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How to reduce your credit card debt

7 ways to cut down your credit card debt and get your finances in control.

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In 2020, over 206 million Americans owned at least one credit card and contributed to the $14.27 trillion worth of household debt that has been accruing interest steadily. It’s no surprise that the average household carries around $52,000. The question is — how do we begin to pay back our debts or just avoid it altogether?

7 ways to reduce your credit card debt

If you find yourself burdened with an outstanding credit card balance and interest charges building each month, consider the following strategies for clearing your debt.

1. Make regular repayments and pay more than the minimum

Budget your monthly expenses, see what you can put towards your repayments and stick to a plan that is comfortable for you. Always try to pay more than the minimum so you can avoid the extra interest and get out of debt a bit earlier. Pro tip: setting up an automatic debit to transfer that amount to your credit card account on a recurring date each month will help ensure that you stay on track.

2. Repay the debt with the highest interest rate

Paying off the account with the highest interest rate first could represent significant savings — the interest saved could be used to repay the rest of your debt sooner. Once you’ve paid that account off, close it to avoid further charges and move on to the account with the next highest interest rate.

3. Apply for a credit card with a 0% balance transfer offer

0% balance transfer credit cards let you transfer your existing debt onto a new credit card with the benefit of paying no interest for an introductory period. It’s important to repay your balance transfer amount within the introductory period since the interest rate will typically revert to a higher interest rate.

Compare balance transfer credit cards

%
Name Product Amount saved Balance transfer APR Balance transfer fee Recommended minimum credit score Filter values
Citi® Diamond Preferred® Card
0% intro for the first 18 months (then 14.74% to 24.74% variable)
$5 or 3% of the transaction, whichever is greater
740
An impressive 18 months intro APR on balance transfers and purchases, as well as no annual fee make this one of the top 0% APR cards available.
Citi® Double Cash Card
0% intro for the first 18 months (then 13.99% to 23.99% variable)
$5 or 3% of the transaction, whichever is greater
740
Get a strong 18 month 0% intro APR on balance transfers AND up to 2% back. This is a rare card that offers both rewards and balance transfers.
Luxury Card Mastercard® Titanium Card™
0% intro for the first 15 billing cycles (then 14.99% variable)
$5 or 3% of the transaction, whichever is greater
700
Enjoy unique excursions, privileged access to exclusive events and insider opportunities.
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Compare up to 4 providers

4. Consolidate your debt with a personal loan

A debt consolidation loan can offer substantial savings on interest payments compared to a credit card. It also often allows a longer term to pay back your debt. When considering a personal loan, factor in related costs such as application, establishment, monthly or yearly fees.

5. Refinance your home loan

While this may sound drastic, refinancing your home loan can offer with it several perks. Refinancing generally gives you access to lower interest rates when you take on a new lender’s deal. Carefully weigh up the pros and cons of this option though, because you’ll essentially be moving your credit card debt onto your home loan, which means stretching your debt over more years.

6. Discuss your options with your bank

By having a chat with your bank, you may be able to negotiate a more comfortable payment plan. You could be approved for an interest reduction or a short payment hiatus, which could help you catch up on your repayments.

7. Look into financial counseling

Financial counseling does not have to be expensive and you can even receive help for managing your debts. Obtaining professional financial and legal advice for your personal situation can sometimes be the first step towards debt freedom. You will be given personalized advice on how to consolidate your debts, manage creditors and protect your credit rating.

Credit Card Stress

In a survey conducted by Finder.com in July 2020, credit card debt was reported to be the highest form of debt stress for Americans who admitted to being in debt. Approximately 32.14% of Americans claimed credit card debt gives them the most stress when compared to student loans, mortgage, medical debt, auto and personal loans.

Types of debtMost stressful types of debt according to those with debt
Credit card debt32.14%
Student loans21.39%
Mortgage21.15%
Medical debt12.43%
Auto loans8.48%
Personal loans4.42%

Source: https://www.finder.com/personal-loans/debt-consolidation-loans#american-debt-stress-statistics

When looking at age demographics, stress for other debts fluctuated as participants aged going up and down while credit card debt stress only increased with age. Around 46% of those aged 65 and older noted being the most stressed about credit card debt.

Age rangeMortgageAuto loansStudent loansMedical debtPersonal loansCredit card debt
18-24 year olds12.35%7.41%41.98%6.17%1.23%30.86%
25-34 year olds17.93%7.59%35.17%13.79%5.52%20.00%
35-44 year olds23.16%9.60%20.34%11.30%6.21%29.38%
45-54 year olds20.86%6.75%17.18%15.95%4.91%34.36%
55-64 year olds23.65%8.78%14.86%14.19%4.05%34.46%
65+ year olds25.20%10.57%6.50%9.76%2.44%45.53%
More women appeared to be stressed about credit card debt than men at 33.77% and 30.13% respectively.

Don’t bury yourself in debt

While credit cards can be a convenient way to pay, make sure you’re in control of them and not the other way around. If you have found yourself in credit card debt, follow the necessary steps and seek assistance as soon as possible to regain control of your finances. When considering if a credit card is still the best option for you, compare all your options and be wise about what you need for your own personal circumstances.

How to avoid credit card debt

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To prevent falling into debt, the following tips can help you keep your credit card under control:

  • 0% purchase credit card. Get a credit card that offers 0% interest on purchases. This will allow you to make purchases and repay them without accruing any additional interest for a promotional period of up to 24 months.
  • Pay more than the minimum. Making only minimum repayments on your credit card balance typically means that you’re only paying 2.5% of your statement balance. At that rate, it might take you years to repay even a modest balance.
  • Stick to a budget. Create a budget for your expenses each month and schedule a payment plan to have your debts covered. Set up automatic debits to ensure that payments are made regularly.
  • Move your statement due date. By making sure your statement due date is just after payday, you’ll definitely have the funds to repay your credit card bill on time.
  • Identify why you first fell into debt. Was it overspending, high interest rates or a combination of the two? Try working with a budget or get a card with a lower interest rate.
  • Take measures to curb your spending. Creating a monthly budget should help curb expenditure, but you could also consider reducing your card’s credit limit as a stronger preventive for overspending.
  • Stop using your credit cards. If your spending problem requires more than monthly budgeting and occasionally leaving your credit card at home, consider cancelling your cards altogether. Prepaid credit cards and cash are surefire ways to avoid debt.
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