How to Pay Down Your Credit Card Debt

Americans carry $4,293 in average credit card debt across 2.5 credit cards, according to recent Experian data. With credit cards charging an average interest rate of 16.86%, according to the Federal Reserve, even the average credit card balance can cost hundreds of dollars per year in interest charges.

For those who have more debt, that number can climb into the thousands. March 21 is National Credit Card Reduction Day, offering an opportunity to review your credit card debt situation and find ways to pay off what you owe.

Tips for Trimming Your Credit Card Debt

If you're having a hard time finding ways to eliminate your credit card debt, here are some tips that can help you get started.

1. Put Your Cards in a Drawer

Before you start strategizing about how you want to pay off your credit card balances, consider putting a moratorium on your current credit card spending. Even if you manage to tackle your debt swiftly, it can feel like you're spinning your wheels if you're adding more to your balances each month.

By taking your cards out of your wallet and using cash or a debit card instead, you won't have to worry about losing ground as you work your payoff plan.

2. Find Room in Your Budget

The more money you can pay toward your credit card debt each month, the faster you'll eliminate what you owe. Take a look at your monthly spending and seek out areas where you can cut back and repurpose those dollars for debt reduction.

If you're living paycheck to paycheck, this step can be tough. Even if it's just a few dollars extra a month, though, it can make a difference in the long run. Do what you can and continue looking for opportunities to earn or save more in the future.

3. Snowball Your Debts

The debt snowball method is a popular strategy to pay off debt more quickly and can help you achieve your goal of becoming debt-free. To start with this approach, put all of your extra payments each month toward your credit card with the lowest balance.

Once that card is paid off, take the amount you paid toward the account each month and apply it to the card with the next-lowest balance, in addition to the payment you're already making on it. Once that card is paid off, you'll repeat the process until you pay down all of your cards.

The debt snowball method is a simple but effective way to focus your efforts on one debt at a time, helping you eliminate them more quickly than if you were to continue making the same payments on each card until they're paid off.

Find balance transfer credit cards in Experian CreditMatch.

4. Consider a Balance Transfer Credit Card or Consolidation Loan

If your credit is in good shape, it may help to apply for a balance transfer credit card or consolidation loan.

Balance transfer credit cards often offer introductory 0% annual percentage rate (APR) promotions, allowing you to move a balance over and pay it off interest-free. If you're caught with a balance at the end of the promotion, however, you'll start paying a higher interest rate on that amount going forward.

Also, balance transfer credit cards don't have set repayment periods, so they may not be a good choice if you'd be tempted to stick with the minimum payment.

With a consolidation loan, there's no 0% APR, but you may be able to qualify for a lower interest rate than what you're currently paying. Also, consolidation loans have set repayment periods, which means there's a light at the end of the tunnel.

Find the best personal loans in Experian CreditMatch.

If neither of these options sounds like a good fit, consider trying other ways to trim your credit card bills, like asking your card's issuer for a lower rate.

5. Once You've Reached Your Goal, Pay in Full

If you choose to continue to use credit cards after you've eliminated your debt, make it a goal to pay your balance in full each month by the due date. By doing this, you'll be able to take advantage of the rewards and other benefits credit cards offer while avoiding interest charges.

What to Consider Before Closing a Credit Card

If you choose not to continue using some of your credit cards after you've paid off your balance, consider keeping them in a drawer instead of canceling the accounts.

When you cancel a credit card account, it can potentially hurt your credit scores by reducing your overall credit limit. Your credit utilization—your balances divided by your credit limits—make up 30% of your credit score.

If you cancel a card with a high credit limit and have high balances on your remaining cards—even if you pay them in full each month—it could increase your credit utilization and negatively impact your credit scores.

If you decide to hold on to the cards you no longer plan to use, try to use them at least once every six months or so to keep the accounts active. Otherwise, your card issuer may choose to close down the account for you.

Maintain Your Motivation

It can be tough to pay off credit card debt, especially when you'd rather use that money for other things. To help you stay motivated, think about what you want to do with the extra cash flow after you've eliminated all of your credit card debt.

If it's a vacation, start planning where you want to go and what you want to do. If it's saving up for a home renovation, imagine the plans and the positive effect the improvement will have on your home. Whatever it is, try to visualize how paying off credit card debt will make your life better, then remind yourself of that vision every time you're struggling to stick with it.

Paying down credit card debt can take time, but it's time well spent.