Have $6,000 or More in Credit Card Debt? Here's How to Get Rid of It

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There are tons of benefits to using credit cards, such as insurance on car rentals or earning points to take that much-needed vacation. If you're not careful, however, you may find yourself struggling with the weight of balances that grow every month.

You are far from alone in this journey. Shedding the stigma and addressing your finances head-on can be the first step towards regaining your financial freedom. In this article, we'll provide practical, clear steps to help you break free from the cycle of credit card debt.

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1. Cut expenses and stop using your credit cards

The first step in reducing credit card debt is to stop adding to it. A budgeting app can help you see your spending so you can reduce costs. For example, you might eliminate streaming services and consider whether all of your other purchases are nice-to-haves or necessary.

Look for ways to reduce your essential expenses, as well. Opting for a low-cost mobile carrier could lower your phone bill, while comparing rates from different insurance providers might lead to cheaper car insurance .

Additionally, meal planning and taking advantage of grocery store sales can significantly cut your food costs. To avoid temptation, think about removing apps from your phone that lead to overspending, such as shopping or meal delivery services.

Once you've stopped increasing your debt, it's time to dig yourself out.

2. Pay more than the minimum payment

The minimum payment amount is set by your credit card provider and is usually calculated based on a percentage of your balance. For example, if your balance is $6,000 and your credit card sets minimum payments at 1%, you'll pay around $60 per month plus interest. But by just paying the minimum balance, you'll pay a lot more over time.

Say your interest rate is 17.99%, and your balance is $6,000. If you pay the interest plus 1% of your balance, your payment will be $149.95 per month -- but it will take you 62 months to pay off the balance and you'll pay over $3,000 in interest.

Paying just $50 more than the minimum balance ($199.95 per month) allows you to pay off the card in 41 months, and you'll pay $2,030 in interest. Even just a small increase in payment can reduce your repayment period and the interest paid over the life of the loan.

3. Open a new credit card and transfer your debt

It might seem counterintuitive, but opening a new credit card can actually be a smart move to get out of credit card debt. Many credit cards offer lower introductory interest rates or even 0% interest for the first 12 to 15 months, or longer. Take advantage of these offers by reviewing the top balance transfer credit cards and applying for one that offers no annual fee and low or no interest on balance transfers.

Once you receive the new card, put it in a drawer and forget about it. Then, transfer the balance from your current credit card (or cards!). Pay as much toward the balance as you can every month and watch your balance dwindle.

There are two points to keep in mind about this strategy: Some credit cards charge a balance transfer fee of 3% to 5%. However, if you're paying 25% in interest before you transfer the balance, that is still worth the cost. Also, if your credit score is low, it may be hard to get approved. But if you can get approved, this can be a low-cost way to tackle debt.

4. Use the avalanche method to pay down credit card debt

You may be familiar with the snowball method for paying off debt, which recommends paying the smallest debt first and then "snowballing" your progress into paying off larger debts. The avalanche method takes a slightly different approach.

Rather than paying the smallest debt, first tackle the credit card with the highest interest rate. Once that is paid off, move to the next highest interest rate, and so on. Paying off the debt with the highest interest rate first means you'll pay less over time.

For example, if you owe $1,000 at an annual interest rate of 25%, your daily periodic rate (the amount of interest you pay each day) would be approximately 0.0685%, which translates to about $0.68 per day in interest for the initial balance. As you pay down the debt, the interest charged each day decreases.

Now, imagine if you take 60 days to pay off the debt vs. 190 days. Paying off your debt faster significantly reduces the total interest paid. This highlights how tackling higher-interest debts first can lead to substantial savings over time.

5. Automate credit card payments

Automating your payments for at least the minimum balance is a simple way to protect your balance from growing. Credit card late payment fees are capped by the CFPB, but they still add to your overall credit card debt. They can also trigger an increase in your credit card interest rate, further inflating your balance.

Setting up automation serves two crucial purposes: it helps maintain your credit score, which can be impacted by late payments, and it prevents the potential increase in interest rate. Additionally, automating payments allows you to align payment dates with your pay schedule, making it easier to budget. Just make sure to pay more than the minimum balance whenever possible.

Having credit card debt can cause feelings of embarrassment or isolation. But you are not alone. Many people struggle with credit card debt. Taking these actionable steps will get you on the path to eliminating it.

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