How to Deal With Your Credit Card Debt

While Americans reduced their credit card debt substantially from 2020 to 2021, the average cardholder still carried $5,668 in credit card debt last year.¹ When used responsibly, credit cards can be a key tool to help build credit and manage expenses, but it’s important to keep your balances in check. Here is some useful advice if you’re looking for ways to get a better handle on your credit card debt:

How to pay down debt faster

To best manage your card usage, you’ll want to pay off your credit card purchases in full on time each month to avoid paying interest. But there may be times when unexpected expenses and large purchases cause you to carry a balance from month to month. The key is paying off as much of your outstanding balance as you can each month, so you can pay down credit card debt faster. Here’s how:

1. Make extra payments – There are two schools of thought about making extra payments to pay down credit card debt. One approach is to make extra payments on the credit card with the highest interest rate first, since, mathematically, it will save you the most money in the end. The other approach suggests paying off the smallest bill you have, so you can reduce it sooner, and give yourself small wins to stay motivated. These are commonly referred to as the Avalanche vs. Snowball methods of debt repayment.
   
   No matter your approach, if your goal is paying down credit card debt, you should be diligently devoting every spare dollar toward that debt.

2. Cut down on expenses – Paying down debt calls for some sacrifices. Start by getting an accurate picture of what you’re spending, and be honest with yourself about where you're spending money on nonessentials. Are you using your gym membership to its fullest? Are you using it at all? Are you regularly using all of those streaming subscriptions? Did you sign up for a free trial and forget to cancel before the monthly fees kicked in? Little changes like these can put more money in your pocket.
   
   The more deeply you cut your expenses (assuming you use ALL of the money you’re saving to pay down your credit card debt), the more ability you’ll have to make larger payments toward your debt.

3. Automate payments – If you haven’t already, sign up for automatic payments. This helps you stick to an on-time payment schedule, avoid unnecessary late fees and further reduce your debt. See if it's possible to schedule automated payment date(s) to align with you paycheck and other bills.

4. Avoid making additional purchases – While you’re paying down debt on a particular credit card, the responsible thing to do is remove that card from your wallet for a while and store it away until your balance is within a more manageable amount. It’s much harder to reduce debt if you’re steadily adding more purchases to your outstanding balance.

Can you negotiate credit card debt?

Don’t be afraid to ask for help when you really need it. Getting in touch with your credit card company can be a smart move because lenders are willing to work with you to find a solution to your credit card debt. Working with them, you may be able to make new payment arrangements or take advantage of special offers that can benefit you.

Make your debt more manageable

If your credit card debt has become too difficult to manage, and you need a way to gain more immediate control of your balances, a debt consolidation loan is worth exploring.

By taking out a loan to pay off your debt, you’re transferring several credit card balances into one new loan. This creates one fixed monthly payment (with only one due date to remember), which could potentially save you money on interest over time. When managed well, debt consolidation can help give you more solid footing to grow.

Learn more about how debt consolidation loans offered through OneMain Financial can help you manage your credit card debt and put your finances back on track.

Explore better credit card options

It’s possible that the reason your credit card debt has become hard to manage is because you’re carrying a card that’s not right for you. If your credit card is not improving your financial situation, then it’s not a good fit. Once your current credit card debt is behind you, it may be a good idea to search for a new card moving forward — one that fits your finances and goals a bit better.

Stay focused on moving forward

Credit cards can be a useful tool in building your credit and helping with expenses, if used responsibly. Keeping a close eye on your spending, payment due dates and balances — and adjusting your credit card usage accordingly — can help you maintain a healthy credit lifestyle now as you build toward a stronger financial future.

1. “Quarterly Report on Household Debt and Credit,” Federal Reserve Bank of New York. https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2021q4.pdf

This article has been updated from its original posting on July 21, 2021. Maureen Rayburn contributed.