How to reduce and pay off credit card debt


You need a plan of action to reduce and eliminate this debt. Paying off credit card debt requires a hands-on approach, from determining the best repayment strategy to communicating with creditors to negotiating interest rates.

Credit Score Report

A good way to start is to check your credit report and your credit score, both of which can be done for free. Check if this is correct and identify the accounts that lower your rating.

Negotiate with lenders

Explain to lenders the steps taken to avoid defaults and ask to renegotiate the debt. Lenders will make concessions if they feel loose credit lines have been abandoned for good.

Debt consolidation

Combine several old debts into one new one, ideally at a lower interest rate, making payments more manageable or the repayment period shorter. There are several ways to consolidate debt, including balance transfer cards (with balance transfer fees) and personal loans.

Repayment strategy

There are two ways of dealing with debt. “Avalanche” and “snowball” methods. The first is to pay off the debts with the highest interest rates first. The other is to tackle the lowest amount of debt first, pay it off, and then tackle the next loan.

Payment automation

Automating payments is an easy way to ensure that the repayment strategy is working and that future debts are paid on time.

Points to note

  • As the credit card balance is carried forward, interest is calculated on the average daily balance. Making smaller payments frequently can reduce interest. Pay double the minimum amount to have a big impact on debt reduction.
  • Consider borrowing money to pay off the outstanding amount using a peer-to-peer lender service.

(The content on this page is courtesy of the Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava, and Labdhi Mehta.)



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