How do I get out of credit card debt?
<div class="user-question">Best way to pay off $5000 of credit card debt?</div>
Thank you for submitting your question! I understand how overwhelming credit card debt can feel, but it's important to remember that paying off $5,000 is manageable with the right approach. The sooner you start paying off this debt, the sooner you will feel a weight lifted off your shoulders.
When you have credit card debt, it’s important to create a plan to pay it off as quickly as possible, because credit cards typically have high interest rates that compound daily meaning your debt continues to grow exponentially the longer you avoid it. Let’s look at an example:
The good news is, I’m here to help you create a plan to pay off your debt FAST! Here are my steps to create an actionable plan to get rid of your debt.
Don't have time for the whole thing? Here are our main takeaways.
<div class="frich-tip">1️⃣ Check out these companies to see if you qualify for any debt relief.</div>
<div class="frich-tip">2️⃣ As you work through repaying your debt, don't forget to focus on your credit score. Having a good credit score means you'll pay less in interest on any existing or new debt. Here are some credit repair services we like.</div>
<div class="frich-tip">3️⃣ Repaying debt means putting every additional dollar towards it as quickly as possible. Here's a compilation of companies that help you make additional cash.</div>
1️⃣ Assess your debt
Start by looking at your credit card statement to check:
- The total balance
- The interest rate (APR)
- The minimum payment amount
Once you know these numbers, you should review your budget and figure out how much you can realistically put towards your debt each month.
<div class="frich-tip">Fich tip: Play around with this Credit Card Payoff Calculator, so you can see how different payments will affect your payoff timeline. The more you can dedicate to your debt, the better; even $50-100 extra can make a huge difference in how much interest you'll end up paying.</div>
<div class="frich-tip">Frich tip: Check out these companies to see if you qualify for any debt relief.</div>
2️⃣ Cut expenses & find extra cash
Next you should find extra room in your budget to pay off the debt even faster. Some ideas for cutting back on expenses and earning extra money include:
- Pausing nonessential subscriptions: Audit your current subscriptions - streaming services, meal prep kits, subscriptions boxes etc. See if there are a few you can live without for the time being. Fortunately, many of these platforms still offer free versions with ads, and while life without ads is more fun, sacrificing this for now could free up extra money in your budget to tackle this debt.
<div class="frich-tip">Frich tip: Rocket Money helps you find & cancel unused subscriptions quickly & effortlessly!</div>
- Limit eating out: Cooking meals at home is an excellent way to save over 50% on your food budget. Start meal planning every week, writing out your grocery list, and sticking to that list when shopping.
- Controlling impulse buys: Impulse spending can derail your progress when it comes to paying off debt, so it’s important to be aware of your impulses. One way to do so is by implementing a 24-hour rule on any non-essential purchases. This gives you time to truly think about whether or not you need that item. Other helpful tips include unsubscribing from marketing emails and removing your credit card from saved payment methods!
- Sell items you no longer use: This is the perfect time to declutter your space and gather items you no longer use or need. Apps like Poshmark, Mercari, and Facebook Marketplace make it easy to sell clothing and household items, while sites like Decluttr or Gazelle are great for offloading old tech. Even selling just a few things could provide a quick cash boost to pay off your debt!
- Pick up a side hustle: Sometimes cutting out expenses can be difficult when you’re already on a tight budget, but that doesn’t mean you can’t find extra cash elsewhere.
<div class="frich-tip">Frich tip: Here's a compilation of companies that help you make additional cash.</div>
Remember, these steps are TEMPORARY. The point is to dump any extra money you can towards your debt. Once your debt is cleared, you can reinstate your subscriptions, and reintroduce your discretionary spending if it still aligns with your other financial goals.
3️⃣ Lower your interest rate (if possible)
Another option is to try to lower the interest rate on your debt. Having a lower interest rate would mean more of your payment goes toward the balance instead of interest. There are a few ways you can try to get a lower interest rate:
- Call your credit card company and ask for a lower APR – Many people don’t realize you can actually negotiate your interest rate! Call your credit card issuer and politely ask if they can reduce your APR. If you’ve been a responsible customer (on-time payments, good credit history), they might lower it - especially if you mention you’re considering a balance transfer to another card with a better rate. If you decide to take this route, below is an example script you can use!
- Consider a balance transfer credit card – Some credit cards offer a 0% intro APR for 12-18 months on balance transfers. This means you could move your debt to a new card and pay it off interest-free during the promo period. Just make sure:
- You pay off the full balance before the promo period ends (otherwise, you’ll be hit with a high APR)
- The balance transfer fee (usually 3-5%) doesn’t outweigh the interest savings. Most balance transfer credit cards charge a fee to move your debt; typically around 3-5% of the transferred balance. While this fee might seem small, it can add up depending on your debt amount. Before committing to a balance transfer, calculate whether the amount you’d save in interest outweighs this upfront cost.
- You don’t rack up new debt on the old card.
<div class="frich-tip">Frich tip: Your chances at succeeding to negotiate your interest rate will be exponentially higher if you have a good credit score. Consider these credit repair options if your credit score is below 670-700 points.</div>
- Look into a debt consolidation loan – If you have decent credit, you could take out a personal loan with a lower interest rate (e.g. 7-12%) and use it to pay off your credit card debt. This turns multiple high-interest payments into a single, lower-interest payment, making it easier to manage. But be sure to compare loan terms, fees, and monthly payments to make sure this option actually saves you money.
<div class="frich-tip">Frich tip: Using a debt consolidation calculator like this one can help you decide if a debt consolidation loan would be beneficial for you. You can also consider these debt consolidation companies.</div>
4️⃣ Automate & stay consistent
Once you have a plan in place, it’s time to set up automatic payments so you never miss a due date. And be sure to track your progress and celebrate milestones along the way, because debt payoff is truly something to be proud of!
The most important thing is that you stay consistent and don't incur any additional debt.
Once you pay off this debt, it’s crucial to learn from the experience and avoid repeating the same mistake. The best way to avoid credit card debt is by using your credit card to cover everyday expenses and pay off the balance in full each month. Don’t buy stuff you can’t afford!
<div class="frich-tip">Frich tip: Prioritize having an emergency fund saved up, so an unexpected expense won’t put you back into debt. Here are our favorite HYSAs to keep that emergency fund in.</div>
Btw - here's how others are doing👀
Do you have credit card debt?
🏙️32% Yes
🫂68% No
Remember that debt is normal, and with a solid strategy you will be able to overcome this and start building wealth for the future! For more tips on tackling debt, budgeting, and investing, join me on Instagram - @girlchasingwealth. See you there!
Founder, Girl Chasing Wealth
Alex
