If you’re wondering how to get out of credit card debt, you’re not alone: Americans owe $1 trillion in credit card debt.


Credit card debt can be a heavy financial burden, with interest charges and late fees accumulating quickly if you fall behind on payments. Your credit score and emotional well-being also pay the price.


There are a few common ways to eliminate credit card debt. How do you know which one is right for you—and where do you start? We’ve broken it down into two simple steps that will get you on the debt payoff track. 


Step #1: Get serious about a budget
Before we dive into debt pay-down and consolidation options, your first step is to make—and commit to—a budget. Nothing will sabotage your credit card payoff goals faster than out-of-control spending. Sticking to a budget will be the engine that drives you to success.


There are a variety of strategies for budgeting. Some people love online tools, others rely on sticking cash in envelopes. What matters most is finding a system that resonates with you and stick to it.


Regardless of which budgeting style you choose, an essential element is your commitment to stop using credit cards. People who know how to eliminate credit card debt have learned the first step is to stop accumulating it.


Good budgeting habits help you pinpoint your income and expenditures. They also make it possible to identify areas where you can cut back on expenses or preserve some extra income—enabling you to pay as much as possible toward your credit card debt every month.


As part of your budgeting process, be sure to track where you stand with each credit card: the balance, interest rate, and minimum payment.



Step #2: Pick a method for paying down your credit card debt
You have two primary options: keep multiple credit card accounts open, or consolidate your credit card balances into one single debt.


Paying off multiple open accounts
If you’re comfortable managing multiple credit card accounts, there are two well-known options for paying down your credit card debt:


1. Debt avalanche method
Start by ranking your credit cards according to interest rate. Your first “target” will be the card with the highest rate. You’ll make the minimum payments on your other cards, and dedicate all extra money toward the balance with the highest interest rate. When that card is paid off, you’ll turn your attention the card with the next-highest balance, using your extra funds to pay it down ASAP.


Key considerations: This method can save you money in interest payments. However, if your highest-interest-rate card has a big balance, it could take you quite a while to pay it off, which can be discouraging.


2. Debt snowball method
In this scenario, your first target will be the card with the lowest balance. Every extra cent you have will go toward eliminating this balance—while paying the minimum on your other cards.


Key considerations: Your morale will get a boost when you quickly achieve a $0 balance, encouraging you to stay committed to the method. However, you’ll end up paying more in interest compared to the avalanche method.


Consolidating credit card debt
With debt consolidation, the idea is to wipe out multiple credit card balances with one single loan. Instead of making payments on multiple credit cards each month, you’ll make one payment to one entity. There are two common paths to credit card debt consolidation:

1. Debt consolidation loan
An installment loan allows you to consolidate multiple types of debt, including credit cards, medical bills and other types of loans. Installment loans have a set payoff date—ranging from a few months to a few years—and let you make monthly or biweekly payments. Installment loans range from a few hundred to several thousand dollars.


The process starts with a loan application. Lenders examine your credit score and other financial info to determine if you meet their standards, and to establish your interest rate. A better credit history generally translates to a lower annual percentage rate (APR).


After you’re approved for the loan, the lender will either pay off your existing debts for you or disburse cash to you to pay off debts yourself. You’ll now make one fixed, predictable payment for just the installment loan. 


Key considerations: It’s possible to save money—potentially a big chunk—by paying less in interest each month. You’ll have fewer bills, too, making it easier to maintain a singular focus on eliminating your debt. It can also be encouraging to have a firm date on the calendar when you know the debt will be fully paid off. Additionally, an installment loan can help you build credit with on-time payments.


2. Credit card balance transfer
You may be able transfer current credit card balances to just one card. This is often accomplished using a new card with a low introductory interest rate, with the intention of paying off the balance before the intro period ends and the interest rate increases.


Key considerations: You can possibly reduce your overall interest rate and save money on total interest. A balance transfer may initially decrease credit score if your credit utilization ratio (the amount you owe vs. your credit limit) changes drastically, but over time, it can help you build credit with on-time payments



Step #3: Implement your chosen method, and commit to smart financial behavior
Many people manage to get out of credit card debt—but only for a short time. Unless you improve your everyday money habits, you could end up right back where you started: overwhelmed by credit card debt.


That’s why RISE offers educational resources and tools to help you develop better money habits. With Credit Score Plus, you’ll get free access to your credit score and ongoing credit alerts.


An online loan from RISE can help you take control of your credit card debt and improve your financial wellness—apply for a loan today.


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