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Seven Strategies for Paying Off Credit Card Debt

People faced with high credit card debt face another challenge, too: picking and choosing from various techniques, strategies and “must-do” approaches to bringing balances back to zero.

There are many approaches, but the right strategy depends on your financial habits, personality and motivation for paying balances. The six most popular payoff strategies include:

  • The Avalanche: If you have multiple credit cards, make at least the minimum payment on each. Then, put as many extra funds as you can towards the card with the highest interest rate until paid off. Paying more than the minimum greatly reduces the total interest paid and amount of time it takes to pay off the debt.
  • The Snowball: This method can work well if you are juggling several credit cards with similar rates. Pick the smallest balance, pay it off as quickly as possible, and make only minimum payments on other credit cards. Though you may pay more interest over time, the snowball is effective if you need help building good financial habits and will be motivated by early successes.
  • The Middle: The middle is exactly as it sounds – somewhere in the middle of the snowball and the avalanche. This strategy does not prescribe how to pay off debt specifically – you simply pay down balances on all of your cards, all at the same time. This is best for people who feel they need to make a dent in all of their credit accounts, even if the process is slower than the snowball or less strategic than the avalanche.
  • The Request: If you’re paying debt on high-interest cards, you may succeed in simply calling your credit card company and requesting a lower rate – especially if you’re a longtime customer with a good payment history.
  • The Balance-Transfer: Credit card companies flood mailboxes with balance-transfer offers, promising low interest rates for people who move old balances to a new card. While this may prove to be a good solution if you have high debt and high interest rates, it’s important to read the fine print; many balance transfer offers only provide a low interest rate for a limited period of time, or charge a transfer fee that may offset any savings in interest.
  • The Auto Payment: Once you determine your payoff plan, you should consider setting up automatic payments through your bank’s bill pay system or directly through the credit card’s website.

For more tips on paying down debt, visit Take Charge America’s Financial Education Library.