App version: 0.1.0

7 Tips to Reduce Credit Card Debt

7 Tips to Reduce Credit Card Debt
Jason Steele
Jason SteeleUpdated April 25, 2022
Share this article:
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Getting out of credit card debt can be one of the biggest challenges when it comes to managing your personal finances. The average amount of credit card debt for a household in the United States is $6,270. Plus, because credit card debt is unsecured, credit card interest rates can be high.With these facts in mind, it’s easy to see why reducing your credit card debt is one of the most important things you can do to help your finances. Read on for seven tips on how to get out of credit card debt.

1. Evaluate Your Finances

The first thing to do when you’re trying to figure out how to get rid of credit card debt is to take stock of your finances. You want to look at not just your credit card debt, but all other forms of debt you may owe, including student loans, car loans, personal loans, and home mortgages.Be sure to review your credit card statements, and pay close attention to interest rates on your debt. Also, take note of which loans are tax-deductible, such as a student loan or a home mortgage, and which are not. Unfortunately, credit card interest is never tax deductible. Having this knowledge about your debts can help you make more informed decisions about which debts to prioritize paying off.

2. Create a Budget With Priorities

One of the best ways to reduce credit card debt is to create a budget that prioritizes your financial goals. Many people will aim to pay off their loans with the highest interest rates first, but there are other payment strategies (more on these below) that can prioritize debt payoff differently. As you work to get out of credit card debt, you may also want to prioritize debt reduction over other purchases and discretionary spending in order to reduce credit card debt sooner. Whether your debt burden is above or below the average credit card debt, it can be worth the sacrifice now to avoid further financial pain later.

3. Have a Payment Strategy

When it comes to how to get rid of credit card debt, there are several debt reduction strategies available that approach debt payoff differently. Below, we’ll break down these common strategies:
  • Snowball method
  • Debt avalanche
  • Blizzard method
  • Automated payments

Snowball Method

With the debt snowball method, you pay off the smallest balance first, and then the next smallest debt. The primary benefit of this method is psychological, as you can gain a feeling of satisfaction from having one of your debts quickly erased. As the strategy’s name implies, taking this approach can help you build momentum towards paying off your larger debts and avoid getting discouraged as you’re starting out.

Debt Avalanche

The debt avalanche method is a popular payment strategy where you pay off your highest interest rate balances first, while making the minimum payment on the rest of your debts. As soon as your debt with the highest interest rate is paid off, you proceed to the debt with the next highest rate. While this strategy admittedly lacks some of the confidence-boosting effects of the snowball method, it allows you to save money on interest charges that can add up in the long term.

Blizzard Method

The blizzard method is best described as a cross between the debt snowball and debt avalanche methods. You start by paying off debt with the smallest balance first, like the snowball method. However, you pay debt with the highest interest rate balance next. With this method, you can start by gaining confidence and finish by reducing your interest charges as much as possible. 

Automated Payments

Another great way to help reduce your credit card debt is to take advantage of automated payments, a key tool when it comes to how to use credit cards responsibly. Nearly every card issuer offers the ability to make bill payments automatically, and most allow you to configure automatic payments so you can cover your minimum balance, statement balance, or any amount in between. Setting up automated payments takes the hassle and stress out of making payments and ensures they’re on time, one of the things that affect your credit score. However, you have to make sure to have the funds available in your checking or savings account before the funds are automatically deducted.

4. Target One Debt at a Time

One effective way to pay off your credit card debt is to focus on a single debt, while still making at least the minimum payments on your others. You could make multiple payments each month, focusing all of your available funds on paying down and paying off this debt. This approach can help you feel like you’re making progress and reduce the number of debts weighing on you.

5. Pay More Than The Monthly Minimum

When you pay your credit card’s monthly minimum, you’re complying with the terms of the loan. However, by only paying the minimum amount due, you’re leaving a larger balance remaining to start racking up credit card interest. To reduce your credit card debt, it’s critical that you always pay more than your monthly minimum, one of many important credit card terms to know.

6. Consolidate Your Debt

Credit card consolidation is another method to reduce credit card debt, and it can have numerous benefits. First, you’ll have just one payment to make when you’re able to consolidate all your debts. This will make payment much less of a hassle, and it will also present a lower psychological burden every month as you won’t have a long list of debt payments to think about.Plus, when you can consolidate your debt to a loan with a lower interest rate, you’ll  save money on interest charges each month. Just keep in mind that you’ll still need a decent credit score to qualify — those with lower scores may be limited to top secured credit cards or credit building cards.

7. Get Professional Credit Counseling Services

Another option is to look for a credit counseling service that can offer advice on how to manage your credit card debt and pay it off. Non-profit credit counselors can help you choose from one of many possible solutions to determine the best way to reduce credit card debt for your situation. They can also let you know if credit card debt forgiveness options make sense for you. Counseling can take place in person, online, or over the phone. You may be able to find non-profit credit counseling services through a university, military base, credit union, or housing authority. 

Explore Credit Card Options

If credit card debt is weighing on you, there are a number of options for how to get out of credit card debt that you can explore. The first steps to reduce credit card debt are to evaluate your finances and make a budget. From there, you can choose a debt payoff method that makes sense for you.Regardless of whether you have credit card debt, you can benefit from a credit card with a lower interest rate. If you’re looking for a new card, Lantern makes comparing credit cards easy. Browse different card options and see how their interest rates stack up and what credit score you may need to qualify.

Frequently Asked Questions

How do you consolidate debt with loans?
How soon can your credit score increase with paying off debt?
Can you avoid credit card debt?
Photo credit: iStock/MicroStockHub
SOLC0222058

About the Author

Jason Steele

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
Share this article: