6 tips to pay down credit card debt in a year

When your credit card was new and shiny, the balance read $0. A few months and purchases later, it had a manageable balance. You were making payments. But over time, the balance seemed to grow on its own.

So what happened? Those small purchases added up over time. And in the meantime, the minimum payments you were making weren't keeping the balance down.

If you find yourself saying, "Now it's time to pay that balance down," read more and get a 12-month plan to make your debt a memory.

1. Take a break from using your credit card.

Pausing your spending forever may not fit your long-term money management preferences. But it can help to frame this step as "not right now," instead of "never again." Don't let new spending cancel your hard work paying down debt.

Remove your cards from your wallet and store them in a safe place. You should also remove them from sites where it's easy to make online purchases. You're less likely to use your plastic if it's not readily available.

2. Create a safety net.

Should you save or pay off debt first? Oddly enough, the next step to paying down credit cards may not be making extra payments. Instead, make sure you're making the minimum payment, then funnel extra cash into an emergency savings account.

Before aggressively paying down your cards, start small and work toward having $1,000 in a savings account. Having a cash cushion in a safe account that you can get to easily will keep you from charging unexpected expenses to your credit card.

3. Develop a plan.

If you only make the minimum payments, you won't make much progress because of accrued interest. Think of your monthly payment as a chisel. A small payment is like a small chisel, chipping away slowly at your balances. A big monthly payment will help blast through that debt much faster. Plus, minimum payments can be costly over the long run. Check out this article on the high cost of credit card minimum payments.

Start small.

If it feels daunting, increase your payments a little at a time when you're able to cut another expense or get some extra income. Don't miss the opportunity to pay down debt instead of putting that extra money elsewhere.

Canceling premium cable, eating out less or clipping coupons are all changes that can help. When faced with painful cuts, remember that this is just a temporary change until you pay your credit card balances down.

If it's easier to pull in some extra income than giving up spending, look for items you no longer use and sell them online or at a garage sale. You may also want to consider a second job, a new job for you or your partner, or an entrepreneurial endeavor.

4. Contact your creditor.

If you need help managing your credit cards, many companies have programs in place to help you if you're struggling with payments. You could also transfer your balances to a credit card with a lower interest rate. This helps you save some interest, so you can pay down the balance quicker.

Keep in mind, moving debt around doesn't actually lower what you owe and you may incur balance transfer fees. Plus, the emotional feeling of seeing a $0 balance on the old card can be a bit of a mental trap.

Stick to your plan to pay the consolidated balance down. Then let any interest savings you might squeeze out of this strategy speed up your paydown plan.

If you need more help, you can contact an agency that specializes in helping people manage credit and pay down debt, like the National Foundation for Credit Counseling.^{See note1} They may be able to help you understand more about credit and give guidance specific to your situation.

5. Use the snowball method.

If you've got one credit card, your path is simple. Apply all your extra monthly cash toward that credit card until it's paid off. If you have more than one card, there are a couple of routes you can take.

Pay your smallest balance first.

This can help you stay motivated with quick wins as you may pay off your smaller cards. Pay the minimum due on all your other debt, then pay as much as you can toward your smallest balance. Repeat the process with the next smallest card until you're debt free. Keep in mind, this method may cost more in interest in the long run.

Pay your highest interest balance first.

Pay the minimum payment on all your other debt, then pay as much as you can toward your debt with the highest interest rate. It might take longer to see a debt paid off, but it'll help you save money on interest over time.

6. Make the most of windfalls.

If you receive a tax refund, work bonus, overtime pay or even extra money in your budget, it can be tempting to spend your good fortune. But applying these windfalls to your credit card balances can speed up your repayment time. Remember those short-term cuts you put in place when combing through your budget? Speeding up your debt paydown plan can mean returning to some of that spending sooner.

Beat the mental game.

Personal finance is just that. Personal. Much of the way we spend or save is tied to who we are, how we think and what we've learned from society.

Changing your habits can be hard, but remember to take small steps to improve your situation. Don't get discouraged when you have some spending and saving setbacks. The important thing is to remember your long-term goals, adjust your plan as needed and get back on track with that $0 balance in mind.

The USAA Advice Center provides general advice, tools and resources to guide your journey. Content may mention products, features or services that USAA Federal Savings Bank does not offer. The information contained is provided for informational purposes only and is not intended to represent any endorsement, expressed or implied, by USAA or any affiliates. All information provided is subject to change without notice.