Sep 20,2023

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Credit card debt. It can become an embarrassing secret you keep from your friends, family, partner, or even yourself. But the more you ignore it, the worse it can get.

If you’ve got a lot of credit card debt, you’re not alone. A 2020 Federal Reserve survey of consumer finances found just over 45% of U.S. families reported revolving balances on one or more of their credit cards at the time of the survey.1

What’s more, credit card debt may be a secret shame for many Americans; according to a 2023 survey by Nerdwallet: 33% of respondents with credit card debt said no one knows how much credit card debt they have.2 Researchers have even found a connection between debt and depression.3

You don’t have to feel bad about your high balances. Instead, take action. Learn how to get out of credit card debt and make a plan to attack those balances today. You could improve not just your credit health but your emotional health, too. In fact, 89% of surveyed debt consolidation customers told us they felt a sense of relief from consolidating debt with a Discover® personal loan.*

What is the best way to pay off credit card debt?

The best way to pay off debt is the one that works for you. There are many effective methods for paying down debt. For example, the debt snowball and avalanche methods are two time-tested strategies. A personal loan for debt consolidation is another excellent choice for many people.

Still, any approach to reducing credit card debt will start with these same basic steps:

Step one: Know what you owe

Before you can pay off credit card debt, the first step is to understand how much you owe and what the interest rates are on each card. This will help you pinpoint what your debt is costing you and get you started on a plan.

Let’s say you have a $15,000 balance on a credit card with an annual interest rate of 15%. You pay $359 toward that debt each month, slightly more than the minimum payment required.

Your total interest charges would be $6,349 by the time you paid off your $15,000 of credit card debt, and it would take you 5 years to be debt-free. That assumes you don’t make any new purchases.

In the above scenario, you’d shell out a total of $21,349 to pay off that debt, more than 30% over your original balance.

So, the first step is to make a list of all your monthly expenses.

Step two: Create a budget and stick to it

It may seem daunting to make a list of everything you spend on each month. But it’s also important. Having a complete picture of what you spend will show you where you can cut back.

Maybe you didn’t realize that your morning coffee adds up to $50 a month. Or that you haven’t used your gym membership in a long time, but you’re still paying for it. Comparing your expenses to your income  could help you improve your spending habits.

Once you know what you spend

  • Make your budget. There are a lot of different approaches to budgeting. The trick is to start simple. (Many people like the 50/30/20 rule for that reason.) Create buckets for your “needs” (housing, transportation, food, etc.), “wants” (restaurants, gym, travel), and savings. Then see where you can cut back. Do you really need cable TV? Can you renegotiate your cell phone bill?
  • Avoid making new purchases on your cards. You don’t want to increase what you’re paying in interest while you try to rein in credit card debt.

Budgeting  may help you free up extra cash, which could help you get out of credit card debt faster. You can also set up savings for an emergency, so you don’t have to borrow more when unexpected expenses hit.

Tips for reducing credit card debt more quickly

There are really no tricks to paying off credit card debt. It will take patience and consistent effort. But these tips could help:

  • Pay more than the minimum every month. You could even pay more than once a month.4 You’ll pay off your credit card debt faster, which means you’ll pay less in total interest. The downside? You’ll be paying more every month, and a bigger bill might feel tight in your monthly budget.
  • Negotiate a better interest rate with your credit card company. Sometimes you can lower your rate by talking to the credit card company. If so, you could save some cash and maybe even pay down your credit card debt faster. But be prepared: The company might not agree, and it could be frustrating.
  • Look into a balance transfer. This option allows you to pay off one credit card balance with a separate card that has a lower interest rate. Do consider this option carefully: Many balance transfer offers come with an upfront or annual fee that could reduce any money you save. Also, introductory rates eventually expire and are usually replaced by higher standard rates.

Consider a personal loan for credit card debt consolidation

Staying tied to revolving debt means that each new purchase will increase your balance and the interest you owe.

A fixed-rate personal loan for credit card debt consolidation might be a better solution. 

Benefits include:

  • You can lock in a fixed rate (one that doesn’t rise) and a set regular monthly payment (one that doesn’t change month-to-month).
  • You pay one lender. Using a single personal loan to consolidate multiple debts helps you simplify your monthly bill paying.
  • Because it’s an installment loan, you’ll pay it back over a defined period, with one set regular monthly payment. Imagine circling the date on the calendar when you’ll have that debt paid off!

And maybe the best part: You could save money on interest on higher-interest debt when you consolidate to a personal loan with a lower fixed interest rate.

Want to see how that works? Our debt consolidation calculator will show you how much you could save in interest.

How do I choose a personal loan for credit card debt?

If there is a downside to personal loans, it might be that some of them come with fees like origination fees and closing costs, or prepayment penalties if you pay off the loan early. Discover Personal Loans doesn’t charge any of these fees.

Once you decide on a personal loan for debt consolidation, you will want to comparison-shop for personal loans as you would for any major purchase.

Review and compare these five factors:

  1. Interest rate. Look for a rate lower than what you currently pay on your highest-rate credit card debt. Keep in mind that some lenders may offer low rates but have high fees.
  2. Fixed payment. A fixed rate (versus a variable rate) means you’ll have the same payment every month. This makes monthly bill-paying easier.
  3. A repayment term that you choose, such as 36-84 months.
  4. Fees. Steer clear of loans with added fees like application, origination, or closing costs.
  5. Prepayment penalties. Make sure there’s no prepayment penalty, so you can pay off your loan anytime you like. Discover Personal Loans does not charge any fees or prepayment penalties as long as you pay on time.

Celebrate your progress

Once you start making a dent in your credit card debt, take a moment to enjoy your progress. It’s a big milestone and you should be proud.

Then, keep your momentum going by sticking to your budget, paying off your credit card balance in full as often as you can, and increasing your savings. You could see your credit health and your general well-being soar.

Want other actionable tips on how to get out of credit card debt faster?

Read More

Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.

*ABOUT SURVEY
All figures are from an online customer survey conducted August 19 to September 6, 2022. A total of 665 Discover personal loan debt consolidation customers were interviewed about their most recent Discover personal loan. All results @ a 95% confidence level. Respondents opened their personal loan between January and June 2022 for the purpose of consolidating debt. Agree includes respondents who ‘Somewhat Agree’ and ‘Strongly Agree’.

1 https://www.federalreserve.gov/publications/files/scf20.pdf
2 https://www.nerdwallet.com/article/credit-cards/2023-consumer-credit-card-report?trk_location=ssrp&trk_query=debt%20shame&trk_page=1&trk_position=1
3 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8806009/
4 https://www.nerdwallet.com/article/credit-cards/making-small-frequent-payments-credit-card-good-idea#:~:text=Paying%20your%20credit%20card%20bill,to%20make%20mid%2Dcycle%20payments