How to pay off credit card debt fast

3 min read

Anthony O'neal
How to pay off credit card debt fast

Debt has the tendency to stress, overwhelm, and bog us down when we're not able to use our hard earned income to work for us because instead it's being used for monthly payment after monthly payment, interest payments on debt consolidation loans, and paying off multiple credit cards - yikes!

If you know anything about me and what I preach - it's that all debt is bad debt and the worst is credit card debt, because credit card balances seem to pile on making it impossible to save money with credit card interest rates piling up and just making the minimum payments every month.

For an in-depth general guide for paying off debt, take a look at my Ultimate Guide to Debt Payoff. Let's take a closer look at how we can eliminate all outstanding credit card debt and start building wealth and healthy financial habits.

Setting yourself up for success: ensuring a good financial foundation

The most essential part of financial stability and healthy money habits is having a good financial foundation - if you're drowning in credit card debt and struggling to make minimum payments, that foundation is hard to build. But what does it mean to have a good financial foundation and how can you do it while also paying down your credit history debt?

Increase your income

Having some extra cash on hand every month to put towards your credit card accounts doesn't hurt! Plus, once those credit card companies are off your back, you have more money to put into paying off other debts like personal loans, or more importantly, putting into retirement accounts, savings accounts, and investing.

Get a second job, side hustle, or get that raise!

If you are able to find a way to increase your income either by getting a second job, or by getting a raise at your current job, you can then throw all that extra money right at your credit card and get your credit utilization rate to drop.

However, the more debt you have and the higher interest balances you have will definitely affect how long it takes you to pay all your debts - getting extra income helps you put as much money as you can towards those monthly payments and ultimately reduce your debt.

Cut expenses and lower your bills

The second most important thing when it comes to your financial foundation, and the key to avoiding financial hardship with credit card debt and spending in general - cutting expenses and lowering the bills that you can. What does this mean?

Cancel that Netflix and Hulu plan

If you're buried in debt, you may have to cut out monthly recurring expenses that aren't necessary, like Netflix and Hulu for a while until you can get your credit card debt paid off and start setting some money aside. Until your credit reports are clean and your credit scores go up, you might want to take a pause with Netflix for a while.

Lowering your expenses and increasing your income are the two easiest ways to ensure that you're building a solid financial foundation to stand on after your card debt is eliminated, interest rates are down, and you have the ability to start putting that money into an interest savings - that makes money instead of taking it.

Get on a budget

Pilots don't attempt to fly planes without coordinates, sailors don't direct ships without coordinates - so you shouldn't manage your money without a budget.

A budget is essentially the coordinates of money, it tells you where each dollar is supposed to go and you end up at your desired destination - financial freedom and being debt free. You can't do that without creating a budget for yourself and allowing yourself to consistently stick to that budget.

Cover your necessities

When you create your budget, you need to make sure that your plan includes the basics, water, heat, electricity, as well as your other monthly expenses and other bills. Once you have these covered you can go into allocating money to your other accounts.

That being said, when you have credit card debt, you'll have to sacrifice some personal cuts too. You may have to take some money out of your spend accounts and devote it to your credit card to reduce the balance before you can set money aside for additional spending.

Save up an emergency fund

The oldest excuse for credit card use in the book is "it's for emergencies" - well, no more of that. Instead, focus on saving up a decent emergency fund, typically one that covers 3-6 months of expenses, in order to be prepared if you need it but not have to rely on credit cards to get you through that.

Depending on how much credit card debt you have, you may not be able to save up an emergency fund right away, you may have to wait until your credit card balances are at zero.

Regardless, saving up an emergency fund is critical in order to make sure that you don't continue to use your credit cards after they are paid off - because you don't want to go through all that effort and consistently being disciplined about your money to acquire debt again.

How to actually get out of credit card debt

You've set up your financial foundation, you're on a budget to cover your necessities and save up an emergency fund - but what about actually going through the repayment process and freeing up your monthly income and experiencing the liberating feeling of debt relief.

There are a few ways to do this and both ways require you to be disciplined, consistent, and motivated to stick to your goals and plan of living a debt free life.

STOP using your credit cards

It may seem obvious, but it isn't always. It's impossible to expect yourself to become debt free and pay off your credit card debt when you're still having to make monthly payments month after month because you keep using them and racking up a balance.

Use an emergency fund instead - seriously

This is where an emergency fund, that we mentioned earlier, comes in handy. Living below your means is the key to debt reduction quickly. Make sure that you have your essentials covered with a budget and then don't make any extra purchases with your credit cards (lock them in a safe and throw away the key if you have too).

The debt snowball method

We've talked about the debt snowball method before and how it's an amazing way to pay off debt fast by starting with the smallest balance out of all your credit cards, regardless of interest rates, and putting the monthly payment plus any more money as you can contribute to that balance until it is paid off.

This method is often compared to the debt avalanche method, but works much better for a few reasons.

  1. the debt avalanche method takes a lot longer and has you starting with the higher interest rate first
  2. the avalanche method doesn't take into consideration that smaller balances are easier to pay off than higher interest rates. Often the higher the interest rate the larger the balance.

Once you have paid off the card with the lowest credit limit, you take the next lowest balance and combine the monthly payment of that one with the extra money you were putting towards the previous credit card and add it to the regular payment.

They call it the snowball method because it makes it easy to start out paying off a smaller balance and, quite literally, snowballs into becoming debt free faster than you originally thought.

You can apply this method to personal loans, or other forms of debt in order to not just eliminate credit card debt, but all debt!

Let's recap

I've said it before and I'll say it again - all debt is bad debt. It's hard not to get buried in it once it starts, but having a debt management plan to get you out of that will help tremendously in the long run.

Now, this doesn't mean borrowing money to consolidate credit card debt, or taking out debt consolidation loans to help you pay off credit debt - nope, we're doing it the right way.

That being said, in order for your to stay consistent with your debt payoff plan and improve your personal finance stability, you need a good foundation.This means saving up an emergency fund, creating a budget for yourself and sticking to it, making sure your necessities are covered and STOP using your credit cards! That last step is so important - you can't become debt free and pay off credit card debt when you keep using them.

If you're doing all of these things and still not seeing progress and it still feels impossible to pay off credit card debt, try increasing your income, lowering your expenses, and utilizing the snowball method to tackle the minimum payment and extra.

However, it's so important to stay consistent to pay off credit card debt fast - it will be hard but it will pay off in the long run.

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