the transfer. Designate your original credit card for emergencies or use it only for those charges you can pay off immediately.
Step 7: Step up your credit card repayment plan.
Many people do not have the financial means to pay off their credit cards in full every month. Setting up a debt payment plan is more realistic and comfortable for most, making it one of the best ways to pay off credit card debt. Focus on one credit card at a time—prioritize them by the highest interest rate to the lowest or from the smallest balance to the largest. Keep in mind the time frame of any low-interest introductory periods on your credit cards, as an interest hike could increase your overall debt and impact your repayment plans.
Now that you know how to pay off credit card debt, create a plan and make it happen! Paying off your debt is an amazing way to plan for your future—and it’s completely doable. All it takes is commitment, dedication and a focus on why you’re doing it. If you begin to feel overwhelmed at any point, consider talking with a financial professional who can help you devise a plan to achieve your financial goals.