Debt-Free in 5 Months? Our Guide to Paying off a Bunch of Credit Card Debt

A woman's hands hold a lot of credit cards.
Aileen Perilla/The Penny Hoarder

Americans carry $829 billion in credit card debt, according to data released in August from the Federal Reserve Bank of New York.

It’s just there. Like a clingy child who won’t loosen his grip on your legs. A kitten weaving between your feet, occasionally tripping you up.

It’s annoying, it’s stressful, it’s weighing you down — and it’s time to pay it off.

Chances are, you’re already — err, hopefully — making monthly payments. But it might feel like you’ll never pay off that mountain of debt. (Thanks, interest rates.)

Keep trekking. We put together a guide to help you craft your perfect debt-payoff plan.

Start Now By Laying the Groundwork

It’s time to strategize and optimize — and map out an official month-by-month plan. Take a couple of steps today to help you figure out where to start.

Figure out Exactly How Much You Owe

To find each of your debt-carrying accounts, try a free service like Credit Sesame. You’ll receive a free credit score and tap into your “credit report card,” which provides a free debt analysis.

Credit Sesame offers personalized advice on how to work on your credit score, so you might pick up some debt-payoff tips as you explore the site.

Create a Budget

If you don’t already have a budget, it’s probably because budgeting is a daunting task.

Make it easier on yourself by using a free app like Empower, which automatically tracks and categorizes your spending so you can determine where to cut back.

You can also go old school, and create a simple budget in Excel.

Set Your Debt-Free Date

Use a debt-payoff calculator, like the free one through Trim, to help you map out your monthly debt payments and work these payments into your budget.

Month 1: Reduce Your Interest Rates

A woman holds a wallet with a lot of credit cards.
Aileen Perilla/The Penny Hoarder

This month, take some time to see if you can’t make your debt a little more manageable.

Unfortunately, many credit cards come with stupid-high interest rates — anywhere between 15% to 20% or higher. That means your monthly payments aren’t funneling exclusively toward the principal; they’re also paying interest.

Here are a couple of tactics to help you pay less in interest and more in principal:

Refinance or Consolidate

When you refinance, you take out a personal loan with a lower interest rate, pay off your credit card, then work to pay off that loan, which is more manageable with those lower rates. Consolidating is similar, but it wraps up multiple debt-carrying credit cards into one monthly payment — leaving you with a single interest rate to tackle.

If you’re not sure where to find a personal loan with optimal rates, use the online marketplace Even Financial. It can help you borrow up to $100,000 (no collateral needed) with fixed rates starting at 4.99% (lower than your average credit card rates) and terms from 24 to 84 months.

Open Another Credit Card

Initially, opening another credit card sounds like an awful idea, but hear us out. Find a balance-transfer card with a 0% interest rate (or at least lower interest rate). Transfer your debt over to that card, and you’re left paying directly toward the principal — no interest.

Heads up: You’ll probably need decent credit to qualify for a new card. Start by researching the best balance-transfer cards.

Month 2: Prioritize Your Payments

It’s time to employ some snowy metaphors — and prioritize which cards you want to pay off first.

One option is to use the debt avalanche method. This method of paying off debt requires you to prioritize your debt payments, paying off one balance at a time. The key, however, is to pay off your debt with the highest interest first.

Why? The longer these high-interest-yielding debts sit, the more you’ll owe. Start by ranking your debt with the highest rates first, then work your way down that list.

On the other hand, there’s the debt snowball method. With this method, you pay off the smallest balances first. Sure, your cards with higher interest rates will linger, but if you’re the type who craves immediate gratification, this might be for you.

As you strike the smaller balances off your list, you’ll feel more accomplished and more confident moving forward and handling the big stuff.

A graphic comparing the debt snowball and debt avalanche methods.
Kristy Gaunt/The Penny Hoarder

Month 3: Find Extra Money to Put Toward Your Debt

Focus on cutting your expenses this month, so you can shovel extra money toward your payments.

There are a ton of ways to save money on everyday expenses, but we like to start by scrutinizing those unavoidable monthly bills we all face.

Just hop on Squeeze, a website that allows you to compare rates for mortgages, auto loans, student loans, renters insurance and mobile and internet plans (among others) for free.

Say you want to compare internet prices. Based on your location, the site aggregates all your options and shows you companies alongside price points and download speeds.

It’s squeezing any extra money out of your monthly expenses, so you can put it toward your debt.

Month 4: Up Your Income With Flexible Gigs

This month, your goal is to put as much money as you comfortably can toward your debt.

Consider securing a flexible side gig. Here are a few of our go-to ideas:

Help Small Business Owners

Close up of a man's hands as he works on paperwork atop a green picnic table.
Carmen Mandato/ The Penny Hoarder

Does earning $60 an hour sound appealing? How about the freedom to work from home while helping others succeed?

Those are the perks of working as a bookkeeper, says Ben Robinson, a certified public accountant and business owner who teaches others to become virtual bookkeepers.

And no, you don’t have to have a CPA to be successful in this business. In fact, all you really need are decent computer skills and a passion for helping business owners tackle real-world problems.

It’s a great opportunity for parents who want to work part time, grads just out of college and anyone who wants to bring in real money while working from home.

We talked to Robinson about what it takes to become a virtual bookkeeper, as well as tips and advice for making this career track work for you. You can read the full interview here, or check out his website for more information.

Hang out With Pups

On Rover you can choose to offer a variety of services, including dog walking, overnight boarding at your home or theirs, and daycare. Rover says sitters can earn as much as $1,000 a month — just for snugglin’ pups!

Earn $17.50 an Hour as a Proofreader

If you have an eye for typos and a serious dedication to the laws of grammar, you could be a perfect candidate for a side hustle in proofreading.

The average per-page rate for freelance proofreaders is 35 cents, according to Proofread Anywhere founder Caitlin Pyle. If you read at an average pace of 50 pages per hour, Pyle says you could make $17.50 an hour.

Learn how to find freelance clients in Caitlin’s free seven-day introductory course for proofreaders.

Month 5: Prepare For The Future

a woman stands on a porch with a cup of coffee and some credit cards.
Aileen Perilla/The Penny Hoarder

As you whittle away at your debt, start taking steps to ensure a debt-free future. One tactic? Build an emergency fund.

You might wonder how you can put away savings while putting all you’ve got toward your debt, but it’s possible.

Try setting up an automated savings account through Digit.

Link Digit to your checking account, and its algorithms will determine small (and safe!) amounts of money to withdraw into a separate, FDIC-insured savings account.

Additionally, savers will receive a 1% bonus every three months.

If you need that money sooner than expected, you’ll always have access to it within one business day. Digit is free to use for the first 30 days, then it’s $2.99 per month afterward.

One More Step: Avoid Future Credit Card Debt

Because everyone’s in a different financial situation, you might not conquer all your debt by the end of these five months. However, you’re making solid headway, so keep chipping away — and steel yourself against future credit card debt.

A new app called Debitize basically turns your credit card into a debit card, for free. With it, you can connect any credit card to a checking account.

Whenever you swipe your credit card, Debitize pulls the same amount of cash from your bank account. It stores the cash for you until it’s time to pay your credit card bill. Then it pays that bill for you a week before the due date.

Carson Kohler ([email protected]) is a staff writer at The Penny Hoarder. She’s cheering you on from St. Petersburg, Florida.

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