6 strategies to pay off credit card debt

Millions of Americans face overwhelming credit card debt as prices and interest rates climb. Altogether, the collective balance of all Americans' credit card debt has topped $1 trillion since 2023—more than double what it was just 20 years ago.

If you're in this boat, know that there is hope. Let's go through some strategies to pay off credit card debt quickly.

To get out from under credit card debt, you first need to see where your money is going. Track your expenses for a month, and then establish a budget so you can become more purposeful with your spending. With the many different types of budgets out there, you can try a few and find one that works for you.

A budget helps you live within your means and find where you might be able to shift your spending so you have money to pay down debt. It does take a shift in mindset—backed by some conscious dedication—to adjust your lifestyle and cut some nice-to-haves so you can bring down your credit card balances. But as you take control of your finances, you'll realize how much high-interest credit card debt can add to the total cost you pay for things.

For instance, let's say you go to lunch every month with your friends, but instead of budgeting cash for it, you've gotten in the habit of charging it to a card with a 20% APR and a running balance. You regularly get a $20 burger, spend $15 in drinks and shared appetizers, pay $5 in taxes and leave a $5 tip. If you don't pay off that $45 lunch by the statement's due date, the cost of it with 20% interest jumps to $54 the next month. Three months later, if it's still not paid, the cost of that lunch will have doubled to $93.

Setting a budget and reining in your credit card use are big first steps in managing your debt. It takes dedication and sacrifice to limit yourself to buying only as much as you can afford to pay off each month, but it's incredibly worthwhile to break this dependence. And then, you can explore strategies to tackle credit card debt.

What does it mean to live within your means?

Living within your means is the foundation of reaching any financial goal. But how do you achieve it?

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Using a credit card while trying to pay it down won't help you make much progress. You're just adding more in principal and interest charges for yourself to deal with in the future.

This is why having a budget is an essential part of reducing credit card debt. When you know the limits of your spending, you can reserve cash for those needs each month rather than charging to a card. Pay with cash when you can, and try to stop spending when you run out.

• Goal: Live within your means and avoid more debt. Using more cash will ensure you not only get out of debt quickly but also stay out of debt and achieve other financial goals, including saving and investing.

• Best for: People who want to stop using their current paycheck to pay for old debts. Credit cards have their usefulness, but they can lead to vicious debt cycles where you buy more than you can afford and have to pay for it for a long time. A cash budget can help keep you and your spending in the present and in check.

When you make the minimum payment on your credit card, your money is spread across the outstanding balance, accumulated interest and any fees you owe. But the money you pay above the minimum usually goes toward reducing the principal. This decreases your balance faster and saves you interest costs.

• Goal: Decrease your balances. When more money goes toward the root part of what you owe, it means you have a smaller base for calculating interest. A lower outstanding balance means lower interest charges on your next statement.

• Best for: Anyone who can put even a little extra toward credit card debt each month. By applying more money to your principal, you'll knock down balances bit by bit across the board. With commitment and control, you should reach a point where your debts are manageable and you can shift focus to getting rid of bad debt and nurturing good debt.

With the avalanche method, you prioritize paying down high-interest debt first. These are the cards that charge more than a 6% annual percentage rate (APR), which you want to target because they're costing you more than your money can typically earn in investment interest.

Put your credit card bills in order of the one with the largest APR to the one with the smallest. Any extra money in your monthly budget should be put toward the debt with the highest APR while you continue making the minimum payments on the rest. Once your highest-rate card is paid off, move on to aggressively paying down the card with the next-highest APR. Continue until all your debts are paid down.

• Goal: Accumulate less interest over time. Paying off high-interest cards first saves money in the long run because you're getting rid of costlier debts as quickly as possible.

• Best for: People who want to chip away at cards that charge too much (and then get rid of them). Be aware that this strategy requires determination. Progress may feel slow since the extra in your monthly payment likely only will apply to accumulated interest and fees until you're caught up.

The snowball method prioritizes the credit card with the smallest total balance. Sort your debts by outstanding balance from the least to the most. Extra funds in your budget should go toward paying down the smallest balance first while you continue to make minimum payments on the remaining cards.

The key to the snowball method is that once the smallest balance is paid off, you'll have a bit more money each month to pay down the next-highest card. Once the second card is out of the way, you'll have even more to go after the next card in line.

• Goal: Quick progress in whittling down the number of cards you have. Starting with the smallest balance means you could have your first payoff quickly. The satisfaction of that achievement can keep you motivated for more.

• Best for: People with tight budgets. When you don't have a lot of extra money each month, it can be less intimidating to wipe out a small balance first.

If you have a strong credit score, you may be approved to transfer your balance to a new card with a low APR or even 0% APR. Moving debt from one card to another with a transfer won't decrease your balance, but it can decrease your total cost by lowering the interest that will accumulate.

Be sure to read the terms of the balance transfer. Most low and 0% APR offers are for a limited time—often 6-18 months. After that, you'll be charged the APR outlined in the card agreement, and it may be much higher than competitive rates.

• Goal: Take advantage of low- or zero-interest payments for as long as possible. This system is most effective if you make a plan to pay off the principal in the time you have low or no interest charges. For example, if you put $3,600 on a card that has a 0% APR promo for 12 months, you could make $300 payments every month and pay it off before ever being charged interest.

• Best for: People with good to excellent credit who feel confident about making payments on time. You may need a good credit score to qualify for the best interest rates. If you do land them, you have to commit to at least the minimum payment every month, or you may risk immediately defaulting to the full APR.

You may be able to merge your credit card balances into one account using debt consolidation. You'll have to apply and be approved, so your terms will depend on your credit score. The stronger your credit profile, the better your loan terms are likely be.

Look for lenders offering a low APR and low or no fees. A fixed-rate consolidation loan will lock in your rate, meaning it won't change for the life of the loan. Homeowners can look into a home equity loan or home equity line of credit that allows them to borrow from their home's value.

• Goal: Simplify and then collectively lower the total cost of your debt. By merging several accounts, you only have to worry about one monthly payment. Just be sure you don't consolidate and then open and use more cards, or it will defeat the purpose.

• Best for: Borrowers with large credit card debt. Depending on your credit, you may be able to consolidate a larger amount of debt than you would if you used a balance transfer.

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As you consider these debt payoff methods, remember that the most important thing is simply taking action. Start now and allow yourself time to make adjustments along the way.

If the process feels overwhelming, a Thrivent financial advisor can assess your financial situation and help work a plan to pay off debt into your overall financial strategy.