How to Pay Off Credit Card Debt When You Have No Idea Where to Start

Credit cards
Aileen Perilla/The Penny Hoarder

Over 41% of American households carry some kind of credit card debt, according to a recent study from ValuePenguin.

And the average balance for those households is $9,333.

With balances that high, and credit card interest rates north of 15%, it’s not uncommon for families to pay hundreds of dollars every month in interest alone.

And sometimes, there’s just not enough room in the budget for debt payments. Creditors know that, and they’ll use scare tactics to manipulate people into paying debts they can’t afford.

There’s a common misconception, for example, that someone can take your house or you can go to jail for not making your payments. Credit card debt is unsecured civil debt, meaning no one can put you in jail or take your house for not paying it.

However, in certain states, a creditor can obtain a judgment against you, resulting in a court summons. Never ignore notices or orders from the court, and make sure your address is always up to date so you recieve them.

But if you’re in a place where you want to pay off your credit card debt and you just need a little help, you have options. It’s easy to get scammed in the world of credit and debt, so here’s what you need to know about all the legitimate ways to get help paying off credit card debt.  

How to Pay off Credit Card Debt During Hard Times

A woman sitting at her table contemplating expenses
Aileen Perilla/The Penny Hoarder

Making payments isn’t the only way to pay off a credit card. There are other ways, and they can save you time, money and hassle throughout the process.

Credit Card Debt Loan

One way to pay off credit card debt is to take out one new loan to pay off all your old debt. It’s called a debt consolidation loan. It won’t reduce your debt burden, but it can lower your interest rate and monthly payment.

Debt consolidation is the go-to method for people who’ve fallen on temporary hard times or who’ve done the work to improve their finances and want to take care of their debt problem quickly.

Debt Management Program

Through a debt management program, a company will handle your consolidation and hopefully get you better interest rates and lower fees. You’ll be assigned a credit counselor, who’ll set up a repayment and education plan for you. It’s specifically for unsecured debt, like credit cards and medical bills.

A debt management program pays your creditor for you, ensuring you stay current on your debt payments. Your credit score may even improve during the program. But if you miss a payment, you can be dropped and lose all the benefits you gained.

The program typically lasts three to five years. So if you want to pay off your debt faster, you’ll want to read on.

Balance Transfer Credit Card

If you have good to excellent credit (690 or above) and can feasibly pay off your debt within a year, a balance transfer credit card is a great idea. Balance transfer cards exist to save people money on their debt by transferring the balance of a higher interest rate card to one with zero percent interest.

Most of these cards offer zero percent interest for 12 to 18 months with no annual fee. They generally have a 2-5% balance transfer fee, but you can easily find balance transfer cards with no fee. A higher credit score will help you qualify for a card with better terms.

Personal Loan

You can also consolidate with a personal loan. Online banks will allow you to apply for debt consolidation loans without doing a hard inquiry of your credit, so if you want to shop around, head there first. Then try your local credit union; they’re known for having the most affordable rates on loans.

It’s also important to note that lenders may tack on origination fees and prepayment penalties, or require collateral. Read the fine print before you commit to anything.

Home Equity Loan

If you own a home with equity, you can take out a home equity loan or line of credit, or do a cash-out refinance. For most people, these options will offer the lowest interest rates. But they’re also the riskiest, because your home is the collateral.

It’s important to know that your debt consolidation loan may not cover the entirety of your debt. In those cases, you’ll want to prioritize paying off the remaining debts based on the terms of your new loan.

If your terms and debts are flexible, there are a few methods you can use to make paying off your debt more attainable. If you want to pay off the highest-interest debts first, that’s known as the debt avalanche method. (It’s best if you’ve gone the balance transfer card route.)

If you want to prioritize your smallest debt amount and work up to the largest, that’s called the debt snowball method.

You can’t go wrong with either.

Settling Your Credit Card Debt

If you’re in more than just a season of financial instability, and you can’t see yourself affording the amount of credit card debt you owe, debt settlement is an option. Debt settlement reduces the amount of debt you owe, but it will significantly lower your credit score and negatively impact your credit report.

The process isn’t as simple as debt consolidation, either. You have to convince every creditor that if they don’t settle with you, they probably won’t get anything at all. So of course, during that time you won’t be making any payments — while interest and late fees accrue.

If you aren’t successful in negotiating, you’ll still be responsible for the full amount, plus any extra you incurred. If you are successful, you’ll have to pay the settlement amount in full. Then in April, you’ll owe taxes on the amount forgiven.

Other Ways to Get Help With Credit Card Debt

Cutting up credit cards
Aileen Perilla/The Penny Hoarder

If you’re having trouble negotiating your debt, or can’t make the payments you planned, don’t be afraid to ask for help. These options aren’t the most ideal, but dealing with the problem head-on is better than letting it accumulate any longer.

Debt Settlement Company

People with many creditors — and those who can’t save to pay lump sums of their settlements — can pay a debt settlement company to do it. Like a debt management program, a debt settlement firm will negotiate debts on your behalf, and the company will pay them while you make monthly payments to the company.

The difference is that the settlement company is making monthly payments on your behalf. While you’re paying the debt settlement company, you’ll still be delinquent on all your other debts — and bombarded with calls from creditors trying to collect.

And that doesn’t guarantee the company will be successful. But if it is, you’ll pay the settlement company up to 25% in fees on top of the settlement.


Bankruptcy is another last resort. The two major types for individuals are Chapter 7 and Chapter 13.

Chapter 7 allows the filer to completely discharge all their debts in four to six months, by liquidating their assets. A trustee gathers and sells all of your nonexempt assets to pay off your debt. Those assets can include property that’s not your primary residence, a vehicle with equity, investments or valuable collections.

Those who earn a high income or have significant assets choose Chapter 13, which allows them to keep certain assets while still repaying certain debts. It’s a long, arduous process that doesn’t guarantee to resolve your debt. It can be reversed if your income increases, and it wrecks your credit.

Neither option is better than the other; both have negative long-term ramifications.

If you’re serious about getting out of credit card debt, your best plan of attack is to first, stop using them and second, find ways to make extra money and pay it off as fast as possible.

This credit card debt calculator is a great tool to estimate how much extra you need to pay off your debt and how much you can save by paying it off quicker.

Jen Smith is a staff writer at The Penny Hoarder. She gives money-saving and debt-payoff tips on Instagram at @savingwithspunk.

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