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How do you pay off credit cards?

Alex Ritchie avatar
Alex Ritchie
- 5 min read
How do you pay off credit cards?

Credit card debt can quickly spiral out of control if you’re not careful. If you can’t clear your balance on time, interest charges will increase how much you’ll need to pay.

As time passes, interest may start being charged on your interest charges, and before long you could find yourself unable to pay enough off your debt to keep it from growing further.

Let’s explore several potential strategies for paying off a credit card, or multiple credit cards, so you can get out from underneath your debt. 

How you can lower your credit card debt

The best strategy to pay off your credit card debt will depend on your specific financial situation. It’s worthwhile speaking to a financial advisor about one or all of these strategies to determine which option may be worthwhile pursuing for your budget and needs. 

Make your credit card payments on time

It’s almost always advisable to pay your bills and make your loan repayments on time, as late repayments and loan defaults can hurt your credit score, making it harder to borrow money in the future. Additionally, paying off your credit card in a timely fashion can help you avoid being charged interest on your purchases.

Most credit cards offer a limited number of interest-free days on purchases made each billing cycle. If you can clear your credit card debt before these days expire, you won’t be charged interest on your purchases. Staying on top of your credit card repayments like this can help prevent your credit card debts from growing unmanageable in the first place.

Pay more than the minimum

Most credit cards require you to pay a minimum amount of your debt each billing cycle – often somewhere around 2%. But only making the minimum repayments won’t be enough to cover the interest charges on your credit card balance. This means it may take years to pay off your credit card balance, and cost you a lot in interest charges.

Even if you can’t afford to completely clear your credit card balance yet, the more you can comfortably afford to pay off, the less interest you may be charged and the more progress you can make towards becoming debt-free.

Transfer your balance

Some specialist credit cards charge low or no interest for a limited introductory period when you transfer the balance owing on another credit card. You can then use this intro period to make a concerted effort to pay off your outstanding balance, as it won’t have interest charges added to it each month.

However, once the intro period expires, you’ll start being charged interest on any balance that’s still owing, often at a higher rate than many other credit cards. This could quickly put you back in the same position or worse than where you started.   

How to pay off multiple credit cards 

If you're finding it hard to manage credit card debt spread over multiple cards, you'll need more than motivation to get your financial situation under control. There are a few strategies you may consider to pay off your debt sooner. 

Smallest debt first 

If you owe money on multiple credit cards, it may feel like it’s impossible to get them all paid off. Instead, you could consider paying off the credit card with the smallest debt owing first as an easy win to motivate you to keep going.

By clearing the balance of one card at a time, and just paying the minimum amount on the others, you’ll slowly be able to get on top of your card debt.

Highest rate first

Interest charges are one of the most significant factors that contribute to growing credit card debt. Another popular strategy for paying off multiple credit card balances is to focus on the card with the highest interest rate first.

Regardless of the size of this debt, this could help you to prevent interest charges from growing your credit card debt and for the debt to continue to snowball. 

Consolidating your debts

Consolidating multiple credit card debts into one may help you better manage your repayments and minimise the amount of interest you're paying. One option is to apply for a balance transfer credit card to consolidate your debts

Alternatively, if you want to spread out your repayments over a longer period, it's possible to consolidate your debts into a personal loan if you qualify for one. Keep in mind that spreading your repayments over an extended period can sometimes cost you more in total than clearing your debts separately. It’s worth considering the personal loan interest rate and the total cost of the loan over its full term against any of the aforementioned strategies before you proceed.

Some lenders will also allow you to refinance your mortgage to consolidate your credit card debts. However, think hard before stretching out your short-term credit debt over the much-longer term of a mortgage, as you could end up paying much more in interest over the years.

Can I use one credit card to pay off another card?

Paying off one credit card with another that is not a balance transfer credit card is rarely a great idea. By doing this, you're only moving around your debt instead of paying it down. 

Depending on your issuer, such transactions might be charged at your card's cash advance rate, which is usually much higher than your purchase rate. Most credit providers will also not allow you to set up a direct debit facility linking two credit cards.

If you find yourself struggling with your repayments, it could be worth talking to your credit card provider. Most credit providers are willing to work with their customers to make their repayments manageable. They might offer you a solution you haven't considered. It may also help to contact a financial counsellor if you’re in financial difficulty and need expert help.

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Product database updated 14 Apr, 2024

This article was reviewed by Personal Finance Editor Peter Terlato before it was published as part of RateCity's Fact Check process.