How to pay off credit card debt fast

Those methods fall into two broad categories  —  either pay off each debt individually or consolidate all of your debts into a single monthly payment.

Let’s take a look at three popular strategies for paying down credit card debt, along with the pros and cons of each, to help you decide which option is best for you.

1. Debt snowball method
2. Debt avalanche method
3. Balance transfer credit cards

1. Debt snowball method

The snowball method is a debt-repayment strategy that focuses on paying down the account with the lowest balance first. As you direct your larger payments toward that balance, you continue to make the minimum payments on your other accounts so you don’t end up paying late fees, hurting your credit or even defaulting.

To get started, list your account balances in order from lowest to highest. Set up your budget to pay the minimum on all your credit card accounts except the one with the smallest balance. For that balance, put as much extra money as you can toward paying it off each month.

When the balance on that account is zero, put the money you were using to pay it off toward the account with the next-lowest balance. Continue until all your credit card balances have been paid in full.

Say you have three credit cards with balances of $700, $1,500 and $4,000. With the snowball method, you’d pay off the card with the $700 balance first. Then you’d move on to the card with the $1,500 balance, and you’d pay off the one with the $4,000 balance last.

Pros

The debt snowball method is effective because you’ll likely see progress quickly. When you get a few quick wins under your belt, you build momentum. This can help you stay motivated to continue working toward your goal of becoming debt-free. Plus, fewer outstanding balances may make the process seem less overwhelming.

Cons

The snowball method doesn’t take into account the interest you’re being charged. If your larger debts are also the ones with the highest interest rates, you may pay more in interest using the snowball method than you would with another debt-repayment strategy.

So if your goal is to minimize your interest payments while paying down debt, another repayment method may be a better choice.

2. Debt avalanche method

When you use the debt avalanche method, you focus payments on high-interest debts first, while making the minimum payments on the rest of your accounts.

When the account with the highest interest rate is paid off, put the money you’d allocated for it toward the debt with the next-highest interest rate. Repeat the process as many times as necessary until all your credit cards have been paid off.

Say you have three credit cards with APRs of 22%, 18% and 12%. With the avalanche method, you’d pay off the card with the 22% APR first. Then you’d move on to the card with the 18% APR, and you’d pay off the one with the 12% APR last.

Pros

The biggest advantage of the debt avalanche method is the possibility of saving on interest charges. If you’re concerned about how much interest you’ll rack up while paying down your debt, this method may be a good strategy for you.

Cons

A debt-repayment strategy that helps you save money may be appealing. But if your account with the highest interest rate also has a large balance, it may take a while to pay it off. And that can work against you in your quest to become debt-free because it may be psychologically demoralizing.

Say you have a $5,000 balance on a card with an APR of 22%. If you pay $300 a month to that account, it will take 21 months to pay it off — as long as you don’t use the card to buy anything else.

Two years is a long time to wait to eliminate your first debt. With the avalanche method, you may not get those quick wins that help create a sense of accomplishment. So it’s easy to get discouraged and lose motivation to keep moving forward.

If you need to see progress quickly to stay motivated, the debt snowball may be a better strategy.

3. Balance transfer credit cards

A balance transfer credit card could let you transfer balances from one or more accounts to a different card. Typically, these credit cards have 0% introductory balance transfer APR offers if you transfer the balance within a certain amount of time after opening the account.

Pros

If you pay off your balance before the intro period ends, you can avoid paying interest. Knowing you have a limited amount of time before the intro offer expires may help motivate you to pay down your debt quickly.

Cons

Paying off your debt interest-free may seem like the best option of all, but if you make your payments late, your introductory offer could be revoked. Plus, the promotional period is limited — and if you have a balance when it ends, your account will accrue interest at the card’s regular balance transfer APR.

Also, you may be charged a balance transfer fee when you transfer balances from other cards, and you can only transfer balances up to the credit limit you’ve been offered on the card. If the amount of debt you have is higher than the card’s limit, this payment strategy may be not be the best option for you. Also, even if you can transfer your entire balance, it may be bad for your credit scores if the amount you owe is near your limit on your new balance transfer card. So you’ll need to watch out for that, too.

Our Top Choice For Balance Transfers & Cash Back

The Discover it® Balance Transfer card is a well-rounded option as it offers fantastic cash back rewards, a generous intro APR period (especially on balance transfers), a unique bonus opportunity and does not charge an annual fee. It offers a 0% Intro APR on purchases for 6 months and 0% Intro APR on balance transfers for 18 months, followed by 16.24% – 27.24% Variable APR. You will also earn 5% back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants and gas stations (up to $1,500 in combined purchases each quarter you activate, then you earn 1%) and 1% back on all of your other purchases. The unlimited cash back match bonus is what sets this card apart. All of the cash back you’ve earned in your first year is matched. There are no minimums or hoops to jump through to earn this bonus. It is easy and can be very lucrative if you use your card regularly and take advantage of the 5% categories.

Pay As Much of Your Balance as Possible During the 0% Period

Now that you’ve set everything up and stopped the interest charges, it’s time to act. Take advantage of this interest-free period to pay off your balance. Keep making payments like you were before, but now those same payments are much more powerful because the full amount goes toward reducing your balance.

Using $10,000 of credit card debt with the current average APR (22.12%), it’s easy to see the impact of this strategy in the graph below:

If you make $200 monthly payments on a standard card with the average APR, your balance will go down less than $400 in 18 months. You will barely make any headway. If you kept making that same payment with that same APR, it would take 140 months to pay off and you’d pay $17,886 in interest alone!

If you transfer your balance to a card with 18 months of 0% intro APR and make those same $200 monthly payments, then even with the balance transfer fee, your balance will go down more than $3,000! Again, both of these examples are making the same payments. The second one simply takes advantage of the card issuers’ introductory offers to drastically cut credit card debt. The ongoing APR does kick in after your 0% intro APR so the more you can pay down your debt within that intro period the better.