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How To Pay off Credit Card Debt

(Originally published April 1, 2022) Credit card debt can interfere with your long-term savings and spending goals. Our lead financial educator offers some tips to help you pay off your credit cards so you can plan future purchases and prepare for the unexpected.

Portrait of Katie J. Skipper

Katie J. Skipper (She, Her, Hers)
BECU Community Content Manager
Apr 6, 2023 in: Credit & Debt

Paying off credit cards can feel like a never-ending battle. Pay too little each month, and the debt goes on forever. Pay too much, and you might not have enough to cover a surprise expense, so you charge it and you're right back where you were — in debt.

If you're carrying a balance on your credit cards from month to month, you're not alone. More than a third of Americans with active credit card accounts carry a balance, too. The average U.S. credit card balance was $5,805 as of the fourth quarter of 2022, according to TransUnion, one of the three major credit bureaus. That's an increase of $678 from Q4 2021, which suggests people are relying on credit cards more to help them cope with inflation. 

So how do you pay off your credit cards, especially when costs keep rising and new expenses keep coming up? Stacey Black, BECU's lead financial educator, has some tips to help you break the debt cycle and be intentional about future spending.

Stacey Black
Stacey Black, BECU Lead Financial Educator

Assess Your Spending

If you want to know how to pay off credit card debt, the first step is to figure out how much you spent and what you spent it on.

1. Make a List of Expenses

Start by making a list of everything you buy and the prices. This includes monthly essentials, like utility bills, and fun expenses, like gifts and entertainment. If you have a list of purchases, you can review them on your credit card statement or look them up on your credit card company's website. If you bought several items online from the same retailer, you can often check your order history on retailers' websites. This exercise is also helpful if you do a lot of online shopping and want to make sure items you ordered were delivered.

2. Look For Past Spending Patterns

Thinking about where and when you spent money can reveal whether you have been spending more than you want to. Maybe your favorite coffee shop appears on your expense list more often than you realized, or maybe you're paying for a subscription for a magazine you haven't read in years. Sometimes deals are hard to resist, and online shopping can make it easier to spend.

Look back at your spending for recurring special occasions, too, like birthdays and holidays. Because those occasions come up every year, you can decide if you're spending the right amount and include them in your budget.

As you look at your expenses, see if you can determine the source of your debt. Did a few big items or events lead to the balance you're carrying, or is it because of a steady stream of daily purchases that add up to more than your income?

By evaluating how you spend, you can pay off your debt and make more intentional spending choices.

An illustration of four different color credit cards on round, gray backgrounds, arranged vertically. A bracket to the right points to a checklist, suggesting the four credit cards are the subject of the list.
First, figure out how much you spent and what you spent it on.
Illustration of a person sitting at a computer. The monitor says "INCOME" and has a graph below it with a line showing peaks and valleys. A thought bubble to the right of the person shows a camera, food, graduation cap, coffee cup, house, car and a dog.
Make a list of everything you buy and the prices.

3. Track Your Current Spending

Black also recommends tracking your current spending for a month or two in a spending diary. She uses free check register apps, spreadsheets and even a little notebook and pen to write down every expense, regardless of the payment method. If you use an online money management tool, you can tag your purchases. A basic spreadsheet works, too.

"My advice always is to do what works for you," Black said. "The best tool is the one you'll use consistently."

An illustration of six icons arranged in two rows, each on a gray circular background: A camera, coffee cup, graduation cap, tickets to a show, food in a to-go container, and a car. Each of the icons has a red X below it except for the car, which has a green checkmark.
Look for spending patterns. Does your favorite coffee shop appear on your expense list more often than you realized?

4. Understand Needs vs. Wants

Determine your spending needs vs. wants. Your needs are committed expenses like housing (rent or mortgage payment), utilities, childcare, car payment and food — the stuff you must pay for every month.

Cut back where you can — but try not to cut out all your wants. When people are too strict, they are more likely to give up and go back to overspending, so the occasional treat is fine. Even better is prioritizing a little fun and budgeting for it to avoid splurges.

5. Limit Your Credit Card Use

Only use your credit cards if you're sure you can pay off what you spend each month while continuing to pay down your balances. Otherwise, you'll continue adding to the debt you're trying to reduce.

If you have credit card information saved on shopping websites or in apps, it might be too easy and too tempting to use them. Consider removing those cards from online retailers' sites.

Commit to a Payment Amount

Now that you know what your expenses are, compare that amount to your income. The amount you have left after expenses is the amount you can put toward paying down your debt. If your expenses are greater than your income, you have more work to do to reduce your spending.

Commit to paying the same amount every month, even as your credit card debt and required minimum payments decrease.

"As your balances go down, your minimum payments go down, and the effect of your payments goes up, so you'll start paying off your debt faster," Black said. "The momentum can be really motivating."

Choose a Payment Strategy

There isn't a one-size-fits-all approach to paying off credit cards. Just like tracking your spending, Black said to choose the strategy that's right for you.

"Decide which plan is the one you can stick with and hold yourself accountable," she said.

Remember you'll keep paying the same total amount every month toward your debt, even when your required payments decrease. Use a credit card debt repayment calculator to see how long it will take to pay it off.

Here are three popular — and effective — repayment methods:

1. Debt Snowball

To reduce your credit card debt using the debt snowball method, focus on paying off your lowest balance credit card first while paying at least the required minimum on your other cards. Once the lowest balance card is paid off, shift that payment to the next lowest balance card. Continue to do this until all your credit cards are paid off.

The total monthly payment for all your cards should remain the same until you are debt free.

This method requires that you have more than the combined total minimum payment of all your cards to put toward your debt.

2. Debt Avalanche

The debt avalanche method is like the snowball method, except you focus on paying off your highest interest rate card first while paying the minimum on the remaining cards.

Once you pay off the highest interest rate card, shift the payments to the next highest interest rate card while continuing to pay the minimums on the remaining cards.

Like the debt snowball, the total monthly payment for all your cards should remain the same until you are debt free, and this method requires that you have more than the combined total minimum payment of all your cards to put toward your debt.

3. Debt Cascade

Use the debt cascade method if all you can afford right now is the minimum payments on your credit cards. Eventually, the credit card company will lower the required minimum — but don't reduce your payment. Keep paying the same amount, and your debt will shrink faster and faster.

Once you pay off one credit card, redirect the funds you were using to another card, using one of the methods above.

Illustration of three credit cards with a dotted line that suggests moving from one card to the next. The orange card on the left is labeled "1st" and "$1,100." The turquoise card in the middle is labeled "2nd" and "$4,600." The blue card on the right is labeled "3rd" and "$9,800."
Debt Snowball: Focus on paying off your lowest balance first, then shift the payment to the next-lowest balance.
Illustration of the debt avalanche, a credit card balance from a high interest rate credit card to a lower interest rate card. A dotted line arcs from an orange credit card labeled 14.5% on the left to a yellow calculator in the middle that shows "BALANCE" in the display window. The dotted line then arcs to a red credit card labeled 5.0% on the right.
Debt Avalanche: Focus on paying off your highest interest rate first while paying the minimum on your other cards. Then shift the payment to the next-highest interest rate.

Balance Transfer Credit Cards

Taking advantage of a low-interest or no-interest balance transfer credit card offer can be a great way to reduce your debt, but be sure you do a little math before you jump to this solution, because it might end up costing you the same or more in the long run.

Black advised asking yourself a few questions before you make the switch:

  • Will I definitely qualify for the low-interest or no-interest balance transfer credit card offer? If getting a lower interest rate isn't a sure thing, then you might end up damaging your credit by applying for a new credit card. Plus, you might qualify for more credit, with a high interest rate, that you're tempted to use.
  • Can I pay back enough of the debt in time to make the low interest offer and transfer fee worthwhile? If the no-interest balance transfer credit card lasts 12 months then jumps sky high, you'll want to be sure that a year is enough time to pay down your debt. Also keep in mind that most credit cards charge from 3% to 5% of the amount you plan to transfer.
An illustration of a turquoise credit card with red arrow to the right of it labeled "%" and pointing down toward a red checkmark in a circle.
A balance transfer offer can help you reduce debt but do the math to make sure it won't end up costing you more.

Credit Karma has a free and easy-to-use balance transfer calculator. After you figure out how much you can pay off during the promotion period, you can switch over to a debt repayment calculator to figure out how long it will take you to pay off the remaining balance and how much interest you'll pay at the new rate. Then decide if it's worth it to apply for more credit.

With any credit card offer, read the details before you apply.

Debt Consolidation Loans

Debt consolidation loans can be another great tool for reducing debt — but use caution.

"Before you take out a loan, it's important to create a budget and really know where you stand," Black said. "Think about your financial situation and how you got into debt in the first place."

If you have too many financial obligations or you don't have control over your spending behavior, you're likely to start charging your purchases again and end up with even more debt than you started with.

If you can commit to paying off the loan without adding more credit card debt, then you'll want to do some homework about the loan. Just like with a balance transfer offer, do the math with a debt consolidation calculator to make sure the interest rate and any fees are really going to save you money.

Save Money for Future Expenses

Having a strategy to get out of debt and sticking to it is great, but you also need a savings plan to prevent yourself from going into debt again when you make your next big purchase, or in case of an emergency. Start saving now while you're paying off your credit card debt.

1. Set a Savings Goal

Identify any high-cost items you want to pay for in the future, such as a vacation, a car or holiday gifts. Total up how much you plan to spend and divide it up to determine your savings goal. You can divide by 12 to set aside money monthly or by the number of paychecks you receive and save when you get paid.

2. Separate Your Money

If you put all your money in one place, it can be difficult to keep track of it and it can be easier to spend. Consider opening separate accounts. Nickname your accounts based on what you're saving for — "New Car" or "Holiday Savings," for example, and use those accounts only for their named purpose.

You can also use digital tools to separate your money into different categories without opening new accounts. BECU Envelopes is an example.

3. Set Up Automatic Savings

Most credit unions and banks have automatic savings plans that allow you to transfer a fixed amount of money automatically into your savings account. Your new savings balance will grow instead of your credit balance.

Create a Budget and Stick to It

Now you know how to pay off credit card debt and save money for future spending — both your needs and your wants.

"It takes time and commitment to get out of debt and break that cycle," Black said. "But it's such a relief for people when they are finally debt free."

Related Content

Portrait of Katie J. Skipper

Katie J. Skipper (She, Her, Hers)
BECU Community Content Manager

Katie writes for BECU about personal finance and social justice topics. Her career spans reporting for newspapers and communicating on behalf of government agencies and private businesses. Learn about Katie's career and education on LinkedIn.