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Top Credit Card Paydown Strategies

Top Credit Card Paydown Strategies

This guest post written by Andrew from LendEDU – a consumer education websites and financial product marketplace. Andrew writes about personal finance and has gained valuable experience with debt through paying off his student loans.


Across the United States, consumers owe more than $1.041 trillion in credit card debt, according to the Federal Reserve. The average balance across all open and active credit cards was more than $6,300 per person in 2017, leaving many struggling to find a way out of debt.

Paying off credit card debt can be a challenge because of the interest charges that accumulate on balances that carry over from month to month. With double-digit rates on most popular cards, consumers need options for eliminating their balances in a cost-effective, realistic way.

The New Year can be a time of motivation to improve yourself, and that includes your personal finances. Paying off credit card debts is on the top of the list each year for millions of individuals. The strategies below can provide a feasible way to manage credit cards, and create a resolution that is simple to stick to with impressive results.

How to Pay Down Credit Card Debt

If you’re eyeing a credit card debt resolution for the New Year, you can use one or several plans to get the job done. Utilizing a debt consolidation loan, a balance transfer offer, the avalanche or snowball method, or a payment restructure can be beneficial in achieving your debt payoff goal. Each of them offers a way to start taking steps towards paying off your debt.

Here’s what you need to know about each option:

Debt Consolidation

One of the most popular methods for getting out of debt efficiently is a debt consolidation loan. Through a bank, credit union, or online lender, qualified borrowers can secure a personal loan and use the funds to pay off credit card balances. The benefits of a personal loan include the ability to receive a single lump sum up front, predictable payments for the duration of the loan, and a fixed interest rate that may be lower than the collective credit card rates.

Debt consolidation loans are not for everyone. Those who are in credit card trouble need to be sure they are willing and able to not rack up additional debt on the card or cards after paying off a balance. Additionally, a personal loan for consolidation is only beneficial when the interest rate is lower than the credit card interest rate. If you have lackluster credit, you may not get a lower rate on a loan.

Also, most banks and credit unions require borrowers to have a steady income, a relatively high credit score, and no credit missteps in the past before offering a consolidation loan. If you can qualify, a consolidation loan can help you move forward predictably when paying off your debt.

Balance Transfer Offers

Balance transfer offers may provide another way to get out from under the weight of high-interest credit card balances. With a balance transfer, a current or new card issuer offers a no- or low-interest period for balances transferred over to the new card. This allows cardholders to pay off balances without interest accruing during that time.

However, it is important to understand how balance transfers work. If you are unable to pay off the full balance by the time the offer’s term ends, you are likely to see interest capitalized on the balance. This means you may pay more over the long run.

Additionally, balance transfers often incur fees, ranging from 1 percent to 10 percent of the amount transferred. This can increase your total debt balance. If you can secure a balance transfer and pay off the amount in the offer period, you will have saved a substantial amount in interest charges, however.

Debt Avalanche Method

A lesser-known strategy for paying off debt is the avalanche method. This tactic requires you to look at all your credit card debts, including minimum payments and interest rates, and order them from highest interest rate to lowest. You pay the minimum payments on each, but you pay more on the highest-rate card. Once that debt is paid off in full, you tackle the next highest-rate card.

The debt avalanche strategy allows you to reduce the total amount of interest paid on credit card balances over time. It works best when you are dedicated to getting your credit card debt paid off in full, and when you have extra funds each month to put toward the highest-interest card. It is important to be diligent about not adding to your credit card debt while applying this method, as it has the potential to defeat the purpose.

Debt Snowball Method

Similar to the avalanche tactic, the debt snowball method can be beneficial in paying off credit card balances. Under this strategy, you compile the same information as far as minimum payments, but you focus on the balance remaining on the card instead of the interest rate. You pay the minimum on all cards except the smallest balance card. While this does not save you in interest accumulation, it can spark motivation to continue to pay off your debt.

The debt snowball method, similar to the avalanche strategy, requires an intent focus on your plan. It also means you should take care to not add to your balances as they are paid off. Both methods can be beneficial in creating a habit of paying off credit card balances.

Payment Restructuring

Finally, payment restructuring is another way to payoff your debt. With this strategy, you pay your credit card balances twice per month, in line with your paycheck, as opposed to once each billing cycle. This helps from a cash flow perspective from one pay period to the next, but it also helps reduce your interest charges, depending on how your credit card billing cycle is set up.

Any one of these debt payoff strategies can lead to significant benefits, including a lower amount paid in interest or predictability when it comes to repayment. Be sure to evaluate your ability to implement or qualify for the strategy of your choice.

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