Why it's important to pay off a credit card quickly
The longer you have an outstanding balance on a credit card, the more interest you'll rack up on your debt, making it cost more. If your credit card has a high interest rate attached to it, then it's even more important to try to pay off your balance as soon as you can. You can use this credit card interest calculator to see how much interest your balance may be costing you.
Paying off a credit card fast can also help your credit score improve. One factor that goes into calculating your score is your credit utilization ratio, which measures the amount of available revolving credit you're using at once. Even if you make your minimum payment on time every month, your credit score could go down if you carry too high a balance.
How to find more money to pay off a credit card
To pay off a credit card fast, you'll need extra money to put toward your debt. To that end, here are several steps you can take to get your hands on more cash.
Rework your budget
You may already be living pretty frugally and spending money mostly on essential expenses, like rent, food, and transportation. But if there's any wiggle room at all in your budget, it pays to cut back in those spending categories that allow for it.
Get a roommate
Housing may be the largest expense you grapple with every month. If it's possible to lower that expense by splitting your rental costs with a roommate, it'll help free up cash to put toward your credit card debt.
Get a side job
If you're already spending minimally and can't do anything to reduce your housing costs, getting a second job could help you get more money to put toward your credit card debt. Even if you only have time to work a few extra hours each week, earning more money could help you make a dent in your credit card balance.
How to pay off credit card debt strategically
If you've managed to scrounge up some extra money to pay off your debt, you can use a debt payoff strategy to tackle it instead of (or along with) debt consolidation, which we'll cover in a minute.
Here are two ways to pay down your debt:
- Snowball method: You pay off your debts in the order of smallest balance to largest balance, regardless of interest rate.
- Avalanche method: You pay off your balances in order of highest interest rate to lowest interest rate.
There are pros and cons to each approach, but if your goal is to shed your debt quickly, you may want to also consider consolidating your debt.
RELATED: Check out The Ascent's debt snowball calculator to see which debts you should pay off first when using this method.
MORE INFO: See The Ascent's complete comparison of debt snowball vs. debt avalanche.
The most efficient ways to pay off credit card debt
If you owe money on multiple credit cards, debt consolidation could be your ticket to paying it off faster. There are several ways you can consolidate credit card debt.
Balance transfer
With a balance transfer, you move your existing credit card balances onto a new balance transfer credit card and then pay off that single card every month. Often, balance transfer credit cards come with a lower interest rate than what your current credit cards are charging you. And many balance transfer cards come with a 0% introductory APR, where you pay no interest at all for a limited period of time.
Now to qualify for a balance transfer offer, you'll need to have a good credit score. If you don't, this may not be an option.
If you get a balance transfer card with a 0% introductory APR and you don’t pay off your balance by the end of the intro period, you’ll accrue interest on the remaining balance. Plus, most balance transfer cards charge a fee of 3% to 5% of the amount you transfer.
Though balance transfers have their drawbacks, it's an option worth looking into because it could make your debt much less expensive to pay off. You can use this balance transfer calculator to figure out how much you stand to save with a balance transfer.