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Tips for How to Pay Off Debt & Save on Interest
Author: Christie Matherne
- Catch Up on Past-Due Bills. Bringing your payment status to current on all of your credit card accounts will ensure that your credit score does not suffer further damage. It may reduce the interest rate that’s applied to your balance as well.
- Build an Emergency Fund. Building even a small cash reserve is important before you truly begin focusing on debt repayment because it gives you something to fall back on in case something goes wrong, preventing you from backsliding into debt after all your effort to get out of it.
- Make a Budget. This budget should reduce spending on non-necessities and maximize monthly debt payments. You should make this budget in consultation with a credit card calculator to ensure you’re debt-free in a reasonable amount of time.
- Consider a Balance Transfer Credit Card or Debt Consolidation Loan. If you have a good or excellent credit score, there’s a good chance that a 0% balance transfer credit card or a personal loan for debt consolidation will save you money and help you get out of debt sooner. People with lower scores may not be able to qualify for attractive enough terms, unfortunately.
- Focus on the Most Expensive Balances First. If you owe multiple balances, allocate the lion’s share of your monthly debt payment to the balance with the highest interest rate, while making the minimum required payment on the others. Once the costliest debt is paid off, repeat the process with the next-most-expensive one, and continue until debt-free.
Maximizing your monthly payments is important if you want to minimize interest charges when paying off credit card debt. As you can see below, the more the average household pays toward their credit card debt each month, the less they’ll pay in interest and the sooner they’ll become debt-free.
Examples of How Long It Will Take to Pay Off $10,000 in Debt
| Debt | Monthly Payment | Payoff Time | Total Interest Accrued |
| $10,000 | $300 | 45 months | $3,481 |
| $10,000 | $400 | 31 months | $2,345 |
| $10,000 | $500 | 24 months | $1,780 |
| $10,000 | $1,000 | 11 months | $835 |
Note: Payoff timeframes assume the average APR among credit card accounts with finance charges: 16.43%.
Questions & Answers
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Upvote
How do I calculate my monthly credit card payment?
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1
Adam McCann, Financial Writer
@adam_mcan
You can calculate your monthly credit card payment by multiplying the monthly interest rate by the outstanding balance. The monthly rate can be obtained by dividing your APR by 12 for the number of months in a year. The simplest way to do that is using a credit card calculator.
Keep in mind that your monthly credit card payment can be any amount between the minimum set by your issuer and your entire balance. You also do not have to pay the same amount every month. You can find both your required minimum payment and the full balance on your monthly credit card statement. You can also find this information by logging in to your online account or contacting your card's issuer.
How to Calculate Your Monthly Credit Card Payment
- Open a free credit card calculator.
- Fill in your card's balance and APR.
- Choose the option for calculating the payments needed to pay off your credit card within a certain amount of time.
- Fill in the number of months until you want to have your card paid off.
- Click the “Calculate” button.
- Look at the results to see your monthly payment, as well as information about the amount of interest you'll pay and how much you could save by increasing your monthly payments.
You can learn more about credit card payments on WalletHub.
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Upvotes
How can I pay off $5,000 in credit card debt?
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4
Chip Lupo, Credit Card Writer
@CLoop
To pay off $5,000 in credit card debt within 36 months, you will need to pay $181 per month, assuming an APR of 18%. You would incur $1,519 in interest charges during that time, but you could avoid much of this extra cost and pay off your debt faster by using a 0% APR balance transfer credit card.
The average length of a 0% APR balance transfer intro period is 13 months, according to WalletHub's Credit Card Landscape Report, and the...
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9
Upvotes
How To Pay Off Credit Card Debt
Adam McCann, Financial Writer
@adam_mcan
The best way to pay off credit card debt is as soon as possible. And you can save both time and money by using a credit card payoff calculator as well as a 0% balance transfer credit card, if you have good or excellent credit. You can check your latest credit score for free on WalletHub to find out.
The more credit card debt you owe and the more balances you have, the more complicated things can get. That's why you need a plan. Below, we'll explain the best ways to pay off credit card debt as quickly and inexpensively as possible, starting with WalletHub's preferred method.
How To Pay Off Credit Card Debt in 6 Easy Steps
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7
Upvotes
How do I know which credit card to pay off first?
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7
Chip Lupo, Credit Card Writer
@CLoop
You should pay off the credit card with the highest interest rate first because you'll save the most money that way. Apply the biggest monthly payment you can manage to the balance with the highest interest rate and pay at least the minimum amount due on your other credit card accounts to avoid credit score damage. Then, move on to the balance with the next highest interest rate and repeat the process with each card until you've...
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Upvotes
How do I figure out how much interest I will pay on my credit card?
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2
WalletHub
@WalletHub
You can figure out how much interest you will pay on your credit card by dividing the card's APR by 365 and multiplying first by your average daily balance and then by the number of days in the billing period. The interest charges you owe will also be listed on the credit card's monthly statement.
How to Calculate Credit Card Interest Charges
- Find your credit card's APR
Your credit card's APR...
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How do I find the interest rate on my credit card?
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Christie Matherne, Credit Card Writer
@christie_matherne
To find the interest rate on your credit card, look at your cardmember agreement and your monthly credit card statements. Your interest rate will be there in the form of an annual percentage rate (APR). But as “annual” implies, an APR is the cumulative interest rate for a whole year, which isn't all that helpful for calculating actual interest charges from day to day or month to month.
You can figure your daily interest...
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Upvotes
What is the best strategy to pay off credit cards?
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Bianca Smith, WalletHub Credit Cards Analyst
@bianca_stoian
The best strategy to pay off credit cards is to repay the credit card with the highest APR first because you will minimizeinterest chargesthat way. Rank all your credit cards by interest rate and, after paying the minimum amount due for each, put the rest of your debt budget toward the card with the highest APR.
Best Strategy to Pay Off Credit Cards
1. Pay at least the minimum amount due on...
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What is a variable interest rate on a credit card?
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10
WalletHub
@WalletHub
A variable interest rate on a credit card is an interest rate that goes up and down with the index rate it's tied to, which is most often the Prime Rate. The Prime Rate is the interest rate banks give to the most creditworthy borrowers. The Prime Rate goes up and down, too, usually based on adjustments to the Federal Funds Rate, which changes based on the economic climate. Most credit cards today have a variable interest...
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What is the best credit card calculator to use?
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9
John S Kiernan, Managing Editor
@John
The best credit card calculators are the credit card payoff calculator, credit card interest savings calculator, and balance transfer calculator from WalletHub because they are free, easy to use, and capable of finding hidden savings. The key is to select the right type of credit card calculator for the objective at hand.
Best Credit Card Calculator to Use, by Situation
If you want to determine what it will take to become debt free: Use WalletHub's credit card payoff calculator.
This type of credit card...
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Upvotes
Should I pay more than the minimum on my credit card?
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9
Chip Lupo, Credit Card Writer
@CLoop
Yes, you should pay more than the minimum on your credit card. While paying the minimum amount due on time every month will keep your account current, paying more than the minimum each month will save you money on interest, improve your credit score, and reduce the amount of time it will take to pay off your debt.
Why You Should Pay More Than the Minimum on a Credit Card
You'll Pay Less...
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Ask the Experts
With credit-card debt levels remaining high in 2024 but decreasing, we asked a panel of credit experts to shed light on the unsustainable credit behavior that leads to such negative results and their effects on the economy. Click on the experts’ profiles to read their bios and thoughts on the following key questions.
- What daily behaviors lead people to amass credit-card debt?
- What is the biggest mistake people make when managing credit-card debt?
- How does the growth of credit-card debt affect the economy?
- How will actions taken by the Federal Reserve affect credit card debt in 2021?
- What role, if any, should government play in incentivizing and encouraging people to maintain low debt-to-income ratios (e.g., through tax incentives)?
Todd Chipman
Finance, Economics, and Personal Finance Instructor – Nebraska Wesleyan University
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Brian Starr
Ph.D. – Assistant Professor of Economics and Finance – Lubbock Christian University
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Andrew Ching
Professor of Business and Economics – The Johns Hopkins Carey Business School
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Samique March-Dallas
Ph.D. – Associate Professor|CFO Faculty Advisor|Research Cafe Coordinator| Bloomberg Finance Lab Director; Department of Accounting and Finance| School of Business and Industry – Florida A&M University
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Kent S. Belasco
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Ranajoy Ray-Chaudhuri
Ph.D. – Assistant Professor of Economics & Finance, Department of Accounting, Business, Economics & Finance; Director, Muhlenberg Scholars Honors Program – Muhlenberg College
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* WalletHub is committed to transparency and editorial independence. The information about the following cards has been independently collected by WalletHub: Citi Double Cash® Card and BankAmericard® credit card
