6 Alternative Ways to Pay Off Credit Card Debt

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September 23, 2022

6 Alternative Ways to Pay Off Credit Card Debt

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If you’re an adult in the U.S., you may carry some credit card debt. 95% of adults have an open credit card account, and the average balance of those with debt is now $5,221, according to Experian. The average balance has been trending down over the last few years, but even though there is a downward trend in the amount of debt we carry, you may need to explore alternative ways to pay off credit card debt.

Paying off credit card debt is worth the effort. Not only can it help you improve your credit score, which could help your long-term personal finance goals, such as buying a home, but it also provides greater peace of mind. Once your credit card debt is paid, it frees up your “extra” money each month to invest in your other priorities, financial investments, savings, or traveling, versus debt payments.

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Alternative ways to pay off credit card debt

Whatever your motivation is to be debt-free, let’s explore six ways to pay it off without adding on additional interest charges.

1. Debt Snowball

Debt snowball, or the snowball method, is one approach to ridding your finances of credit card debt. With this method, you list out each of your credit card balances and list them in order of smallest balance and ending with the card with the highest balance. Then, each month you pay as much as possible towards the card with the smallest balance while only paying the minimum monthly payment due for each of the others.

When the smallest amount is paid off, you turn around and apply that same monthly amount towards the next-smallest amount, including the minimum you were also paying.

Proponents of this payoff strategy say it encourages you to keep going since paying off the smallest balance first will give you a “win” and the feeling of accomplishment. This helps motivate you to continue and keep the momentum going. As time passes, you’ll be making larger chunks of payments, which is where the name “debt snowball” came from. However, keep in mind this is not necessarily the way to avoid paying interest charges. It’s actually possible you pay more interest over time compared to other payoff methods since you may not be tackling your high-interest rate cards first — but you will make progress towards whittling down your balances.

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2. Debt avalanche

Another strategy often supported by finance experts is the avalanche method. This starts by listing out all of your credit card balances and ordering them from highest interest rate to lowest. Like the snowball method, you pay as much as possible with your monthly payment towards the balance with the highest interest rate. Meanwhile, you’re paying the minimum monthly payment for all the other cards. As you pay each balance, you move on to the next-highest interest rate card.

Supporters of this method say you can crunch the numbers and see how with this method, you pay less in interest over time (how much less exactly depends on your particular interest rates and credit card balances). However, if your card with the highest interest rate is the one with a larger balance, it can be months (or even years) before you pay off the balance once and for all.

On a deeper mathematical level, you may not only pay less interest over time, but you could technically lessen the amount of time it takes for you to pay off all of your debt balances. This is because you pay less towards interest (as time passes) and more towards the actual balance.

3. Transfer debt with a balance transfer credit card

The debt snowball and avalanche pay-off methods may be better suited for those with multiple credit card balances. However, you may have a large debt you need to get rid of for one, two, or three credit cards. Another alternative could be to transfer the credit card balances over to a balance transfer credit card — ideally with one offering a promotional 0% APR on balance transfers for an extended period of time or at least a lower interest rate than what you’re currently paying.

One benefit of this method is that it’s straightforward to execute. It goes even more quickly if you happen to be prequalified for a balance transfer credit card offer. If you’re not prequalified, you can research the options available online and apply for the one that best suits your needs. With the right card, you could pay hundreds of dollars fewer interest charges and tackle your balance immediately.

This strategy isn’t without its drawbacks, though. For starters, you’re only transferring debt, so there may be a negative impact on your credit score at first. Not only will there be a hard inquiry on your report, but your credit utilization may also increase by transferring all of your balances to only one card. If you close your previous accounts and only keep the account to where you transferred the balances, you could use more of your credit limit.

Also, a balance transfer almost always includes a balance transfer fee, typically 3% to 5% per balance transfer, which could tack on a substantial amount of money. You will need to run the numbers to make sure it makes financial sense.

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4. Home equity line of credit

Another option is to put the equity in your home to work. With increased values in today’s housing market, a home equity line of credit (HELOC) could be another option to pay off high-interest debt. A HELOC is a credit line established based on the amount of equity you have in your home. You use your home as collateral, and in return, you can borrow money from a home equity line for numerous reasons, including paying off high-interest credit cards.

You should note this is different from a home equity loan or a personal loan, which gives you a lump sum loan amount with fixed repayments versus a line of credit where you access funds on an as-needed basis.

HELOCs continue to be popular options for borrowing and a good reason. Pros include:

Typically a lower interest rate versus a credit card
You only borrow what you need
Flexible repayment plans, with some repayment, plans up to 10 years
Potential to increase your credit score with on-time monthly payments

But HELOCs come with a few disadvantages, too, including:

Your home is the collateral, which means if you don’t make the payments, your home is at risk
Rates can be variable, which means you can’t predict the amount of interest you’ll owe
You’re lowering your available equity

5. Debt consolidation

Another alternative for paying off credit card debt is a debt consolidation loan. A debt consolidation loan allows you to combine several types of debt, including credit card balances, student loans, auto payments, and others, into one single payment. The idea is to obtain a lower interest rate so you can focus on paying off the debt as soon as possible.

These types of loans offer advantages but have a few risks too. Since you’re taking on more credit than initially, your credit score could be negatively affected. There are also fees associated with these loans, which could add a significant amount to the loan — so much it could increase the amount of the debt you owe.

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Relieve $25k+ in Credit Card Debt or Personal Loan Debt With TurboDebt

Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
Subject to qualification and approval. $1,500 monthly income required.
Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.

Apply for Debt Relief Today With TurboDebt!

6. Debt management plan

A debt management plan from a nonprofit credit counseling agency may be a debt relief option. The agency works with you to combine your credit card balances into a single monthly payment while setting up a structured debt repayment plan. Unlike a debt settlement plan, your balances are not reduced, but the counseling agency can work on your behalf to lock in a lower interest rate.

Although taking on a debt management plan is noted in your credit report, it should not negatively impact your credit score. Over time, by paying off your debts, your credit score should improve. You need to ensure you can fit your new monthly payment plan into your budget to make your debt management plan work.

The bottom line

Paying off credit card debt may not look the same for everyone. As you make your debt-free plans, consider all the alternatives available to make the right choice for your personal finances. One of these solutions could work for you and get you started on your debt-free journey today.

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Sara Coleman is a former corporate gal turned creative entrepreneur. She began writing professionally several years ago and now contributes to multiple websites, blogs, and magazines. She’s also an avid reader and can’t resist a great historical fiction novel. Sara holds a BA in journalism from the University of Georgia and can be found supporting her Bulldogs every chance she has. She resides in Charlotte, North Carolina, with her wonderfully supportive husband and three children. When she’s not ushering her kids to sports and dance lessons, she can be found creating content for her own website, TheProperPen.com.

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