Smart Money Moves You Can Make While Paying Off Credit Card Debt

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If you have credit card debt, then you know how much it impacts every part of your life. Debt causes stress, limits your ability to deal with the stress, and can easily turn into a spiral.

Credit card debt is even more burdensome these days due to escalating interest rates. Now more than ever, the number one thing you can do to support your long-term financial health is to make a plan and pay off that credit card debt.

How Credit Card Debt Saps Your Financial Strength

More and more Americans have credit card debt and the amount of that debt is increasing. Costs of living are skyrocketing and wages are not keeping up. Interest rates are also going up as the Fed tries to keep down inflation. Today, the total amount of credit card debt Americans are carrying totals an eye-popping $986 billion — a 17% jump from 2022. Now that pandemic savings have been spent and inflation has spiked prices, people are literally paying for necessities on their credit cards. Unfortunately, household credit card debt causes two major issues:

  • It ties up your money in service to the debt. In May 2023, the average credit card interest rate was 24.25%. So, if you rack up $1,000 in credit card debt and don't pay it off in the first month, it becomes $1242.5, and the month after that it is $1543.80. Quickly the compounding interest ups your burden, making it even more difficult to pay off the debt.
  • It keeps you from investing in long-term financial stability. If you are managing credit card debt and steering significant funds to that line item in your budget, what you are not funneling funds toward will suffer. Retirement, emergency fund, college savings, investing (which is the best way to create wealth) — all will have to be on the sidelines until you pay down your debt.

Borrowing to pay for necessities makes an already bad financial situation worse, but sometimes it can be the only way to deal with a cash flow nightmare. Because credit card debt rapidly becomes overwhelming, a lot of people then put off dealing with it and the amounts snowball even higher. This can then impact your mental health as well as your financial health, putting you in a poor place to deal with the situation.

Make Your Debt-Beat Plan

If you have credit card debt, your plan should focus on paying that debt off as soon as possible. Consumer credit cards have some of the highest interest rates of any kind of loan. In an ideal world you would, of course, pay off your credit cards every single month, but if you have built up debt whether from a large purchase or cash flow problems, you need a plan.

There are several things you can do.

Use the Snowball Method

The snowball method is useful for people who have multiple debts and need to feel motivated. As mentioned, it's easy to get overwhelmed by your debt and not do anything about it until things become even more critical and you are potentially facing bankruptcy. The snowball method addresses that.

List all of your debts by amount from smallest to largest. Then pay off the smallest of those debts. Put the money that was going to payments towards the next biggest debt. The snowball method works by giving you easy wins, and as you work through the stack, the payment going to the debt gets bigger.

Again, this is for people who need motivation and to have a win. You can then give yourself a small reward each time you pay off the debt. You also need to set and stick to a budget.

Use the Avalanche Method

The advantage of the avalanche method is that it saves you time and money in the long run. However, as it takes longer to see results, it requires more patience. (One thing you can do if feeling overwhelmed is pay off a small debt then switch to the avalanche method with that win under your belt).

With this method, you list all of your debts by interest rate from largest to smallest. For most people, this will put credit card debt at the top. As with the snowball method, you need to set and stick to a budget.

With this method, you pay the minimum on your debt, but all extra money goes towards the debt with the highest interest rate. Once that is paid off, you add the minimum to the next most expensive debt.

This is the best method if you have the patience to use it.

Both of these methods require that you actually have extra money. If your payments are taking up more than your free money after paying the bills, then you are going to need a way to get that payment amount down quickly. Here are our managing debt tips for reducing it and freeing up some extra cash.

Get a Debt Consolidation Loan

With a debt consolidation loan, you take out a loan for the total amount of debts you owe, resulting in a significantly streamlined debt: one payment, one interest rate, one defined term. With a debt consolidation loan you know exactly when you will be out of debt.

Ideally, you would also be gaining savings by reducing your overall interest rate, which will lessen the pace of compounding. Be careful that your loan term is not too long — in some cases you could still end up paying more interest if you are paying off the debt for many years. And know that what interest rate you qualify for is dependent on your credit score and debt-to-income ratio. The banks will assess your ability to repay the debt consolidation loan, so it is not always guaranteed you will qualify for the best rates.

Find a Debt Relief Program

A debt relief program or debt settlement service is when a third party steps in to help you negotiate with your creditors, often for an amount less than what you owe. (Some debt relief programs claim to settle for 45% less than what is owed.) However, you will pay monthly fees to the program, and this is not a quick fix. But it is a solid option if you are truly struggling with your credit card balances and can’t see a way toward being able to repay the full amount. You stop paying your credit cards and instead send money to the debt settlement program and they contact your creditors when they feel they will be willing to negotiate, which often means your credit cards need to go dark for several months.

Don't Wait Until You Pay Off Debt To Make These Smart Moves

If most of your extra money is going toward debt, you might be tempted to put off other things that can help your finances. Don't be! While you are paying off your debt, especially if you have reduced payments with a debt consolidation loan:

  • Set aside small amounts of money for an emergency fund. Ideally, your emergency fund should be enough to cover your costs for 3 to 4 months without income, but in this case you just want to have something you can access should a small household emergency crop up. You want to protect your progress in paying off your debt, and that’s what an emergency fund will do.
  • Take advantage of your employer's 401(k) plan, especially if they match funds. This reduces your tax burden and helps you build funds for retirement.
  • Create a solid working budget. Everyone should have a budget. Track down all of your spending and see where it can be reduced. Check for recurring subscriptions and payments you may have simple forgotten about — and cancel anything you don’t truly need. Knowing exactly what you are spending money on is the first step to spending less without necessarily having to give up all the things you enjoy. Prioritize your luxury expenses — golf outings? movies twice a month? gym membership? — by what you get the most pleasure and joy out of, or look for cheaper ways to get the same thing.
  • Care for your mental health. Don't get so bogged down in money worries that it impacts your ability to deal with your issues. Breathe. Move. Exercise. And make a plan. Once you’ve made a plan to pay off your debt, you will lower your stress considerably.
  • Applaud your every win. Paying down significant debt is a long-term process. Stay motivated by tracking your payments and having a small, meaningful celebration along each step of the way, even if that celebration is simply saying “Yusssss!” to yourself in the kitchen while you eat a piece of chocolate cake. (Mmm, cake.)

Remember this: the most important thing you can do, though, is make a plan to pay down that debt, today. Please call us if we can provide assistance in helping you understand your options.


Loyal Lending can free you from creditor calls and multiple bills with our easy low interest rate debt consolidation loan. With an interest rate in the single digits and a single monthly payment you will be free to plan for your future.

Let Loyal Lending help you find financial freedom from high interest credit card debt.