If you’re in credit card debt, you’re not alone. The average American holds $6,194 worth of debt -- and that number is rising 3 percent per year, according to Experian. However, beyond just lowering your score, being in debt can leave you exposed to higher fees, can limit your ability to be approved for future loans, and can even have legal consequences.
Below are some practical tips to help yourself get out from under your credit card debt and strategies for staying out of debt once you get it paid off. With the help of these suggestions, you should be able to start planning your repayment strategy.
How to pay off credit card debt
Pay as much as you can each month
Although making the minimum payment is all you need to do to stay current with the card, paying as much as you can each month is the best way to pay off debt. You can use a credit card calculator to see the difference that a bigger payment makes.
Let’s say, for example, you have $5,000 worth of credit card debt with an interest rate of 18 percent. If you only make the minimum payment of $125 each month, it will take you 62 months to get rid of your debt and you’ll pay $2,693 worth of interest. However, if you raise your monthly payment to $300, you can be out of debt in 20 months and you’ll only pay $797 in interest.
Get a personal loan
If your debt comes from multiple cards, you can use a personal loan for debt consolidation. By paying off all your cards with a loan, you’ll make it so you only have to focus on making one payment each month and you’ll only have to worry about one interest rate.
Use a balance transfer card
If you have a good or excellent card score, you may be able to qualify for a balance transfer card. You can use this type of card to transfer all of your balances into one place, which means you’ll only have to make one payment a month. Plus, some balance transfer cards even offer an introductory 0 percent interest rate. However, be aware that you usually can’t transfer balances between cards from the same issuer.
How to stay out of debt
Once you know how to get out of debt, it’s important to change your habits so that you don’t rack up another balance. Here are some suggestions to help you stay in the black:
Build up your savings
After you're out of debt, consider making regular contributions to your savings. Having some savings will help you feel prepared for unforeseen expenses like car trouble or medical debt. It can also help you pay off your credit card balances in full each month and boost your score.
Limit using your card
If you have a tendency towards creating credit card debt, you may want to limit how much you use your cards. Paying cash or using a debit card for everyday expenses can be an effective way to avoid overspending.