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How to pay off credit card debt: 5 ways to bury your balances

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Anyone who’s carried credit card debt knows that it can weigh heavily on your mind. Although it would be ideal if we could all avoid it, the reality is sometimes we have no other choice. Before we know it, we’re in too deep and frantically wondering how to pay off our credit card balances.

The good news is that no matter how daunting it may seem, you can pay off your credit card debt. In fact, not only is it possible, but there are multiple ways to go about doing it, depending on your situation.

In this article, we will go over the top five best opportunities out there for the anxiously indebted.

5 strategies to pay off your credit card debt

Here’s the thing: like many financially adjacent issues, the topic of credit cards can be quite personal to the individual. For some, it may not be easy to even think about. Others may find themselves obsessing day and night over ways to become debt-free.

But the reality is: it’s in your best interest to pay back any credit card debts as soon as possible. When you do so, you improve your credit utilization ratio, which frees up the amount of available credit you have in comparison to the amount you’re using. And this can help you achieve a higher credit score.

No matter where you fall on the spectrum, there is a solution that will work for you. Here are a few solutions that can help you get rid of your credit card debt.

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1. The “avalanche” method

In the natural world, avalanches are something to be feared. When it comes to paying off credit card debt, however, they are something to be revered.

For the uninitiated, the “Avalanche Method” is a debt-repayment strategy that targets debt, including credit card debt, with the highest interest rate first. Say you owe money on two separate credit cards. The first has an interest rate of 20%. The second has an interest rate of 18%. The Avalanche Method dictates that you pay off the 20% card first, even if the total balance owed is less than the card with an interest rate of 18%.

It may seem counterintuitive to pay off a smaller balance than a bigger one, but creating a debt avalanche will actually save you money in the long run by targeting the cards with a higher interest rate first. That said, make sure you’re making your minimum payment on all the credit cards you carry debt on each month. Making your minimum payments each month can help you maintain a good credit score

2. A credit card balance transfer

If you feel your interest rate is too high and would like to pay off your credit card debt faster, it might be worthwhile to see whether you can transfer your credit card balance to another card. This action is known as a credit card balance transfer and there are many balance transfer credit cards designed for this problem.

A credit card balance transfer allows you to pay off your credit card debt with another credit card with a lower interest rate.

Often, banks or credit unions will offer promotional credit cards that offer 0% interest for the first 12 months. If you can qualify for one of these cards, you can use it to pay off your high-interest credit card or cards.

While it’s tempting to get out of the grasp of high-interest debt, there are obstacles associated with this method. For example, you will have to qualify for a new credit card, depending on your credit score.

Here’s a quick tip: if you do end up transferring your balance to a new credit card, don’t close the previous card. Doing so could lower your credit utilization ratio and negatively affect your credit score.

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3. A line of credit

Opening up a line of credit to pay off credit card debt is taking a similar approach to a balance transfer. However, in this case, instead of opening a new credit card, you are opening a line of credit with your bank or credit union.

Borrowers are drawn to lines of credit because they usually have lower interest rates and higher limits. Having a low-interest rate is advantageous in itself, but having a higher limit can also benefit you as your credit utilization ratio is another factor that affects your credit score.

However, a line of credit can be even harder to successfully secure than a balance transfer credit card. Your ability to take out a line of credit will depend on several factors, just like any other personal loan option. These factors can include but are not limited to, your salary, credit score, and whether or not you have a cosigner.

4. The “debt snowball” method

The “Snowball Method” is another type of DIY debt repayment philosophy that attacks your smallest debts first.

Once you’ve eliminated your smallest outstanding debt, you then move on to the larger debts.

There is a psychological element to this approach. Since paying off a credit card can be daunting, getting an account down to zero can be a large confidence boost.

Of course, while you’re focusing on the smallest debts, you’re required to continue to make your other minimum payments.

5. A home equity loan

One last option that some may find helpful in their debt-elimination journey is taking out a home equity loan.

Home equity loans generally carry lower interest rates than the common credit card. Although it may seem precarious to tie your credit card to your home loan, it may be the right option for some borrowers who don’t have strong enough credit to qualify for other forms of debt consolidation.

Of course, this is only an option for people who own a home, but it is still a viable option for repaying debt at a lower interest rate.

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