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How to consolidate and pay off credit card debt

Aug. 13, 2022
7 min read
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Editor’s note: This is a recurring post, regularly updated with new information.

Here at TPG, we spend much of our time going on about the incredible value you can get from credit card rewards, whether you’re looking for free flights, hotel stays or simply some cash back to pad your bottom line.

However, these recommendations all carry a huge disclaimer: If you get into credit card debt, you’ll rapidly erase the value of any rewards you’ve earned and end up in a difficult financial situation.

Today, we're going to take a look at what you need to know about how to pay off credit card debt and avoid acquiring more in the future.

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The minimum payment problem

If you have credit card debt, you're not alone. Americans have an average credit card debt of $5,589, according to Experian. As interest rates climb nationally, it's more important now than ever to understand and work to pay off credit card debt.

Credit card debt is easy to acquire because of credit cards' high interest rates for unpaid balances, especially on the most rewarding cards. The other two types of most common debt are mortgages and car payments, which currently have average interest rates of 3 to 5%. In contrast, the average interest rate for a new credit card account is over 16%.

Thankfully, there are strong consumer protection laws in the U.S. that require card issuers to help you understand the dangers of credit card debt. At the end of each monthly billing cycle, your credit card issuer sends you a statement showing all the changes you made during that billing cycle. This statement shows the total amount you owe as of the statement closing date (your statement balance) and also shows a "minimum payment" due.

If you pay your statement balance in full every month, you never have to worry about racking up credit card debt. But if you only make the minimum payment (or any amount below the full statement balance), you will start accruing interest and it can become an issue.

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Pay your bills on time — and in full if possible. (Photo by Rawpixel/Unsplash)

Related: Tip: Amex’s ‘Please Pay By’ date isn’t the same as your payment due date

For example, this is a Marriott Bonvoy Business® American Express® Card statement for a balance of $375. If the cardholder pays off the card in full before the payment due date, they do not have to worry about paying interest.

However, the statement outlines the amount of time and money it would take them to pay off this balance if they were to only make the minimum payment of $35. If they made that choice, it would take them 16 months and cost them an extra $180 in interest charges to pay just this card off. If they were late on their payment or paid only the minimum amount on other months, they would owe even more.

Related: Does carrying a balance help my credit score?

How to pay off credit card debt

Lower spending habits

Before you start tackling debt, take a look at your spending habits. Identify areas where you can cut back. The more you limit your spending, the more you can put toward your debt payment.

List out debts

This can be difficult to face, but it is an important element of choosing your approach. Make a list of each debt you have and the interest rate it carries.

(Photo by Rafa Elias/Getty Images)

Choose an approach

There are a few approaches you can take if you want to pay off credit card debt.

  • Avalanche method: Focus on paying off the card with the highest interest first. Take the money you were able to cut from your spending and put it toward paying down this card. When you have paid this debt, move to the debt with the second highest rate. Continue until you have eliminated your credit card debt.
  • Snowball method: Focus on your debt with the smallest balance first. When you have paid it off, use that money to work toward your next smallest balance. Eventually, use this momentum to tackle your debt with the highest balance and you will eliminate all of your credit card debt.
  • Consolidate credit card debt: You can also consolidate your credit card debt by opening up a new credit card with a 0% intro annual percentage rate offer or take advantage of balance transfer offers. The exact offers vary from card to card, but you can transfer your high-interest balance to this new card and pay it off over the course of 12 to 15 months without racking up any more interest. Just make sure to pay off the balance before the 0% intro APR period expires or you’ll end up fighting an uphill battle against interest again.
  • Credit card forgiveness: It's unlikely that a bank will outright forgive your credit card debt, but you might be able to negotiate a lower interest rate or monthly payment plan. There is no guarantee, but it doesn't hurt to ask.

Related: 5 tips to make a successful balance transfer

How to avoid credit card debt moving forward

When you are out of credit card debt, put strategies in place to make sure you stay out. There are several tools you can use to your advantage, starting with autopay. Most major credit card issuers allow you to set up autopay on your accounts, meaning your bills will automatically be paid before the due date and you’ll never miss a payment. You can use this updated envelope system to make sure you have enough money in your bank account to avoid overdraft fees.

Another option is to pay off all of your balances every two weeks. To do this, set a recurring reminder on your calendar for the 1st and 15th of every month. When that reminder pops up, log in and pay off all your balances, even if the statement hasn’t closed yet. Since you usually have about a month from the time your statement closes to the time your bill is due, this every-two-week method helps you stay ahead of your bills and never miss a payment.

Related: Ten Commandments of credit card rewards

Bottom line

No matter where you fall in comparison to Americans' average credit card debt, there are plenty of strategies available to help you pay off whatever credit card debt you might have.

While you shouldn't hold your breath for credit card debt forgiveness, you can consolidate credit card debt or use one of a few different approaches to pay it off, like the avalanche method.

Regardless of which route you choose, be sure to put a plan in place to avoid or reduce credit card debt in the future.

Related: How to earn points and miles with fair to poor credit

Additional reporting by Ethan Steinberg and Chris Dong.

Featured image by (Photo by Isabelle Raphael / The Points Guy)
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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TPG featured card

Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

2 - 10X points
10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
2X2 Miles per dollar on every purchase, every day

Intro offer

75,000 bonus miles
Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

Annual Fee

$395

Recommended Credit

740-850
Excellent
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,400+ lounges, including Capital One Lounges and our Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023
Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
2X2 Miles per dollar on every purchase, every day
  • Intro Offer
    Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

    75,000 bonus miles
  • Annual Fee

    $395
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
    Excellent

Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,400+ lounges, including Capital One Lounges and our Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023