4 Trusty Ways to Pay off Credit Card Debt in a Hurry and Avoid Interest

how to pay off credit card debt
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So your wallet is stuffed with credit cards that are nearly maxed out.

You’re on a first-name basis with Chase, Citibank and Capital One.

When it’s time to pay for anything, you automatically whip out Visa, MasterCard or Discover like they’re tools in your personal financial Swiss Army Knife.

…and you’re hemorrhaging money on interest payments.

Absolutely. Hemorrhaging. Money.

The good news is, there are proven methods you can use to turn things around and get out from under that burden.

Here are four ways to start paying off your credit card debt right now:

1. Consolidate Your Credit Card Debt

Credit card interest rates often rise above 20% and can persistently gobble up so much of your income that you’ll never get ahead.

At that point, all you’re doing is paying off the interest, not the principal. Instead of financially treading water that way, refinance your debt by taking out a debt consolidation loan.

Here’s how it works:

You get a personal loan from a lender at a lower interest rate.

You use that loan to pay off the balances on your high-interest credit cards. Then you repay the lender a fixed amount every month for a set time period, usually two to five years.

An easy place to start is Fiona, which can help you borrow up to $100,000, if your credit score is at least 620.

Type in your info, and it compares interest rates from several lenders. There’s no charge for this.

The interest rates you’re offered on these loans will depend on your individual credit profile. Compare the lowest rate to what your credit cards are currently charging you. The average interest rate on credit cards these days is nearly 13%, or 16% for travel rewards cards.

This woman saved $12,000 by refinancing her $12,000 of credit card debt with a personal loan.

She’d been paying 15.24% interest to her credit card. She paid off that balance with a 5%-interest loan. Over the seven-year life of the loan, she’ll pay $2,000 in interest.

However, if she’d kept on making the minimum payments on her credit card, she would have paid $14,000 in interest over 25 years.

2. Use the Debt Avalanche Method

Two of the best-known methods to pay off credit card debt are “the avalanche” and “the snowball.”

Following the “debt avalanche” method (also known as “debt stacking”), you pay off your credit cards with the highest interest rates first.

Think of it as killing off your most toxic debt first — your most poisonous, radioactive, money-eating debt.

Rank your credit cards by their interest rate, from highest to lowest.

Here’s an example. (Note to readers: I am totally making these interest rates up.)

  • Chase Visa — 22% interest rate — $5,000 balance
  • Bank of America MasterCard — 19% — $3,000
  • Citibank Visa — 13% — $7,000
  • Capital One MasterCard — 8% — $1,000

Each month, make the minimum required payment on each card.

Then, use all your remaining available cash to pay off the card with the worst interest rate. Once you’ve wiped out that balance, move your debt-killing sniper rifle down to your next target.

This technique requires patience, but can save you significant money in interest payments.

And the more interest you pay off, the more momentum you gain — like an avalanche rolling downhill.

3. Use the Debt Snowball Method

Money management guru Dave Ramsey champions this method.

Here, you’re still focusing on eliminating one credit card at a time, but you’re getting rid of the lowest balance first.

With this method, you’d rank those same four credit cards in a different order:

  • Capital One MasterCard — $1,000 balance — 8% interest rate
  • Bank of America MasterCard — $3,000 — 19%
  • Chase Visa — $5,000 — 22%
  • Citibank Visa — $7,000 — 13%

Once again, pay the minimum on each card, and use your leftover money to pay off the smallest balance. Once you’ve knocked out that one, move on.

The downside: In the long run, you’ll end up paying more in interest.

The upside: Wiping out each credit card balance will give you a “quick win” and pump you up to keep tackling your debt.

Dave Ramsey’s take: “It’s more important to pay your debts in a way that keeps you motivated to keep going until you’ve wiped them all out. If you begin with the biggest one, you might think you’re not making fast enough progress, lose steam, and not finish the job.”

Which method should you use? Use the one that works for you.

4. Get a 0% Interest Credit Card

I know, I know — get another credit card? What’s wrong with this picture?

In all seriousness, this could be an option for you.

If your credit is good, apply for a zero- or low-interest credit card. To entice you, these cards will offer you a super-low annual percentage rate (APR) — for a certain period of time.

Transfer the balance from your high-interest cards to your new card.

Obviously this step, all by itself, will not magically get rid of your credit card debt. (Presto! Abracadabra! Debt be gone!) No, your credit card debt is still stubbornly sitting there, occupying a different credit card.

The advantage you’ll be saving some serious coin on interest payments, freeing up cash to pay down your debt.

Major caveats:

  • You may be charged a balance transfer fee — typically 3% of the amount you’re transferring. Creditcards.com has a handy online calculator you can use to see if transferring your balance is worth it.
  • That sweet low interest rate won’t last forever. After your new card’s “super special introductory promotion period” expires — often in six months to a year — its interest rate will shoot up. It might even end up higher than the interest rate you were trying to escape from in the first place. Read the fine print. Try to pay off your debt before this happens.
  • Don’t get all spendy with that shiny new credit card. It’s so shiny, so beautiful. It is MY PRECIOUS. That’s how we ended up in this situation in the first place, right?

Bottom line: These are five ways to start paying off your debt. It’s time to get serious about slaying the credit card dragon.