Owing a lot of money on credit card debt can be very frustrating, and it can also create serious problems for your finances, given that the average interest on credit card debt is so high.
One Reddit user is facing exactly this situation now. The Redditor is 26 and has $16,500 in credit card debt. He makes $95,000, does not have a car payment, and has only a very small amount of student loan debt. He’s tired of having such a high balance, though, as he wants to begin “exploring other opportunities in life.” This includes becoming more intentional with his finances and doing more than just making payments on time on his credit card.
At this point, he’s looking for some strategies on how to tackle his debt — and fortunately, there are plenty of great options he can try.
Top strategies for debt payoff
The bottom line is, if the Redditor wants to make progress in dealing with this substantial debt, he’s going to have to do much more than pay the minimums. Minimum payments on credit card debt are designed to keep you in debt for decades and to leave you paying tens of thousands of dollars in interest charges. With a $95K annual income, no car payment, and no other debt, there is no reason why the poster can’t pay much more to his cards each month to become debt-free faster.
When he does, he may need to decide how to allocate those funds. If his $16,500 is spread across multiple cards, there are two primary approaches that were both suggested by other Redditors and that are very common techniques used to repay debt. These include:
- The debt snowball method: This approach starts with paying off your debt with the lowest balances first. It was made popular by finance guru Dave Ramsey, and the idea is that you score quick wins to stay motivated. As you pay off each small debt, you take the money you were sending towards it and start paying that on the next debt you are working on. With this approach, your payments to your next debt get bigger as each debt is paid off, gathering momentum like a snowball rolling down a hill.
- The debt avalanche method: This approach is similar to the snowball method in that you pick one debt, make extra payments, and then roll over that entire payment to the next debt on your list as each card is paid off. However, you’ll start with the debt with the highest interest rate first if you take the avalanche approach. This saves you the most in interest since you get rid of your costliest debt first.
Both of these two approaches have merit. If the Redditor (or others paying off debt) thinks he will have trouble staying motivated, the debt snowball method is the better option. If he wants to pay as little interest as possible, he should opt for the avalanche.
Other options are also available to deal with substantial credit card debt
While both the debt snowball method and the debt avalanche method have helped many people to get out of debt, there are also some other techniques worth trying as well. For example:
- The Redditor could consider a balance transfer, which would be a new credit card that comes with a special 0% promotional rate. Depending on the credit limit he’s offered when applying for the balance transfer card, he could transfer some or all of his existing credit card debt to a card with a 0% rate. Although there’s usually a small up-front balance transfer fee (usually around 3% to 4%), dropping his rate to 0% would be well worth it. Once he did that, each payment he made would go toward reducing his balance instead of interest.
- The Redditor could consider a personal loan. If he can apply for one that gives him enough money to repay his entire balance, he could simplify the repayment process and end up with just one loan to pay instead of many. He could also likely lower his rate and have a set payoff schedule with fixed payments and a clear debt-free date.
The poster should seriously consdier all of these optiosn to find the one that makse sense. If he’s not sure, talking with a fiancnial advisor for some debt payoff advice could be worth the effort.
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