How to Pay Off Credit Card Debt in 7 Steps

How to Pay Off Credit Card Debt in 7 Steps

Being in debt is not fun. Unfortunately, many people do find themselves in debt, carrying a balance on multiple credit cards and loans. Even if you have a debt problem that seems insurmountable, you can eliminate credit card debt on your own without using a debt consolidation service. While I think the debt consolidation company route could be helpful to some, they are, for the most part, charging you money for something that you could do on your own.

7 Step Debt Reduction Strategy

The following steps bear some similarity to the Debt Snowball debt reduction method. However, there are some practical tips added to make your debt reduction program more effective. Before you start this process, I recommend that you read 12 Steps to Financial Freedom and Personal Finance Success so that you can build the foundation for this process.

1. Make a List of Your Credit Cards

Gather all of your credit cards and any other loans. Make a list on a piece of paper (or you can use index cards or Post-It notes). Next, write down the name of the credit card or loan, what you owe, the current interest rate, and the phone number for each card. Here’s a sample debt reduction spreadsheet that you can use.


Note: In the illustration, the 1st number is the balance, 2nd number is the credit limit, and 3rd number is the interest rate

2. Negotiate with Card Issuers and Lenders


Call each company and ask for a lower interest rate; also check what they can offer you in terms of balance transfer deals. If the first customer service representative is not helpful, either (1) ask to speak with a supervisor, or (2) hang up and call again. There are good reps and bad reps; you don’t want to waste time with the bad reps.

Don’t be afraid to pit them against each other. Say something along the line of ABC lender is giving me this deal, could you beat their offer?


  1. Don’t limit yourself to your existing credit card companies and lenders. Seek out other lenders who might offer you a better deal. You might try credit unions, bank loans, or social lending networks.
  2. Don’t be afraid to apply for a new credit card that offers 0% APR balance transfer.
  3. If the rep won’t budge, you can also ask to speak to the supervisor. Supervisors are usually more accommodating.

3. Update and Sort the Cards


Once you have negotiated your rates with your credit card companies and lenders, update the interest rates and order the cards from highest interest rate to lowest. In our example:

  • Card A offered no fee 0% APR transfer if you open a new card or pay down the balance first.
  • Card B and C provides a courtesy interest rate reduction, and
  • Card D won’t budge.

4. Transfer Balances from the Highest Interest Cards to the Lowest


The quickest way to save money is transfer your balance from high interest cards to lower interest card(s)*. For example:

  • Transfer $300 from Card D to Card A (now that you paid it off, put it away)
  • Transfer $500 from Card B to Card A (maxing it out)

* Assuming there is no transfer fee. If there’s a fee, you will have to include the balance transfer fee in your calculation.

Also, take a look at the article Should You Transfer Your Credit Card Balance?

There are also a few things you can try:

  • Ask Card A to increase your credit limit, so you can transfer even more to that card.
  • Ask Card D and Card B to reconsider, now that you’ve shown them who’s boss

5. Pay Off the Highest Interest Card First


Here, you want to use the Debt Avalanche Method. To do this, you pay the minimum amount due on card C and A, and put the rest of your budget to pay down the highest interest card. Let’s assume you pay:

  • Card D – paid off via transfer
  • Card B – pay $100
  • Card C – pay $20
  • Card A – pay $20

Note: If a card offers a “no payment” grace period, don’t pay anything and put that money toward the highest interest rate card. However, you have to be careful and keep track of when the first payment becomes due; many cards with a no payment period retroactively charge you interest for the entire period (from day 1) if you are late.

6. Snowball Your Debt


Once card B is paid off, snowball that monthly payment to card C — which basically means use the money that was for card B on the next debt. For instance:

  • Card D – paid off via transfer
  • Card B – paid off
  • Card C – pay $120 ($100 from Card B and $20 from Card C)
  • Card A – pay $20

7. Repeat Until All Your Debts are Paid


Once the card is paid off, snowball that monthly payment to the next card so that you’ll be paying $140 per month on card A.

Bottom Line

  • Negotiate with your current credit card companies and lenders.
  • Don’t be afraid to add new lender(s) if they offer a better deal or a 0% no fee balance transfer.
  • Move your debt from highest interest to lowest interest loan.
  • Pay off your most expensive (highest interest) loan first and snow ball your way down to the next one.

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30 thoughts on “How to Pay Off Credit Card Debt in 7 Steps”

    • Thank you for the correction.

      When I call my credit card companies, they always offer the “no fee 0% APR” transfer, and I don’t even ask for it. May be it’s because I pay off every month and have good credit score?

      I can see how they may be a little more hesitant with folks who owe balance from month to month. In this case, another option is to get a new card that offers “no fee 0% APR” transfer.

      • My credit cards offer me 0% transfer offers too. They want to get your money so you can mess up with them and not pay it off all on time and they get some interest. I do have a good credit score too though 🙂

        I am not saying the card you owe $200 on won’t offer you a 0% transfer – they just aren’t going to reduce your current balance to 0% as well. So the stuff you have on there already will stay at 12% and the new stuff goes to 0%

        Which is why you need to pay off that $200 first ;). then do the transfer.

  1. I really liked the illustrations on this, make it much more user friendly and helped keep the cards straight.

    Fortunately we were able to pay off our credit card in one fell swoop.

  2. Good explanation – those pictures sure make this process easy for anyone to follow. But, er, I do have just one (stupid) question… what is this ‘APR’ of which you speak?

    • @Jen – APR stands for Annual Percentage Rate, or the effective interest rate that the borrower will pay on a loan taking into account any fee.

    • Not really. Your % usage is calculated not by card but by credit type. So all your revolving credit is in one basket. It makes no difference whether you have $5000 on one card, maxed out, with five cards and a combined credit limit of $25k or whether you have $1000 on each card. Read your own link–they’re suggesting that your total revolving credit needs to be higher, but they aren’t saying that spreading your debt across multiple cards inherently helps scores.

      We’ve always been near the max of our Discover card because I got it in college and had a limit of $1000. For some reason, Discover is VERY reluctant to raise credit limits–at the same time other companies were giving me $15k-$30k credit limits PER CARD, Discover wouldn’t bump our limit from $1.5k to $2k until we maxed it out (and paid it off) every month for a YEAR. (As an FYI: We put EVERYTHING on that card, even charitable donations, for the cash back. We even put parts of car and furniture purchases on the card briefly. Remodeling expenses and water heaters–on the card!) Despite this, our credit score hovers somewhere above 800 most of the time–I have about $80k of revolving credit available, of which we’ve never used 10%, even during a big remodel.

      • What your goal is very important in deciding which course of action to pursue. I agree with you that transferring your balances to lower interest rate cards is ideal. The goal is to get out of debt, pay debt off sooner with the smallest amount of interest. If your credit score lowers for a period of time and you aren’t looking at making a bit ticket purchase that requires credit approval, I think you should go ahead with the transfers. Btw, no one should be looking at acquiring more unsecured debt while trying to pay off existing debt. Don’t worry about the score if it has no relation to the actual goal you are trying to accomplish.

  3. Thanks for this post. I’m actually going to apply a little of this method to my own life. I actually have a credit card right now that has a balance of a little under $12,000 on it. The card rate is 18%. I know that it’s crazy but I never really thought of transferring the balance down to lower rate credit cards. I feel silly that I haven’t done this already.

    I run a personal finance site because I want to learn about these things, not because I already know it all. This is great advice.

  4. @Jen – there’s no such thing as a dumb question here. I am learning too.

    @Matt – thank you. When you ask for transfer, be sure there is no transfer fee; otherwise, you have to do some calculation to see if it’s worth it.

    @Paidtwice – thank you for the clarification. I know what you mean now. Usually, the payments also apply toward the lowest interest rate balance first, so you ended up paying the $200 @ 12% last.

    @Mrs. Micah – thank you.

    @ChristianPF – good add. I added your comment to the post.

  5. Great post Pinyo! There is another option, and one that I prefer…pay them off in order of balance, lowest to highest rather than by interest rate. Sure, mathematically paying off my interest rate makes more sense, but frankly if you have this kind of balance on high interest rate cards your not a pro at math anyway (this includes me).

    Paying off by lowest to highest balance is a psychological win. It makes your debt seem to go away faster and gives you that feeling of progress. I think personal finance is about 10% math and 90% psychology.

    One other note, it used to be you could transfer to a low rate card for free. Most offers now have a 3% or more balance transfer fee, so be aware of that. Now granted, that’s probably still cheaper than the higher rate, but something to consider.

    • @glblguy – That’s a great add. I have seen the “10% math and 90% psychology” discussed before and as a logical person, I was against it at first. However, when I reflect further on this, I really support the argument at this point; that is, the mathematically best option may not be the best for everyone.

  6. Its actually more effective to sort the cards in order of lowest balance to highest balance, regardless of the interest rate.

    Personal finance is more about behavior than math. People are less likely to stay on track when tackling large balances rather than small balances. It also gets your snowball moving much faster to go from smallest balance to largest balance.

    The point that people need to realize is that the interest rate isn’t the problem. The out of control spending and use of the cards altogether is the problem.

    • @Kevin – welcome to Moolanomy. Either method works for me. I prefer the mathematically better approach, but I am sure many people will be more comfortable with the psychologically better approach.

      Great point in the closing paragraph.

  7. That’s a good common sense plan on how to attack your debt problem, getting rid of your worst problems first. But I would have to agree that personal finance is more about finance than about math.

    If you have a ton of credit card debt like over $10000, and are in dire straits, meaning you are overwhelmed, I recommend going through a debt settlement company where they allow you to stop paying all your credit card bills immediately in order to offer the CC companies a settlement. It’s risky since you could go into default on your current accounts but if you are nearing bankruptcy anyway it could be a lifeline.

  8. One advice that I got from another blog is that if we have multiple credit cards we should eliminate first those credit cards that has the lowest amount of debt, then to the highest debt.

  9. I tried calling my card company to attempt to negotiate a better rate but they wouldn’t budge. They were in fact quite disrespectful to me. My credit rating is not great and they obviously know that. As such they seem to think it’s fine to talk to me almost as if I’m a criminal! I just wanted a little extra finance to help fund my wedding guitarist business and they were wholly unhelpful.

  10. This is a very useful article! I really appreciate the tips. Do you think that automatic saving is a good method for paying off credit card debt as well?

  11. Thanks for this post. It’s a great breakdown of how to pay off credit cards. I found unbury.me to be quite helpful. It helps people see how debt snowball or debt avalanche works.

  12. Great article. That’s a very good advice for those who have been also struggling and making ways in how to pay and limit thier debts. I agree with you when it comes to paying down debts. Learning how to quickly pay off personal loans, business loans, and any other kinds of loan can help you save money and reduce stress caused by your debts.

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