What’s the best way to pay off credit card debt?

You might be wondering, “What’s the best way to pay off multiple credit cards?” If you’re juggling debt on multiple credit cards, it may help to take a close look at your finances and come up with a realistic plan of attack to get out of debt.

Let’s take a look at a few strategies to help you get started.

Best strategies to pay off multiple credit cards

If you can afford to do so, stop using your credit cards.

This may not be possible for everyone. After all, you still have to put food on the table and pay your bills. If you can’t cut your credit card use altogether, take a look at your budget and consider using your debit card instead whenever possible.

Additionally, consider at least one of the following options that might help you take control of your debt.

Pay more than the minimum

Sometimes it can be tough to pay the minimum amounts due on your credit cards every month. But if you find yourself in a position to pay a little extra and do so as often as you can, it can go a long way toward reducing your overall debt.

Here’s how it works: If you’re able to pay more than the minimum, whatever extra you can afford may be applied toward the principal balance rather than toward accrued interest. This means that you’re working to reduce the amount due, which may help you pay it off faster.

When it comes to applying extra funds to combat your debt, you often hear of two popular strategies: the snowball method and the avalanche method.

1. Snowball method — You make your minimum payments on all of your credit cards. Then, you focus all of your extra money on paying off the card with the smallest balance. Once you pay that card off, you take the money you were paying for that card and put it toward the card with the next smallest balance. This strategy is good for people who need a little extra motivation to stay focused.
2. Avalanche method — You still make your minimum payments on all of your credit cards, but with one major difference. You use the extra cash to pay off the card with the highest interest rate. Once that card is paid off, you apply your money toward the card with the next highest interest rate. This strategy is good for people who want to save more money on interest charges.

Set up a Pre-Authorized Debit (PAD)

A simple step that can make a big difference is opting to pay your credit card bills by PAD.

Setting up a PAD may help safeguard against late payments, which typically trigger costly fees getting added to your balance. If you opt for a PAD payment to help avoid those fees, make sure your bank balance can cover your payment by the due date.

Using PADs can also aid in building healthy financial habits by helping you pay your credit card bills with minimal effort.

Consolidate credit card debt

If you don’t want the hassle of managing multiple credit card payments each month, you could look into consolidating your debt into one monthly payment. There are various options for consolidating debt, but depending on your situation, you may want to do this with either a balance transfer credit card or with a personal loan.

Balance transfer card

If you choose a balance transfer card, look for one that offers an introductory 0% APR on balance transfers and charges a low balance transfer fee. But be careful, because after the introductory period ends, your interest rate could skyrocket. For that reason, this strategy makes more sense for someone who plans to pay off their credit card debt within the introductory period. So if you choose this method of paying down your debt, make sure you understand what that period is and when it expires, and limit use of the card to the balance transfer, avoiding any purchases with the card.

Depending on whether you’re approved and the new credit limit you might receive, you may be able to pay off your existing credit cards with a balance transfer card. But keep in mind that balance transfer cards often come with their own restrictions and fees, so make sure to read the terms and conditions carefully.

Remember that you ultimately still owe the money. But the benefit is that you’re likely reducing the number of monthly payments and potentially lowering your interest rate, which may help you tackle your debt in a more manageable way.

Personal loan

If you’d like to spread your payments over a longer period of time, a personal loan may be an attractive option for you.

Additionally, if you qualify for a personal loan with a low interest rate, you may save money over your repayment period. Remember that a balance transfer card may only offer the introductory 0% interest for a fixed period of time. Your interest rate after the introductory period could be variable, which could make it more difficult to budget what your monthly payments may be. But with a personal loan, installment payments are typically fixed and predictable, which could make budgeting your monthly payment a bit easier.

If you’re considering a personal loan to consolidate your debt, make sure you do your homework. Some lenders charge arrangement fees and late fees, among others, so read any loan agreement carefully before you sign.

Next steps

After you’ve consolidated your debt and paid off your credit cards, you might wonder if you should close those accounts. But we don’t recommend you do that.

That’s because closing your oldest credit card can adversely affect the length of your credit history, which in turn can hurt your credit. So you’d be better off keeping your oldest card open and using it to buy something small like a coffee now and then, to keep it active, as lenders can close unused accounts. 

Now that you’ve got your finances sorted, it may be a good time to build an emergency savings account that you can tap into the next time something comes up, so that you won’t fall back into debt. You can start by setting aside a small amount every month and watch it grow over time.