How to pay off your credit card debt

Negotiate for a lower interest rate

They might not say yes, but it never hurts to ask. Call up your credit card issuer and ask them to lower the interest rate on your card.

You’re more likely to get approved if you have a history of on-time payments and a strong credit score, but you should also let your issuer know why you want a lower rate — to pay off your debt load.

You might want to start with the issuer you’ve had credit with the longest (they can consider rewarding your loyalty) or the issuer of the card with the higher interest rate (to reduce more of the interest you owe).

You can also ask for a temporary reduction on your credit card’s interest rate for a limited time or until you’re in a better financial position.

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Consolidate your debt

Paying a bunch of different bills can be confusing and time-consuming — which is why they often go unpaid and accrue interest.

If you have multiple unsecured debts, and particularly if some have punishingly high interest rates, consider a consolidation plan. You'll be writing one check instead of several, and having one debt consolidation loan with a lower interest rate will save you money in the long run.

Just make sure rolling your various debts into one loan is worth it first. You’ll need a decent credit score (at least 670) to qualify for a better interest rate than what you’re paying currently.

Switch to a balance transfer credit card

Another option for getting rid of those sky-high credit card interest rates is to refinance with a balance transfer credit card.

Look for a card with lower interest rates — some may even offer an introductory 0% APR for a limited time — and make sure the balance transfer fees don’t outweigh what you’re paying in interest. Fees typically range between 3% to 5%.

Issuers will also be looking for borrowers with good credit scores of at least 670. If you qualify for that 0% APR rate, look for a card with the longest promotional period and try to pay off your balance before it expires.

Consider credit counseling

Reach out to a trained credit counselor for help if needed. They can offer advice on budgeting and dealing with housing expenses as well as paying down your debt.

Credit counseling is usually offered by non-profit organizations and you can speak with a professional online, over the phone or in person. Some may even offer free services.

Your credit counselor can also put you on a personalized debt management plan — in which, you’ll make monthly payments to the organization, which will in turn make the separate payments to your various creditors. The credit counselor can lower your monthly payments by negotiating with your creditors to extend your repayment periods or lower interest rates.

Look into the counselor’s qualifications and certifications beforehand. And collect any documents that would give a credit counselor a clear picture of your financial situation, like your income, debt, expenses and assets.

Options you should only use as a last resort

Although paying off your balance quickly is the key to conquering credit card debt, you should try to avoid certain methods.

The following strategies should only be used as a last resort — and even then, probably not at all.

Taking out a home equity loan

Your home equity refers to the portion of your home that you actually own. You have the option of taking a loan against your home equity and using that to pay your credit card bills (you’ll also need to pay off your home equity loan each month in installments).

You’ll pay fixed interest on your loan and it tends to be much lower than credit card interest rates, but there’s a big risk involved. If you can’t meet your monthly loan payments, you could lose your home.

Tapping into your 401(k)

If you have a 401(k) plan through your employer, you might consider dipping into your savings to pay off your credit card debt. However, there are drawbacks to this option as well.

You’ll get charged a 10% penalty if you withdraw funds from your 401(k) before you turn 59½. And you’ll owe taxes on the amount you withdraw because it will be treated as income.

You could take a loan from your 401(k) instead — these loans typically have much lower interest rates compared to credit cards, they don’t require a credit check and won’t show up as debt on your credit report. However, you’ll have to pay back your loan within five years.

If you leave your job and don’t pay back your loan, you’ll have to pay that 10% penalty and deal with taxes as well.

File for bankruptcy

You can file for bankruptcy if your credit card debt has risen to insurmountable levels and you have absolutely no other options available to pay it off.

Chapter 13 bankruptcy lets you potentially negotiate your debts to smaller amounts and create a three- to five-year payment plan.

The Chapter 7 filing is more common since it lets you erase your entire debt load, however you’ll need to sell your property and pass a means test first — which determines whether you have the income to pay back your creditors.

In both cases, your credit score will take a major hit. The Chapter 13 bankruptcy will impact your score for up to seven years, while the Chapter 7 bankruptcy affects your score for up to a decade.