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5 Steps for Overcoming Credit Card Debt

Steven Walters Updated: July 2, 2023 • 5 min read
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When used responsibly and paid off in full each month, credit cards can provide a convenient and flexible way to make purchases, build credit history, and earn rewards on purchases. However, if not managed properly, credit cards can quickly accumulate debt and become a source of financial stress.

Why? Credit cards are high-interest products, with an average APR of around 20%. Meaning the greater the balance you carry from month to month, the more you'll pay in interest payments over time. To maintain healthy personal finances, it's important to take steps to pay down credit card debt and avoid accruing additional debt.

Here are a few tips for managing your credit card debt.

Step 1: Assess Your Debt and Create a Budget

The first thing you'll need to do is find out exactly how much you owe on your credit cards. There are three key numbers you’ll need to know, which can be found on your monthly statement, mobile banking app or by calling the customer service line of your bank.

  • Total amount owed: Log into your online banking portal, or call the phone number listed on the back of your credit card. You typically don't even need to speak to a representative to make a balance inquiry.
  • APR of each card: You'll find this near the end of your monthly statement in a section titled "Interest Rate Calculation."
  • Minimum monthly payment for each card: The minimum payment can change from card to card and is based on your current outstanding balance. It will be printed on your monthly billing statement or in your online banking portal.

Once you have each of these amounts, create a personal budget. Many financial experts recommend the 50/30/20 budget method, as it is a simple way to calculate a budget:

  • Use 50% of your net income for your needs, like mortgage/rent, utilities, groceries and any other necessary spending.
  • An additional 30% goes to your wants - like entertainment, dining out, vacations, or any other non-essential purchases.
  • Finally, 20% goes towards savings or debt repayment.

In this case, you'll want your primary budgeting goal to be paying off credit card debt so that when you get a handle on your budget, your debts won't exceed 20% of your net income. With these numbers in hand, you'll have a clear starting point for creating a plan to pay off debt.

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Step 2: Avoid Carrying a Balance

When using credit cards, financial professionals emphasize the importance of avoiding carrying a balance, or in simple terms, not paying your credit card off in full every month. When you carry a balance, the interest charges can eat up most of your payment, meaning you make very little progress in paying down the total balance.

For example, if you carry a $5,000 balance on your credit cards at 18% APR, and the bank requires a 2% minimum payment, you’re technically responsible for paying only $100 a month. However, $75 of that payment goes toward the interest on your balance leaving $25 towards the principle. In this scenario, if you're paying only the minimum balance, it would take you 472 months (nearly 40 years) to pay off the credit card in full, and you would end up paying over $13,000 in interest, which is more than twice the original balance.

A simple way to ease your interest debt burden is with balance transfer credit cards. A balance transfer credit card allows you to move your debt from a high interest rate card to one with a lower interest rate. Most balance transfer credit cards offer an introductory rate of 0% APR, which helps with paying down the balance on the credit card without adding more interest. The introductory rate will usually last for 12-24 months, and if you can pay off your debt during that time, you get to do so interest-free.

credit card paid off interest

Step 3: Choose a Debt Repayment Strategy

There are a number of well-documented debt repayment methods you can use to help you erase your credit card debt as quickly as possible.

  • Pay more than Minimum: As we already discussed, the minimum monthly payment on a credit card is typically 2% of the balance. When you only pay the minimum amount, your bank collects interest from you. Paying more than the minimum payment can significantly reduce the time it takes to pay off the credit card, and the overall interest charges.
  • Debt Snowball: Order your debts by the amount owed and then begin by paying off the smallest debts first. This is a great way to get a sense of accomplishment as you see each debt erased. And each small debt erased gives you more free cash each month to pay down the other debts. It’s like a snowball rolling downhill, gathering momentum and becoming ever larger until you reach the final largest debt and eliminate it too.
  • Debt Avalanche: The Debt Avalanche is similar to the debt snowball, but instead of tackling the smallest debts first, you tackle the debts with the highest interest rate. This method can be faster, and can save more of the money you would otherwise be paying in interest. It does require some dedication though since you won’t get those boosts of confidence from paying off your smallest debts so quickly.


Step 4: Negotiate with Credit Card Companies

In some cases, it's possible that your creditors will have several debt relief options that you can tap, such as payment modification. If you reach out to your credit card companies and update them on the financial hardships are facing, they might be able to offer debt relief options like modified payment plans, waiving or reducing fees, due-date extensions and more.

To get started, call the number on the back of your credit card, and ask to speak to a representative to explain your situation. Maybe you’ve recently lost your job, or have incurred a large medical expense. Whatever it is, be sure to explain it and then ask them if they have any debt relief programs or payment discounts. Those who have a long history of on-time payments can sometimes use that as leverage when asking for debt relief from creditors.

Step 5: Consider Debt Consolidation

Debt consolidation is a method for combining all your outstanding loans and credit cards into a single loan with a single monthly payment. In some cases, you’ll also get a lower interest rate on the new loan, which can help to make your monthly payments lower and easier to manage.

When looking at debt consolidation for credit cards, the most popular option is a debt consolidation loan. With a debt consolidation loan, you can apply for a lump sum amount that can be used to pay off your other debts. You’ll also get a regular payment schedule that could be any number of months, though usually it won’t exceed 72 months, or six years.

debt consolidation monthly payments


Taking steps to eliminate credit card debt takes focus, persistence, and time. Start by calculating your credit card debt and creating a monthly budget to stick to. Once you have those numbers down, you can choose your debt repayment strategy, whether you tackle your smallest debts or largest debts first, and lastly, you can consider negotiating with your creditors or consolidating your debt.

Steve has been writing in the financial products space for over a decade, with interests ranging from personal loans to investing. He is also deeply into the blockchain space. In his free time, you can find him in the kitchen preparing delicious meals, or outside hiking and biking.