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How to Pay Off Credit Card Debt: The Ultimate Guide

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What are the best credit card repayment options, and which methods are important to avoid at all costs? Paying off credit card debt is not a quick and easy process, but taking control and managing it may be easier than you think. In this post, we’ll cover the best ways to pay off credit card debt.

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According to NerdWallet’s annual analysis of U.S. household debt, credit card debt has increased by more than 6% in the past year, with an average revolving balance of $6,591. Despite rate drops in 2020, credit card debt is still one of the most expensive and high-risk types of debt to have, often feeling impossible to get out of if you’re just making the minimum payments. 

That’s not fun. Especially if the reasons you got into the debt in the first place were for not fun reasons, like medical costs which continue to rise as our income stays relatively the same. 

If you feel like your credit card debt is holding you hostage and preventing you from living the life you actually want to live, my friends, this post is for you.

Today, we’re going to talk about how to pay off that debt without losing your mind, and we’ll also discuss some commonly suggested methods like debt consolidation, credit card refinancing, and borrowing from your 401(k). 

A Note Before We Begin: Let Go of that Guilt, My Friend

Now before we begin, I want to take a second to acknowledge the guilt and shame you might be feeling. So many of my clients feel ashamed when first talking about their credit card debt, saying they should’ve known better! How could they be in this debt when they make a decent income? How has it taken them this long to pay it off– they’re smarter than this after all! AGH! 


The shame, the guilt– let it go. It’s okay. We live in a society that encourages us to live beyond our means. It keeps capitalism going, after all! It’s the economic grease that keeps this country strong! From the constant inundation of ads on our Instagram feeds to the endless media that sells us “solutions” to our daily woes– what’s a gal or guy supposed to do?

It’s okay. That shit is hard. I forgive you, and you can forgive yourself too because you’re here today. We’re going to get through this together. Stop being hard on yourself, and pat yourself on the back for taking the first step to getting this shit out of your life.

I’m proud of you.

My mom is proud of you.

Logan is proud of you.

And you’re not alone. 

Ready to do this and leave behind all those shoulds that have been bringing you down?

Cool. Let’s go.

How to Pay Off Your Credit Card Debt: Step By Step

1. Find your why.

Before you do ANYTHING else, you need to figure out why you want to get rid of this credit card debt and WRITE. IT. DOWN. 

What kind of life do you envision for yourself? How do you want to spend your days? Is money (or lack of money) impacting your daily life? Tell me about it. How will your life be different once you don’t have this looming debt hanging over your head? How will more money improve your relationships, your health, your mental well-being? 

Take some time on this because this is going to be the thing that will keep you motivated on this journey. Just like mental health, there’s no quick fix for getting rid of credit card debt. You’re in this for the long game and knowing your WHY will help you stay the course when you want to forget about it.

2. Make a list of all your debts, the interest rates, and the minimum payments.

Day one of your get out of credit card debt journey means facing the total amount of debt you have as well as all the interest rates for each. I highly recommend using the Vertex Debt Reduction Calculator spreadsheet. You can download it in Excel or Google Sheets and start using it right away. 


What’s nice about this spreadsheet is you can list out each of your credit cards, the total amount of debt, your interest rate, your monthly payment for each as well as any extra payments you make on the debt. This will then tell you the exact month you’ll have your debt paid off. 


What’s more motivating than that? That date will change too as you make additional payments, making paying off the debt almost like a game.


It’s a fun spreadsheet if you’re into spreadsheets. 


Either way, if you use the spreadsheet or not, it’s important for you to see the whole picture of your credit card debt. It may sound overwhelming, but isn’t it a little bit more overwhelming not knowing what your actual debt situation is? 

This way, you’re setting your baseline and everything else after this is going to get a little easier to manage because if you’re dedicated to getting out of debt? Day one will be the day you have the most credit card debt ever, and every day after will be an improvement.


That’s pretty great. Welcome to your journey.

3. Find out your current credit card score.

Haven’t looked at your credit card score in a while? Time to check it out. This is important because it will help you understand which options for debt repayment are available to you. 

According to Experian, here’s what the scores are generally considered:

  • 800+ excellent
  • 740-799 very good
  • 670-739 good/average
  • 580-669 fair
  • 300–579 very poor

Write this number down somewhere, perhaps in that fancy spreadsheet you’ve got going and know all the work you’re about to do will improve this score. Another fun number to track!

4. List out all your monthly expenses.

If you don’t have a budget, start by listing out all your non-negotiable monthly expenses. Rent/mortgage, minimum debt payments, utilities, groceries– the essential expenses that you would need to cover no matter what. 

Then, make a list of the expenses that are NOT essential. Like your eating out budget. As my favorite YouTuber, Graham Stephans, says in his video about paying off debt fast, this is your want list, not your need list. 

If you don’t have a budget, this list is going to be your basis for your monthly or bi-weekly budget. 

5. List out your monthly income.

What do you make on average each month? If you have an untraditional job and get paid more sporadically, can you look at the last six months of your spending and find an average? Give a good guesstimate?

This is an important step because you’ll be able to see immediately if you’re spending more money each month than you make. You’ll also be able to see what money you have leftover after your ESSENTIAL expenses are covered, and that’s the money we’re going to optimize for putting more on your debt. 

If your essential expenses are MORE than your monthly income, we have an issue.

Either you are listing something that is non-essential in your essentials list, or your essential expenses are beyond your means. There are two things you can do in this case:

  1. Make more money by working more hours, getting a side hustle, or asking for a promotion. If your truly essential expenses are putting you further into debt, you’re not making enough money to survive. Your efforts need to be focused on how to make more money, and how to make more money now. Luckily, in the age of the internet and cars, there are tons of ways to make some extra cash. Check out these posts on how to start a side hustle NOW. 
  2. Reduce your essential expenses. Are you house poor? Are you paying too much in utilities? Is your grocery bill insane? Look at ways to reduce these expenses. Get a roommate. Airbnb your extra bedroom. Call your utility company. Use COVID as an opportunity to defer your student loans to dedicate money to more important areas. Here are a few articles on how to reduce your expenses

6. Create a Budget

You knew this was coming, right? You need a budget that will serve as part of your get the eff out of credit card debt plan.

Learn step by step instructions on how to create a budget in: How to Create a Budget

But the important part here? Start slashing those non-essential expenses so you can make extra payments on that debt.

That fancy gym membership that costs you $90 a month? 


The $200 a week you spend on eating out, delivery, and take-out? 

Cut it out and make it for special occasions only.

Got a billion streaming services that cost you every month?

See which ones you can do without so you can start putting that money down on that debt.

It may seem like these small charges of $10 here or $14 there aren’t a major detriment to your plan, but these things add up when we don’t track what we spend. Start tracking what you spend so you can find these pockets of money to rededicate to your debt.

Read: How to Save More Money and Retire a Millionaire by 50

And every time you make an extra payment? Add it to your tracker so you can see that big scary debt number go down and your credit card debt-free date get closer.

How’s that for motivation?

BONUS: Create a yearly budget to stay on track with your spending goals. 

I use a yearly budget that I enter all my bi-weekly budgets into so I can make sure I’m staying on target with my yearly goals. 

After every spending period, I dump my spending report into my yearly budget. It updates the same way your regular budget updates, and you’re able to see if one month you overspent in one category– maybe you should try to underspend in that same category on the next budgeting period in order to catch up. To see it in action, check out:

7. Make a goal for what you’re going to put down on your debt every month.

Goals are so important. You know it and I know it, but why don’t we do them and stick to them? Create some goals for yourself so that you can reward yourself for the little wins as well as the big ones. One of my goals? I want to live off of 50% or less of my income. Another one? I want to put $1,800 a month on my debt. What number, based off the work you’ve done already, can you make your goal? Write it down. Put it on a sticky note along with that debt-free date and look at it every damn day.

the ultimate guide to paying off credit card debt

Alternative Routes to Paying Off Credit Card Debt

Now, I can’t have a post about how to pay off your credit card debt without addressing all the alternative ways to pay off credit card debt. There are options available, especially if you have a good credit score. Most of these alternative options require at least a good or even excellent credit score in order to secure these options at affordable interest rates. I think these are great options IF and only if:

  1. They provide you with a better interest rate than your current debt.
  2. You address the behaviors that got you into this debt in the first place. 
  3. You have an airtight plan on how you’re going to get out of this debt.


Got it? Cool. Let’s cover common alternative ways to pay off your credit card debt. 

1. Using Zero-Balance Transfer Cards aka Credit Card Refinancing

There are several zero-balance transfer credit cards available that allow you to move your high-interest credit card debt to a credit card with a 0% APR for the first 12-18 months. 


These cards usually charge between 3-8% for the initial transfer, which is likely a lower fee than you’ll be paying on an average credit card balance with an interest rate of 16-22%+. 

This is great if you have good to excellent credit, and you have an airtight plan on how you’ll pay off that debt in those 12-18 months of 0% interest. 


It is however not a great option if you have fair, poor or bad credit and it is also not a great option if you do not have a plan for how you’ll pay that credit card off.

Remember, after the 0% APR promotional period is over, depending on your credit score, the APR will increase, likely to the same level as other credit cards, if not higher, so be sure to read the fine print.

2. Debt Consolidation Loan

This, again, is an option if you have good to excellent credit. Debt consolidation loans, also known as personal loans, from an online lender bank or credit union are great options if you have several debts and want to consolidate them into one loan. Usually, they offer lower APRs on your debt, if you have decent credit, and they help you pay off your debt faster. 


What’s nice about these loans is you can often find out if you prequalify online within minutes. Checking to see if you’re prequalified for these loans will not ding your credit. The ding to your credit will happen if you choose to go through with a loan, but usually, because you are consolidating your debt and freeing up credit on your credit cards, your credit score will shoot up several points after the loan pays off all your credit cards. 


I do not recommend this option if you have to get a secured loan, meaning you have to put up your home or other collateral in order to receive a good interest rate. Credit card debt is unsecured, meaning you won’t lose your home if you’re late on your payments or if you are unable to pay your debt back.

Using a secured loan to pay off your credit card debt could mean that if for some reason you lost your job and couldn’t afford the payments, your collateral (often your home) can potentially be taken away in order to pay for the debt.

Important Things to Note

Another thing to watch out for these loans are unnecessary fees like origination fees, and early repayment fees (if you pay off the loan early) so be sure to do your research before accepting any of these loans.


With this option, especially because it will free up credit on your credit cards, I cannot emphasize enough how you MUST address your spending behaviors and how you got into this debt before pursuing this. If you’re going to use your credit cards in the same way as before– I do not recommend this option. 

3. Borrowing from your 401(k)

You may also able to take out a loan from your 401(k). Usually, you can take out up to 50% of your balance or up to $50,000, for a maximum of five years.


Some benefits to choosing this option are that the interest rate is lower than the unsecured loans mentioned above and it will have no impact on your credit score. In addition to this, the interest you pay is interest added to your own account so essentially you’re paying yourself for this loan.


While that all sounds well and good, I would caution against this route.

First, there are risks that you may lose the retirement savings you’ve worked hard to save. In addition to this, if you lose your job, you are required to pay back the loan within sixty days. If you don’t pay back the loan or fall behind on your payments, your withdrawal could be considered an early withdrawal and subject to a 10% fee as well as tax consequences and penalties. 

I especially caution against this method because we are in the middle of a pandemic. Job security is extremely fragile right now, and in addition to this, the market has generally been down this year. Pulling your money out when the market is down is a TERRIBLE mistake and could end up costing you much more in the long run than if you had just stuck to paying off your credit cards at their current rates. 

Take Nerdwallet’s example: 

According to Vanguard’s 401(k) loan calculator, borrowing $10,000 from a 401(k) plan over five years means forgoing a $1,989 investment return and ending the five years with a balance that’s $666 lower. (This assumes that you pay 5% interest for the loan and the investments in the plan would have earned 7%.)

But the cost to your retirement account doesn’t end there. If you have 30 years until retirement, that missing $666 could have grown to $5,407, according to NerdWallet’s compound interest calculator (assuming that same 7% return, compounding monthly).

If you think about that $5,407 money loss in comparison to the amount borrowed– that means you paid 54% of that loan in order to use that $10k. That’s. Insane.

how to pay off credit card debt

TLDR: How to Pay Off Your Credit Card Debt, Step by Step

  1. Write your why.
  2. Make a list of all debts and interest rates. 
  3. Find out your current credit card score.
  4. List your monthly expenses and divide them into essential expenses and non-essential expenses.
  5. List out your monthly income.
  6. Create a budget and bonus points for creating a yearly budget. 
  7. Create some goals to help you stick with it.

That’s your credit card debt repayment plan! Know your why, figure out your numbers, and get to budgeting and cutting out expenses in order to apply ALL THE MONEYS to getting out of credit card debt.


Share your Credit Card Debt Payoff Tips Below

Got other tips I missed? Did you pay off your credit card debt in an innovative way I didn’t cover? Share your experiences below! 

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step by step guide to pay off credit card debt
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How to Pay Off Credit Card Debt: The Ultimate Step By Step Guide
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How to Pay Off Credit Card Debt: The Ultimate Step By Step Guide
What are the best credit card repayment options, and which methods are important to avoid at all costs? Paying off credit card debt is not a quick and easy process, but taking control and managing it may be easier than you think. In this post, we’ll cover the best ways to pay off credit card debt.
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