Dear Money Mentor: How do I begin paying off credit card debt?

May 30, 2022

Establishing credit can help build your future, but credit card debt can be overwhelming to manage. Here are some solutions to pay off credit card debt, as well as tips to further develop successful spending habits.


Dear Money Mentor is designed to answer common consumer banking questions and offer guidance to improve financial wellbeing. Read on for tips and expert advice from Nancy Smock, branch manager, and Anthony Marengo, branch assistant manager.

If you have credit card debt, you aren’t alone. According to the Federal Reserve Board's latest Survey of Consumer Finances, the mean credit card balance is $5,700 per household.1 But credit cards are not all bad. When used correctly, they can help you establish a positive credit score, enabling you to purchase items like homes and cars.

If you’re ready to have a healthy relationship with plastic, here are six strategies to pay off debt. Plus, four tips for developing successful future spending habits.


Strategies for paying off credit card debt

1. Talk to a banker about settling credit card debt

Bankers have seen it all during their careers, so there is no need to be embarrassed about credit card debt. If you feel like you’re falling behind on payments, don’t wait to bring a trusted financial professional into the fold. The sooner you ask for help, the easier it is to course-correct.

2. Make use of the debt avalanche method

Let’s say you have three credit cards. One with a 5 percent interest rate, one with a 12 percent interest rate and one with a 24 percent interest rate. Even if your lowest interest rate card has a more significant balance, pay off the card with the highest interest rate first. Why? It will rack up debt faster. As soon as that first card is paid off, move monthly payments to the second-highest interest rate card. And so on. This is known as debt avalanche.

3. Never miss a credit card minimum payment

If you’re implementing the avalanche approach, note that you shouldn’t neglect other cards while focusing your debt-paydown efforts on one. Make sure you’re at least paying the minimum monthly amount on all credit cards to avoid missed and late payments. Those are a huge threat to your credit score.

4. Pay more than the minimum credit card payment

When only paying the minimum amount due, most of your monthly payment will go toward interest. It won’t actually put a dent in the actual debt you owe. Even if you can only contribute an extra $5, it will help pay down the principal balance.

5. Conduct a credit card balance transfer

As a rule of thumb, keep your credit utilization at around 30 percent. (This is the amount you actually use compared to how much is given to you.) Once you’re hitting the 50 to 60 percent mark, take more drastic steps to get debt under control.

If you qualify for a balance transfer, all of your credit card debt can be loaded to a new credit card. Doing so can offer an introductory promotion of lower or zero percent interest rate for a specified time, such as 12 months. Accordingly, it allows your monthly payments to be more effective in paying down debt. This is because more (or all) of the amount goes toward the principal instead of interest.

6. Consider a credit card consolidation loan

Another option is to roll all your credit card debt into a personal loan. An appealing option to many, for the interest rate will be fixed and typically lower than a credit card. You’re able to see when the loan will be paid off based on the term length you choose and you’ll know exactly how much you need to pay every month.


Once you’re out of debt

1. Avoid closing credit cards

If you have difficulty resisting the temptation to swipe, you should completely close a card once you pay the debt, right? Wrong. That’s because the length of your credit history plays a factor in your credit score. The longer your credit history, the better. Cut up the card or lock it away if you have to, but never close the account. The exception to this rule comes with the accumulation of too many cards, if you feel you have an excess amount of credit accounts open you should contact your financial advisor to evaluate your situation. They will be able to help you find the right balance.

2. Turn credit card payments into savings

Don’t fall into a trap of thinking you have all this extra money to spend after the debt is paid off. Instead, take the amount you were putting toward your credit card and save it—whether for short-term or long-term financial goals.

3. Increase your credit limit

This may seem counterintuitive if you’re prone to acquiring debt but ask your creditors to raise your limits. It can actually improve your credit score. This is because the more credit you’re approved for and don’t use, the more responsible you look to lenders.

4. Set a limit for yourself

As mentioned earlier, you should never exceed that 30 percent credit utilization mark. But if that’s even too high for your comfort, set a personal limit you know you can pay every month.


Find more resources on ways to manage your debt.


1 “Changes in U.S. Family Finances from 2013 to 2016: Evidence from the Survey of Consumer Finances.” Federal Reserve Bulletin, Vol. 103, No.3, September 2017.

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