How to Pay Down Your Credit Card Debt

Did you know that the average American owes $8,195, on average, on both retail- and bank-issued credit cards

So, if you happen to stumble upon (or crash violently into)  some debt, know that you’re not (at all) alone. And you’re not stuck. 

We’ve done some research into the best methods for paying down credit card debt so you don’t have to, and found a few key methods to consider. So let’s get started.

Psst…If you haven’t already tried them, head to your Me.Inc page on the app to explore Nav.it’s Debt Repayment and APR Calculators to support you on your path to financial freedom!  

Find a Payment Strategy

Pay More Than Your Minimum
Your credit card issuer likely gives you a monthly minimum payment (around 2-3 percent of your overall balance). However, you need to know that these banks benefit from the interest they charge you each period. The longer it takes you to pay, the more money goes into your bank’s pocket, and out of yours. Bottom line: PAY MORE THAN THE MINIMUM.

Debt Snowball 
This is a term used to describe a strategy that has you prioritize your loans by amount, focusing on the smallest first. Pay off the smallest, then roll that payment into the amount you’re contributing toward your next smallest loan. Pay the same amount each month, contribute to a different repayment as you pay debt down overtime.

Debt Avalanche 
Opposite the Snowball Method, the avalanche method has you pay off the card with the HIGHEST interest first. It tends to be faster and cheaper than the Snowball Method as the highest payment also likely means it’s the card with the highest interest. So if you get rid of it first, you’ll be paying down smaller amounts faster. 

Automate your payments 
This is an easy way to ensure your debts are being paid so you avoid racking up additional costs in late fees. Think of your debt repayments as a monthly utility bill. Your above minimum rate is NOT a choice. Pay it forward now; reap the benefits later. 

Debt Consolidation

Did you know you can consolidate your debt payments into one account? This can be helpful if you’re paying off debt from more than one account. (Been there, hate that.) 

Find a 0 percent balance transfer credit card 
Ok, so I know it sounds crazy to open up another credit card account when you’re working to pay off your credit card debt…bear with me. If you find a card with a long 0 percent introductory period (15-18 months) and you transfer all of your outstanding credit card debt to that one account, you’ll have one payment each month WITHOUT INTEREST. (Miracles do happen.)

Personal Loans 
Consider a FIXED RATE debt consolidation loan to pay off your debt. Why consider another thing to pay off? Well, personal loans tend to offer lower interest rates than credit cards. Check out our APR (Annual Percentage Rate) Calculator in Me.inc.

Negotiate 

If negotiation isn’t a part of your day job, you might not love this idea. But it’s an important one to consider when managing your credit card debt. Remember: creditors expect customers to negotiate terms. If it’s expected, why not try it out? 

Here’s where you should start:

  1. Request a smaller minimum payment.
  2. Request a lower APR
  3. Explain the situation. If you’re a longtime customer who doesn’t skip out on payments, they will likely hear you out. Don’t just tell them what happened; show them the strategy you have to pay off the debt. 
  4. Find support in a community. Check out Nav.it’s Facebook Community of Nav.igators who have effectively negotiated down their payments. 

Be Aware of Bad Support

If you can’t meet your payments each month, and you’re struggling to find a solution, there are some debt-relief options you may need to consider. Here are those options with a small grain of salt…

Debt management plan
These let you seek support from a nonprofit credit counseling agency. Counselors negotiate new terms with your creditors to consolidate your debt. Be aware: You’ll have to then pay the agency a fixed rate each month. Depending on the negotiation, your accounts could close and you might not be able to open a new one for some time. 

Bankruptcy
Chapter 7 bankruptcy clears your unsecured debt (like credit cards), but will seriously impact your credit report for 10 years. Meaning, during this time, you’ll find it hard to get credit. 

Instead, Chapter 13 bankruptcy helps you restructure your debts into a payment plan of three to five years and is preferable if you have assets you wish to retain. This can impact your credit score for some months after filing and will stay on your report for seven to 10 years. 

Debt settlement
This is when a creditor agrees to accept less than the amount you owe. While it sounds pretty good, it has serious consequences. First of all, it can be costly. It can also take a very long time to settle (like two to four years). It will also stay on your credit report for seven years.

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