Credit card debt is at its highest level in six years. Among households with debt, the average credit card balance is nearly $16,000, according to Nerdwallet. You might not be dealing with that much debt. But figuring out how to pay it all off can still seem daunting.
These steps can help you get back in the black faster.
Figure out which debt to focus on first.
Logically, it makes sense to pay off the balance with the highest interest rate first. It will help you pay less overall in interest charges. But some argue there's a psychological benefit to paying the smallest balance off first to keep you motivated and on track.
Pay off the balance with the highest interest rate first if the interest you're paying on that balance is much higher than that on any other balances, and you don't think you can transfer the balance to a lower interest card and pay it off before it reverts to a higher interest rate (or the transfer fee required to transfer it is too high to make it worth doing).
Paying the smaller balance off first might make sense if you can transfer the highest interest balance through a low- or no-interest rate offer to another card, as long as you're sure that you'll be able to pay the balance off before the offer period ends. It can also make sense if the highest interest rate you're paying is not much higher than the interest on the small balance, and you're the type of person who needs a little encouragement to stay on track.
"We all have different forms of discipline," said Carolyn McClanahan, certified financial planner and founder of Life Planning Partners in Jacksonville, Florida, and some people "need occasional victories to see the cards go away." Although, she emphasized that, financially, "it makes better sense to pay the higher interest first."
Before deciding which balance to focus on first, you can also try calling your credit card issuers to see if you can get a lower fixed rate on the balance owed.
Create a plan and stick to it.
A big reason people end up with credit card debt is because they don't have a budget, said McClanahan. So a good way to start paying off your debt is to create a written plan, detailing which debt you'll tackle first and how much money you'll set aside each month to put toward your balances.
Calculate your budget with all of your monthly expenses and figure out all of the debt that you owe. Make sure to create a line in your budget for your card payments, and try to pay as much as you can afford. If you have it written down in your budget, you may not be as tempted to spend it elsewhere.