How to pay off credit card debt faster: five methods that work
Why minimum payments take decades, avalanche versus snowball with real numbers, balance transfers and cheaper loans, and when to ask for help.
Credit card interest is the most expensive borrowing most people ever take on, at 20% to 30% a year in the US, UK, Canada, Australia and New Zealand, and often more in the Gulf. The good news is that small changes in how you pay make an enormous difference. Here are the methods that work, with the numbers.
1. Stop paying the minimum
The minimum payment is usually around 2.5% of the balance. On a 3,000 balance at 24.9% that starts at 75 a month, then shrinks as the balance falls, so you’re never really getting anywhere.
| 3,000 at 24.9% APR | Time to clear | Interest |
|---|---|---|
| Minimum payment only | 28 years 9 months | 10,922 |
| A fixed 75 a month (the first minimum) | 7 years 3 months | 3,471 |
| A fixed 150 a month | 2 years 3 months | 916 |
| A fixed 300 a month | 1 year | 398 |
Just fixing your payment at today’s minimum, instead of letting it fall, saves over 7,400 in interest and 21 years. Set up a fixed monthly direct debit and the card does the rest.
2. With several cards, choose avalanche or snowball
Pay the minimum on every card, then put every spare unit of money on one card at a time:
- Avalanche: highest interest rate first. This always costs the least.
- Snowball: smallest balance first. You clear a card sooner, which helps many people keep going.
Example: three cards, 1,000 at 18.9%, 3,500 at 29.9% and 5,000 at 22.9%, with 400 a month to pay them.
| Method | All cleared in | Total interest | First card cleared |
|---|---|---|---|
| Avalanche | 33 months | 3,449 | Month 16 |
| Snowball | 33 months | 3,686 | Month 5 |
Avalanche saves 237 here. Snowball gets the first win 11 months sooner. Either is far better than spreading extra payments evenly, so pick the one you’ll stick with.
3. Move the balance to 0%
Balance transfer cards in the UK, US, Canada and Australia offer 0% for 12 to 30 months for a fee of around 2% to 4%. On 3,000 a 3% fee is 90, against roughly 600 of interest in a year at 24.9%. Divide the balance by the number of 0% months and pay that every month, so it’s gone before the offer ends. Don’t spend on the new card: purchases often carry the full rate.
4. Consider a cheaper loan
A personal loan at 8% to 12% to clear cards at 25% cuts the interest by more than half and gives a fixed end date. It only works if the cards then stay at zero. Compare the cost with the loan calculator.
5. Ask for a lower rate
If you’ve paid on time for a year or more, call the card issuer and ask for a lower APR. It doesn’t always work, but it costs nothing. In the UAE and Saudi Arabia, banks quote monthly rates of 2.5% to 3.5%; multiply by 12 to compare with an APR.
If you’re struggling
If you can’t cover the minimum, contact the issuer before you miss a payment and talk to a free debt advice service in your country. Missed payments bring fees, higher rates and damage to your credit record that’s hard to undo.
Work out your own plan with the credit card payoff calculator: enter your balance and APR, then compare paying the minimum, a fixed amount, or clearing it by a date.