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How to Pay Off Credit Cards

Friday, 20 November 2020

A wise man once said, “With great power comes great responsibility.” This principle, though borrowed from a well-known comic book series, is very applicable to your finances. Credit cards give you great borrowing power and, when used wisely, they can be a helpful financial tool for building credit and providing perks like cash back, travel points and extra insurance coverage. With a high interest rate around 20% on credit cards, the responsibility is also yours to manage it carefully, not allowing it to spiral out of control. Emergencies do happen and maybe your credit card debt has built up to a point that it feels insurmountable, but with these strategies on how to pay off credit cards, you can get back on track!

Pay Attention to Your Spending & Use a Budget

The first step in learning how to pay off credit cards starts identifying where you are splurging. Look at your credit card statements for the past 6 months. Are you ordering more takeout? Paying for a subscription you rarely use? Purchasing unplanned gifts? Once you identify how you are accumulating debt, you can start to build a strategy to curtail your spending with a budget.

Making a budget is incredibly rewarding and it doesn’t have to be complicated or intimidating. Start with your total monthly income and subtract your ongoing expenses (rent/mortgage, debt/car payment, utilities, groceries, etc.). After you’ve gone through all your expenses, you might need to reduce non-essential expenses like entertainment, takeout and shopping to put more towards your credit card for now. A little bit of sacrifice now will benefit you in the future and help you achieve your financial goals.

If you find that your credit card spending is out of control and a budget isn’t enough, you may benefit from using a cash/envelope system. Leave your credit cards at home and only allow yourself to spend what is physically in your cash envelope for that budget category. Once spent, you must wait until a new month to get more cash in the envelope.

Recommended Resources:
How to Make a Budget
Ways to Save More on Monthly Expenses

Should You Pay the Credit Card Minimum Payment?

One of the most important parts of how to pay off credit cards is to make it your goal to pay more than the minimum payment. Be realistic and consistent, even if you can only put $50 or $100 extra each month. Your credit card statement will tell you how long it would take to pay off your current balance making the minimum payment, which is usually 10, 20 or 30+ years, plus thousands of dollars in interest. This is because the minimum amount goes mostly towards accruing interest and not the principal (actual money you owe). Also keep in mind that if you’re still using the credit card for purchases, the minimum payment doesn’t cover new charges.

How to Pay Off Credit Cards – Negotiate or Find a Lower Interest Rate

These options require a bit of research on your part, but the benefits are great strategies of how to pay off credit cards. Ask your current credit card provider if the interest rate can be negotiated… it never hurts to ask! If that option doesn’t work out, start looking for another low-interest option, especially if you know you will carry a balance for a while.  

Some credit card companies run promotions in hopes to attract new customers and often offer a lower interest rate when you transfer your balance to them. You can take advantage of a balance transfer promotion with some strategic planning by paying off more debt during the promotion period.

There are also low-interest credit card options available. They have fewer perks, if any, but you’ll pay your debt off much faster with the significantly lower interest rate. Also explore the option to get a line of credit (LOC). A LOC will have a lower interest rate than your credit card’s 20% interest. You can use the LOC to pay off your credit card and pay the money back on your LOC at the lower interest rate.

Two Approaches on How to Pay Off Credit Card Debt

There are different approaches when you prioritize how to pay off credit cards and other debts. If you need some motivation while you pay off debt, consider paying off the smallest debt first (regardless of interest rate). This will give you a sense of accomplishment, motivating you to pay down larger debts, and freeing up some cash flow to put towards the next debt.

Alternatively, the debt with the highest interest rate will cost you more over time, so theoretically you would be saving more money by paying it down first. With this method, it is in your best interest to pay more than the minimum payment to decrease your borrowing time and save on accumulating interest. Put as much extra cash towards the debt as you can to eradicate it sooner.


The stress of debt looming over your head not fun! Sometimes it’s inevitable when emergencies arise, but the truth is that if you use these tips on how to pay off credit cards, you can pay off debt quickly and regain control of your finances. Being responsible now and sacrificing a few niceties will give you the power over your financial future. Our financial advisors at BIG would be happy to assist you in getting on track with your savings and future. Contact us now to see how we can help!

By: Amy Legault