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If you have credit card debt, you're not alone. In fact, about 61% of Americans have a credit card and cardholders carry an average balance of $6,194, according to Experian. While it can be worthwhile to have a card that gives you the opportunity to earn a lot of rewards, all of those savings are for nothing if you're carrying a balance and paying high interest.
There are plenty of ways for you to pay off credit card debt, but not all are created equal. If you want to tackle your debt head on, you'll need to consider interest rates, fees, how much you can afford to pay and more before settling on the best repayment method.
Below, CNBC Select reviews the best ways to pay off credit card debt so you can be on your way to a debt-free life.
- Use a balance transfer credit card
- Consolidate debt with a personal loan
- Borrow money from family
- Pay off high-interest debt first
- Pay off the smallest balance first
One smart way to get out of debt is to complete a balance transfer. You can transfer debt from high interest credit card(s) to a balance transfer credit card that offers no interest for up to 20 months.
If you want a long stretch of time to pay off your debt, consider the Citi Simplicity® Card with 0% APR for the first 18 months on balance transfers (then 14.74% to 24.74% variable APR; balance transfers must be completed within 4 months of account opening) or the Discover it® Balance Transfer with an introductory 0% APR for the first 18 months on balance transfers (then 13.49% to 24.49% variable APR).
Balance transfer cards often have set maximum limits on the amount of debt you can transfer, and you can't complete a transfer between cards issued from the same bank. Make sure you read the fine print before requesting a transfer. Also be aware that good or excellent credit is often required for a balance transfer credit card.
Find out more about how to make the most of your balance transfer.
Personal loans can be a good alternative to balance transfers if you have a large amount of debt. If your debt is spread out across several credit cards, you can consolidate it into a personal loan. And depending on your credit score, you may qualify for a loan amount that will cover your entire balance.
A personal loan provides you with a fixed amount of money over a fixed time period and usually at a fixed interest rate. The interest rates for personal loans are rarely 0%, but often lower than keeping a balance on your current credit card(s).
If your credit is poor (scores below 580), you may have a hard time qualifying for a balance transfer credit card or personal loan. As an alternative, you can ask a family member or close friend for a loan.
Make sure you set up a repayment plan before borrowing any money and stick to it so you don't risk damaging your relationship.
If you have debt across multiple credit cards, it's generally a good idea to start paying off the card with the highest interest rate first. This is called the avalanche method of debt repayment. You can minimize the interest you accrue this way, which will help you save money in the long run.
If you completed a balance transfer, but weren't able to transfer all your debt to the intro 0% APR card, pay off any lingering balances on the high interest card first — but still make sure to pay the minimum on your balance transfer card. After the high interest balance is paid off, you can start to tackle the debt on your balance transfer card more agressively.
Similarly, if you've consolidated debt with a personal loan or loan from family or friends, prioritize paying off high interest balances first. For example, say you have two credit cards, each with a $1,000 balance, but one card has a 25% APR and the other a 15% APR. After you pay the minimums each month, you should put the money from the loan toward the balance on the card with the 25% APR first. Then any remaining funds from the loan can go toward the lower APR balance.
An alternative to the avalanche method is the snowball method of debt repayment: Paying off the smallest balance first can be a good way to boost your confidence and kick off debt repayment. Let's say you have a $5,000 balance on one card and a $1,000 balance on another. If you start paying off the $5,000 balance first, it may seem like you're barely making a dent in your overall $6,000 debt.
But if you pay off the $1,000 balance first, you'll be able to see your progress sooner and feel more confident about your ability to pay off credit card debt.
Financial advisors usually don't recommend the snowball method, because it can sometimes result in more interest charges compared to if you paid off high-interest debt first. But at the end of the day, the most important thing is to create a debt repayment plan you can stick to.
Information about the Discover it® Balance Transfer has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.