How Do I Pay off My High Interest Credit Card Debt?


If you have accumulated a large balance on a high interest rate credit card, it might seem like an impossible task. Monthly finance charges chew through your minimum payment and the balance barely moves down each month.

Why are the rates so high? Maybe you’re on a promotion (0%) that just ended. Maybe you have been 60 days late for a payment. Maybe your credit score has dropped significantly.

Any of those factors could send your interest rate soaring and your  balance increasing.

What to do?

1. Ask For A Lower Interest Rate

Creditors will work with their best cardholders, especially if they pay on time and rarely miss a payment. If you’re getting offers for other credit cards with lower rates, don’t be afraid to bargain a bit with your current card company.

2. Pay As Much As You Can

If you want to make any dent in the bottom line, you must increase the amount of your monthly payment. If you’re only making minimum payments, so much of it goes toward interest and that gets you nowhere.

3. Balance Transfer

If you have $5,000 in credit card debt and you’re paying 18% in interest with a $200 monthly payment — and you won’t inherit or earn an extra $5,000 any time soon — a balance transfer credit card could be an effective way to manage your debt.

A balance transfer is paying off the balances on existing cards or loans by transferring them to another credit card account with a zero-percent interest rate. Generally, you need excellent credit to be approved. You might need to compromise. Even if you aren’t approved for the full amount, any little bit helps.It might require a fee to complete the balance transfer. The fee is typically a small percentage of the account.

What’s the advantage? By shifting to a 0% deal on a new credit card, you save the 18% interest you were paying. It will take 32 months to pay off — but the $1,312 in interest has disappeared from your life. To qualify for a balance transfer, you generally need a credit score of 700 or above.

If you can’t qualify for a 0% deal, there might be a low interest rate card or perhaps you can qualify to shift a portion of your debt. (add to balance transfer area)

4. Choose a pay-off method: Debt Avalanche or Debt Snowball

Then there’s the good old method of paying the debt down as fast as possible. When you start with the cards that have the highest interest rate and work your way down to lower interest cards — saving time and money — it’s called a “debt avalanche.’’ Meanwhile, a “debt snowball’’ is paying off small debts first. Dispensing with a low-balance card debt serves as motivation to attack the high balance cards.

Sometimes, getting rid of your high interest debt isn’t your best strategy, psychologically. It might be better to pay off some smaller balances, thus freeing up money to put toward that high interest rate debt.

5. Focus

Sometimes, the best strategy is to put all your extra money toward a single high interest rate debt. Once that is paid off, work on the next highest debt. Keep going — without using the freed-up money for more purchases — and you’re on the way to debt-free status.

6. Cut Back

Find a way to get more money to retire that high interest rate debt. How? Disconnect your cable. Don’t eat out. Stop smoking. Cut back on coffee and sodas. Find a part-time job. By squeezing extra dollars out of your budget, you might be putting $100 extra (or more) toward that credit card bill. And that’s a very good thing.

7. If You Can Save Interest, Consider a Personal Loan

Another option: taking out a personal loan. The rates are generally between 10% to 20%, but could be as low as 5% if you have good credit. Any way to get off the 18% rate to something more favorable is a victory for you. The idea is to pay off the credit card. Why not save months, if not years? The sooner, the better.

8. Consolidate with a Debt Management Company

Nonprofit debt management companies can consolidate your monthly payments without requiring you to take out a new loan. Also, you can qualify for a debt consolidation program with bad credit.