How to Get Out of Credit Card Debt
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Do you feel like it’s getting harder to pay off your credit card debt? It’s not just your imagination.
In 2023, credit card debt hit a record high. Thanks to the harsh combination of inflation and high interest rates, it’s becoming more difficult to avoid using credit cards, and at the same time, more challenging than ever to pay down balances.
Fortunately there are simple strategies for chipping away at the debt and becoming debt free, regardless of how high your balances are. Here’s what you need to know.
Why is it so Hard to Get Out of Credit Card Debt?
Like quicksand, credit card debt is much easier to get into than to get out of. When it comes to paying off the debt, these major obstacles might be in your way:
Increased Cost of Living
Most goods and services have gotten more expensive in the last few years. According to the U.S. Bureau of Labor Statistics, this is how much some expenses increased between Fall of 2022 and 2023:
- Transportation services: 9.1%
- Shelter: 7.2%
- Food away from home: 6%
- Gasoline: 3%
- Electricity: 2.6
- Food at home: 2.4%
Ultra-High APR
The average credit card interest rate is now 21.19% and many new cards have an APR range up to almost 30%. Cardholders tend to underestimate how much ultra-high rates impact them, but it’s worth looking at the numbers.
If you owe $2,000 on a credit card with 30% APR, and you pay $70 toward the card each month, it will take over five years to pay off the balance and cost $1,551.57 in interest. But at 18% APR, it would take roughly three years to pay off and cost $631.20 in interest. That’s a difference of 13 months and $920.37.
No Payoff Date
Unlike loans, credit cards don’t have a set payoff date. While that allows you to make small payments each month, it can stretch out the repayment period indefinitely. In the meantime, interest charges are added to your balance, further extending the payoff timeline.
Reasons to Get Out of Credit Card Debt
Being in debt costs money, and credit card debt is particularly expensive. These are the average interest rates across several financial products:
- 7.63% Mortgage
- 7.88% Car loan
- 7.63% Mortgage
- 12.17% Personal loan
- 21.19% Credit card
By comparison, the average return on a 401(k) is 5% to 8%, so if you contribute to your retirement fund instead of paying off high-interest debt, you could be losing a lot of money.
According to recent surveys, these are a few other ways credit card debt harms debtors:
- 47% of people say it prevents them from having emergency savings (Clever Real Estate)
- 45% say it's a cause of stress (WalletHub)
- 40% say it's a source of embarrassment (NerdWallet)
Your credit scores can be impacted by credit card debt, too, making it harder to qualify for new, affordable loans. The more debt you carry in comparison to your card limits, the lower your scores will be.
Six Ways to Get Out of Credit Card Debt
More than a third of credit-card holders say they would do “anything” to get rid of the debt. Fortunately, you don’t have to take extreme measures. Depending on your circumstances, one or more of these strategies can help.
Help With Your Debt
1. The Debt Avalanche Method
Save time and money by using the debt avalanche method to pay off your credit cards. With this strategy, you prioritize paying off the card with the highest interest rate first. Once that card is at a zero balance, roll the monthly payment toward the account with the next-highest APR.
Debt avalanche example (with $370/mo for debt payments)
| Balance | Minimum payment due | Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | |
| Card #1 | $500 | $40 | $300 | $200 | - | - | - | - |
| Card #2 | $800 | $50 | $50 | $150 | $350 | $250 | - | - |
| Card #3 | $200 | $20 | $20 | $20 | $20 | $120 | $20 | - |
| Total | $1,500 | $110 | $370 | $370 | $370 | $370 | $20 | $0 |
2. Go on a Spending Cleanse
If you’re in debt because of bad spending habits, you may need a total reset. Instead of making small budget cuts, commit to a spending freeze in which you don’t buy any non-necessities for a set number of months.
Here are a few ways to make your spending freeze more successful:
- Discuss the freeze with friends and family and ask for support.
- Plan free activities, like walks to the park or at-home game nights.
- Challenge yourself to repurpose old items.
- Use old gift cards if you feel the need to splurge.
- Delete your credit card information from online retail accounts.
- Remove credit cards from your wallet.
3. Debt Consolidation
Debt consolidation doesn’t reduce your debt, but it can reduce your interest rates, which helps you save money and eliminate debt faster.
If your credit scores are high enough to qualify, you might be able to consolidate in one of the following ways:
- Loan for debt consolidation: Shop for a personal loan or a home equity loan through your bank or credit union. Be sure to compare all rates and fees before applying.47% of people say it prevents them from having emergency savings (Clever Real Estate)
- Balance transfer credit card: Apply for a 0% APR balance transfer credit card, which can give you a year or more of 0% interest on the balances you transfer to the new card. Just be prepared to pay a 3% balance transfer fee, which is usually 3% or more of the amount you transfer.
4. Debt Settlement
Debt settlement involves hiring a third-party to negotiate lump sum payments with your creditors, in return for having the remainder of your balance(s) forgiven.
While debt settlement can be a tempting solution for credit card debt, you should proceed with caution.
While debt settlement can be a tempting solution for credit card debt, you should proceed with caution. The Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) call debt settlement companies “risky” for a number of reasons. They’re notorious for charging high fees, are rarely effective and their tactics can lead to increased debt balances, lower credit scores and legal problems like wage garnishment, since they typically ask you to skip your credit card payments for 36 months or more.
If you’re considering debt settlement, make sure to avoid any company that:
- Charges up-front fees
- Promises specific outcomes
- Tells you to stop communicating with your creditors
You can also consider searching for a nonprofit agency that offers debt settlement services or even negotiating with your creditors on your own.
5. Bankruptcy
If your income is limited and you can’t see a way to become debt free within the next three or more years, you may need a legal solution.
Disclosure: Consumer Insite has partnered with CardRatings for our coverage of credit card products. Consumer Insite and CardRatings may receive a commission from card issuers.
