Paying off credit card debt. 5 tips from professionals
Updated on 29 January 2025
Paying off credit card debt requires discipline, patience, and a strategic approach. By following the five tips from financial professionals highlighted in this article you will be able to stay committed to your debt repayment plan and work toward achieving financial freedom by reducing your debt burden over time.
Credit card debt and what causes the issue
Credit card debt is a common financial issue that arises when people accumulate balances on their credit cards and fail to pay them off in full each month.
Credit card debt can arise from a combination of factors, including high-interest rates, falling into the minimum payment trap, unplanned expenses, life transitions, overspending, financial mismanagement, and easy access to credit.
Understanding these underlying causes can help people take proactive steps to manage their credit card debt effectively and work toward financial stability.
How common is credit card debt in the United States?
Credit card debt is a prevalent financial issue in the United States, affecting millions of individuals and households.
Based on data from the Federal Reserve Bank of New York and the U.S. Census Bureau, it can be calculated that each American household carries an average of approximately $8,000 in credit card debt in a year.
As of November 2024, the average credit card interest rate in America is 22.08% for accounts with balances that assessed interest.
In the third quarter of 2024, the outstanding credit card balance in the US reached a record high of $1.17 trillion, contributing to a total household debt of $17.94 trillion.
The delinquency rate on credit card accounts, which represents the percentage of credit card balances that are overdue by 90 days or more, was 3.23%, and the charge-off rate increased to 4.65% in the third quarter of 2024, marking the highest level since 2011.
Credit card usage in the United States has been steadily increasing over the years, with more consumers relying on credit cards for everyday expenses, online shopping, and other purchases.
Five ways to help pay off your credit card debts
Here are some tips to pay off credit card debt, including assessing your financial situation, increasing your monthly payments, checking your credit score, transferring your credit card balance to a low-interest credit card, and speaking to a professional.
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Assessing your financial situation
Assessing your financial situation is a crucial step in developing a strategy to pay off credit card debt effectively. To assess your financial situation and create a plan for paying off credit card debt you should first gather all relevant financial information including monthly expenses and income sources.
Then assess your monthly cash flow by comparing your total monthly income to your total monthly expenses.
Next, you should calculate your total credit card debt and review the interest rates on each credit card, which can help you prioritize which debts to pay first to minimize interest costs.
You should analyze your budget and spending habits to identify areas where you can cut back or reduce expenses. Look for discretionary expenses that you can temporarily reduce or eliminate to free up more money for debt repayment.
Finally, you should consider your short-term and long-term financial goals, such as building an emergency fund, saving for retirement, or purchasing a home. Assess how your credit card debt fits into your overall financial goals and prioritize debt repayment accordingly.
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Increasing your monthly payments
To pay off your credit card debt, you will likely need to increase your monthly payments. It can be easy to fall into the minimum payment trap, which means only paying the required minimum payment each month. The minimum payment is typically a small percentage of the total balance and while making the minimum payment can keep the account in good standing, it’s not enough to pay off the balance quickly, resulting in ongoing interest charges and a prolonged repayment period.
To pay off your credit card debt, you might want to consider using the debt snowball or avalanche method.
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Debt Snowball – Start by paying off the credit card with the smallest balance while making minimum payments on other cards. Once the smallest balance is paid off, use the money freed up to pay off the next smallest balance, and so on.
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Debt Avalanche – Focus on paying off the credit card with the highest interest rate first while making minimum payments on other cards. Once the card with the highest interest rate is paid off, move on to the card with the next highest interest rate.
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Checking your credit score
Checking your credit score can be a useful tool in managing and paying off credit card debt. Checking your credit score can help provide insight into your overall financial health. Simply put, it gives you an overview of how lenders perceive your creditworthiness based on factors such as your payment history, credit utilization, length of credit history, types of credit accounts, and new credit inquiries.
Reviewing your credit score can help you identify areas where you can improve your creditworthiness and track your progress. As you take steps to pay off credit card debt and improve your financial habits, you can monitor how these actions positively impact your credit score.
By checking your credit score you can also monitor for any errors or inaccuracies that may appear on your credit report. Errors such as incorrect account information, fraudulent accounts, or unauthorized inquiries can negatively impact your credit score and should be addressed promptly.
A good credit score can improve your chances of qualifying for credit card offers with lower interest rates or better terms. By monitoring your credit score and working to improve it, you may become eligible for credit card products that can help you manage debt more effectively, such as balance transfer cards with promotional 0% APR offers.
Monitoring your credit score can serve as motivation to prioritize debt repayment. Seeing improvements in your credit score as you pay down debt can provide a sense of accomplishment and encourage continued progress toward financial goals.
Some credit monitoring services offer tools and resources to help you manage debt and improve your credit score. These may include personalized recommendations, credit score simulators, debt payoff calculators, and educational materials to support your financial journey.
It's important to note that checking your credit score does not directly impact your credit score. You can check your credit score for free through various online platforms or by accessing your credit report from the three major credit bureaus (Equifax, Experian, and TransUnion) once per year at AnnualCreditReport.com. By regularly monitoring your credit score and taking steps to manage credit card debt responsibly, you can work toward achieving financial stability and long-term financial well-being.
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Transferring to a low-interest credit card
If you have one or more high-interest credit cards, you may want to consider a balance transfer. Credit card balance transfers involve transferring the outstanding balance from one credit card to another credit card, typically with a lower introductory interest rate.
Credit card balance transfers can be a useful tool for consolidating debt and saving on interest, but it's essential to carefully consider the terms and potential costs involved. Evaluate your financial situation, compare offers from different credit card issuers, and develop a plan to manage the transferred balance responsibly.
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Speaking to a professional
If paying off credit card debt is a struggle for you, consider seeking professional guidance from an attorney or financial advisor. These professionals can provide personalized advice, create a debt repayment plan, negotiate with creditors on your behalf, and help you stay motivated and accountable.
Does paying off a charge off help your credit?
Paying off a charge-off can positively impact your credit, but the extent of the benefit depends on your financial situation and how the charge-off is reported. A charge-off occurs when a creditor deems an account uncollectible after prolonged non-payment, typically after 180 days. While paying it off won’t remove the charge-off from your credit report, it will be updated to reflect that the debt has been settled. This shows future lenders that you took responsibility for the debt, which can be viewed more favorably than leaving it unpaid.
Settling a charge-off also prevents further damage, such as additional collection efforts, legal action, or interest accumulation. Some lenders may even require all past-due accounts to be settled before extending new credit. Although the charge-off remains on your credit report for up to seven years, the impact on your credit score diminishes over time, especially if you’re actively working to rebuild your credit.
If you negotiate a settlement, consider requesting that the creditor updates the status to “Paid in Full” rather than “Settled,” as it reflects better on your credit profile. Consistently managing other credit accounts responsibly after paying off a charge-off will further strengthen your credit over time.
Benefits of paying off credit cards in full
Paying off your credit cards in full each month offers numerous financial and credit benefits. First and foremost, it eliminates interest charges, saving you money in the long term. Credit cards often have high interest rates, which means carrying a balance can lead to significant additional costs. By paying your balance in full, you avoid these charges and maximize the value of your credit card rewards, if applicable.
From a credit score perspective, paying off your credit cards in full lowers your credit utilization ratio, which is a key factor in determining your score. Credit utilization is the percentage of available credit you are using and keeping it below 30% (ideally closer to 10%) positively impacts your score.
Additionally, maintaining a zero balance reduces financial stress and improves your cash flow. It ensures you don’t fall into a cycle of revolving debt, which can quickly become overwhelming. Regularly paying off your cards in full also signals to lenders that you’re a responsible borrower, improving your chances of being approved for loans or credit with favorable terms.
Ultimately, paying off credit cards in full helps build financial stability, protects your credit score, and positions you for long-term financial success.
How can Debtstoppers help you with paying off your credit card debt?
The experienced team of attorneys at Debtstoppers can play a valuable role in helping you navigate and address credit card debt.
Our attorneys are experienced in debt settlement and can negotiate with your creditors on your behalf to reach a settlement for less than the total amount owed. We can use our knowledge of consumer protection laws and negotiation skills to achieve more favorable terms and help you reduce the overall debt burden.
Debtstoppers can provide legal protection from aggressive debt-collection tactics. If you're facing harassment, threats, or unfair practices from creditors or debt collectors, our attorneys can help enforce your rights under state and federal laws, including the Fair Debt Collection Practices Act (FDCPA).
Additionally, we can send cease and desist letters to creditors or debt collectors on your behalf, instructing them to stop certain actions, such as contacting you directly. This can provide temporary relief and allow you to negotiate from a more stable position.
We can also review your credit card debt accounts to ensure that the debt is valid and accurate. If there are discrepancies or potential violations of consumer protection laws, we can take appropriate legal action to address these issues.
If your credit card debt is overwhelming and other debt-relief options are not viable, our experienced bankruptcy attorneys can provide guidance on bankruptcy options and explain the eligibility criteria, and implications of filing for bankruptcy (such as Chapter 7 or Chapter 13).
Debtstoppers can also provide legal advice on various debt repayment options, including debt consolidation, debt management plans, or other strategies that align with your financial goals, which can help you understand the legal implications of each option and guide you in making informed decisions.
Finally, if a creditor or debt collector files a lawsuit against you for non-payment of credit card debt, our team of attorneys can provide legal representation and you respond to legal actions, negotiate settlements, or defend you in court.
