Why You Need to Pay Off Credit Card Debt & How to Get It Done!

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Have you found that a large amount of credit card debt is holding you back from reaching many of your goals? Growing credit card balances may be keeping you from saving money for a down payment on a new home, buying a more reliable car, or paying off student loan debt. If you’re unsure of how to pay off credit card debt, you might simply continue to pay the minimum amount each month, enabling the debt cycle to continue.

If you’re ready to pay off credit card debt for good and move on to other financial goals, we’re outlining strategies for how to begin and succeed!

How Debt Affects Your Credit Score

The importance of paying down your credit card debt cannot be stressed enough. Especially when you consider how credit card debt can negatively impact your credit score — the score that all lenders review when you apply for a loan. In fact, 65% of your credit score is affected by the amount of outstanding debt you owe and your history of repaying the debt you carry.

The three main credit reporting bureaus – Equifax, Experian and TransUnion – gather information on your financial history and compile it into a FICO credit score. (FICO is the software used to measure your consumer credit risk). Everyone is able to obtain their updated credit report, for free, once per year.

When you’ve earned a good credit score, there are many advantages you see such as:

  • Lower interest rates and higher limits on loans or credit cards
  • Premium credit card benefits (cash back, reward points)
  • Easier approval and more attractive interest rates when refinancing a mortgage
  • Easier approval and expanded options for rental houses or apartments
  • Lower homeowner’s insurance premiums

If your credit score is lower, these benefits aren’t as easily accessible. So, what can you do? Improving a poor credit score starts with reducing your debt.

Methods to Pay Off Credit Card Debt

There are two methods you can choose for paying down your credit card debt — the Snowball Method and the Avalanche Method. Here are the steps to get started with either approach.

Snowball Method

  1. Find the debt with the smallest outstanding balance.
  2. Take whatever extra money you have available each month and put it towards this payment.
  3. Keep making fixed payments or minimum payments on your other loans or credit cards. Don’t skip payments!
  4. Once you achieve zero balance, move on to your next smallest debt and repeat.

Crossing debt off your list, no matter how small, can help you gain confidence and keep up the momentum.

Avalanche Method

  1. Target the debt that charges the highest interest rate.
  2. Take whatever extra money you have available each month and put it towards this payment.
  3. Keep making fixed payments or minimum payments on your other loans or credit cards, too.
  4. Once you achieve zero balance, move on to the next highest interest rate and repeat.

It may take a little longer to pay off high-interest debt instead of small balance debt but avoiding high interest charges will save you a lot of money in the long run.

Pros & Cons of Balance Transfer Credit Cards

Maybe you’ve been considering the idea of using a balance transfer credit card to help reduce your credit card debt. These can be a helpful debt reduction tool but you need to know the pros and the cons of this approach.

What are Balance Transfer Cards?

  • With a balance transfer card, you’re able to transfer the outstanding credit card balance from your current card, which charges a high interest rate, to a new card with a much lower rate. You are using Card B to pay off the balance of Card A, then you pay off Card B with less interest accruing each month. Some balance transfer cards offer as little as 0% interest as an introductory benefit.

Pros of Balance Transfer:

  • Typical credit cards carry an interest rate as high as 15-20%. Credit union cards may offer a lower interest rate, some starting as low as 7.9%.
  • With a 0% rate credit card, you can pay off your credit card debt months earlier.

For example, if you’re carrying a $5,000 credit card balance and can dedicate $250 toward your payment each month:

  • it will take 24 months to pay off on a card that charges 15% interest.
  • it will take 20 months to pay off on a 0% debt transfer credit card.


  • There may be an initial balance transfer fee, typically 3% of your balance, so you will need to determine if the savings from a lower interest rate offsets any fees.
  • There may be a timeframe for transferring a balance. This means you may only have 30-60 days after opening a balance transfer card to pay off your current debt and transfer the balance.
  • Many cards feature an introductory interest rate of 0%, but it’s just introductory. The interest rate may revert to the card’s standard rate after 6-18 months.
  • New purchases may not be interest free. Often time the introductory rate only applies to the transferred balance and not new charges.

Consolidate with Your Home Equity

If the cons of balance transfer cards outweigh the pros in your case, you can also consider a consolidation loan as a way of paying down your credit card debt. As a homeowner, you have the option of using the equity you’ve built in your home to apply for a home equity loan. If approved, you can use the funds from your loan to pay off your higher-interest outstanding debt at lower, fixed-interest rate.



Are you looking for personalized help? With Diamond’s Loan Health Check-Up program, we’ll review all your outstanding debt to ensure you’re managing your debt responsibly, help you get the best possible rates, and find ways you can save. Contact a Diamond Loan Consultant for your free Loan Health Check-Up.

Not a Diamond Credit Union member? Find out if you can become a member and about the benefits of joining a credit union.


The views, opinions, and ideas articulated in this blog are just that, and should not be construed as financial or legal advice. The writers of these blogs are educated on the topics they are writing about, but they are in no way licensed financial advisors or registered investment advisors. Diamond Credit Union is not responsible for any actions a person may take as a result of the information they read in one of our blogs.