How to Pay Off Credit Card Debt

To pay your bills more efficiently, you can set up one-time or recurring payments through INTRUST online and mobile banking with our service called bill pay. We recommend using bill pay because it:

• Allows you to pay all your bills in one place, including your credit card bills, so you don’t have to log in to multiple sites.
• Provides a record of all the bills you’ve paid, so you can see the companies you pay and the total amount you pay each month for all your bills combined.

Alternatively, most companies make it easy for you to set up payments directly through their websites. These are called automatic payments or autopay. Even though this method is automated, it’s harder to keep track of everything you’re paying from your checking account, which can make it difficult to plan for expenses and identify extra money you may have each month to put towards debt. That’s why bill pay is our favorite method for making and tracking monthly payments.

Once you’ve made your list, subtract the amount you spend from your monthly income. For example, if your income is $2,600 and your payments total $2,100, your extra cash for the month is $500. You likely won’t want to put all that extra money towards credit card debt, because you’ll want a cushion for any unplanned expenses that might come up (such as car repairs). But if you’re trying to pay off credit card debt fast, it’s good to regularly ask yourself these questions:

• Can I afford to pay more on my credit cards this month?
• How much money am I comfortable putting toward my credit card debt?

The more you can pay each month, the faster you’ll pay down credit card debt.

The list you make of what you’re paying each month might remind you of subscriptions you’ve forgotten about. Cancelling subscriptions can give you a few extra bucks for your credit card payments. Even if it’s only $10 more toward your card payment, that adds up. Some people also find that selling items they no longer use is an effective way to earn extra money. It’s easier than ever these days with online sites and marketplace features on social media.

This method is called the snowball method because it can help you see progress quicker, which may help you build momentum. Start by listing your card balances from lowest to highest. For example: $1,600, $3,000, and $4,500. Try to make more than the minimum payment on the lowest balance ($1,600) while continuing to make only the minimum payments on the other two balances. Working on your balances one at a time may feel less overwhelming.

The downside of this strategy is that it doesn’t consider your interest rate: the amount it’s costing you to borrow the money. It’s important to note that interest adds up daily on your unpaid balances and can grow quickly. If the $4,500 balance is also your highest interest rate, you may want to read about the debt avalanche method, which we cover below.

With the debt avalanche method, you make more than the minimum payment on the balance with the highest interest while continuing to make the minimum payments on your other balances. Start by locating the annual percentage rate (APR) for purchases on your cards and listing them from highest to lowest. You can find your APR:

• On your most recent credit card statement.
• By reading your card’s terms and conditions.
• Through your account on your card company’s website.
• By contacting your card company directly.

Once you have the highest APR card paid off, repeat with the next highest, and the next, until you’ve paid off all your balances.

The downside of debt avalanche method is that if you owe a lot of money on a card, say a few thousand dollars, it can take a long time to pay off — a couple of years even. Saving yourself money on interest can be a good thing, but the money you save may come at the cost of feeling like you’re going nowhere fast. Whereas with the debt snowball method, you may get some quick wins that’ll keep you motivated and feeling good.

With this strategy, you apply for a personal loan. You use the funds from the personal loan to pay off your credit card debts. You then make a single payment each month to pay off the personal loan. The benefits of this strategy are:

• You only make one payment.
• Personal loans often have lower APRs than credit cards if you have good credit.
• It’s a consistent payment amount each month, meaning the amount you pay is not variable (or does not change) based on your credit card balances.

However, if your credit score has recently dropped, you may not meet the lender’s requirements for a loan, or you may qualify for an amount that won’t cover all your credit card debt (meaning you could still have multiple payments). Additionally, some lenders charge extra fees. You’ll want to make sure you know what those fees are and what they mean for your loan.

You’ll also want to avoid using your credit cards while paying off your personal loan. Charging purchases to your credit cards during this time will only increase your debt. It’ll take you longer to pay off what you owe and will increase your monthly expenses.

You may be able to transfer the balance of one or more credit cards to a new credit card. This is called a balance transfer credit card. The benefit of this strategy is that a balance transfer credit card could have a low introductory APR period, which means you’ll be charged less (or no) interest on the balance you’ve transferred for a certain period, often 12 to 18 months. However, there are a few things to note:

• A balance transfer usually requires a Fair or Good credit score.
• You’ll want to pay off the balance before the introductory APR period ends.
• You might be required to pay a balance transfer fee, which is a small percentage of the balance you’re transferring.

If the card requires a balance transfer fee, you’ll want to consider whether the card will actually save you money. In other words, think about the interest you’re currently paying on your cards. Is that interest higher than the balance transfer fee? A lot higher? If so, the balance transfer card could be a good strategy. If not, you might want to consider another strategy.

Unless you already have an emergency savings account with enough money to cover unexpected costs, such as car repairs and medical bills, you’ll likely want to avoid spending your entire tax refund on credit card debt. Putting that money into savings now may help you later when you need it most.

• Visit a nearby INTRUST Bank location to open a savings account.
• If you have an INTRUST checking or spending account and a savings account, and you are enrolled in online and mobile banking, you can easily transfer money between your accounts.

According to a report by Experian, the average American has three credit cards. The more you have, the harder it becomes to track when your bills are due and manage your spending across each card.

If you’re in credit card debt, of course you’re carrying a balance on your cards. That’s OK for a short time, as long as you’re making at least the minimum payment on your cards every month. As you’re working towards being debt-free (yes, you’ll get there), know that it’s best not to keep a balance on your cards. Despite popular belief, carrying a balance could hurt your credit score and cost you more money.