Four Strategies to Pay Off Credit Card Debt Faster

Pay Off Credit Card Debt Faster

At Student Loan Hero, we’re big on helping you pay off debt. But we know your debt may not be limited to just student loan debt. And with about $880.5 billion in outstanding credit credit debt, it rivals the roughly $1 trillion of student loan debt Americans hold.

In some ways, credit card debt is worse than student loan debt. Credit card interest rates are almost always higher than student loan interest rates. You also can’t deduct credit card interest on your tax return like you often can for student loan interest.

If you’re looking to change your payments while you pay off credit card debt, there’s no guaranteed relief like there is with federal student loan debt.

For paying off credit cards, the focus is typically on interest rates. Rates can be so high (over 20% APR) that you can be stuck with debt for years. If you pay only the minimum on a card with a $1,000 balance and 18% APR interest rate, it will take you 10 years to pay it off.

To pay off credit card debt, the first step is to decrease interest rates. Here are some proven strategies to pay off credit card debt faster by finding lower interest rates.

1. 0% credit card balance transfer

Pros: Will reduce the interest rate to 0% for a defined period.

Cons: A good to excellent credit score is generally required. Still have to pay transfer fees.

When you’re paying interest on a credit card it is likely to be at a high rate. Some cards exceed a 20% APR.

However, there is one way to keep your debt on credit cards and not pay interest, and that’s with 0% APR balance transfers.

Balance transfers often let you go 12 months or longer without paying interest. In the meantime, you’ll still have to make at least the minimum payments each month. Many companies charge a fee equal to 3-4% of the balance you’re transferring, so be sure to calculate this into any savings.

Another plus: there’s likely little to no paperwork to fill out. You can just fill out balance transfer checks and send them in. Many creditors now let you complete the process online.

2. Negotiate lower interest rates

Pros: It’s low risk, high reward. Takes little time.

Cons: Requires negotiation. Your creditor may or may not lower your rate.

Some credit cards users are able to call and negotiate directly with the credit card companies to lower their rates.

This won’t be easy, so if you want the chance to succeed, you need to go in with a plan. Ramit Sethi lays out a script for the negotiation, which he gives a 50% chance of success. His talking points include:

  • Asking directly to lower your APR (perhaps by 50%)
  • Pointing out how long you’ve been a customer, including if you’ve always made on-time payments, etc.
  • Leveraging other offers, including 0% balance transfer to other credit card companies

If this works, you can save a ton on interest with only five minutes worth of work.

3. Consolidate with peer-to-peer (P2P) lending

Pros: More people can potentially qualify.

Cons: Might not lower rate substantially.

P2P lending is a newcomer to the world of debt consolidation. The way it works is you request a loan through a P2P lending company, like Lending Club. Once you’re approved, it’s up to individual people to decide to loan you money.

Interest rates are as low as 6% APR if you have excellent credit, but can be much higher if you don’t.

This solution is much like debt consolidation from a bank, but you may have more luck qualifying if your credit isn’t so good. However, the interest rate you receive still depends on your credit rating. If you don’t have good credit, using P2P lending might not present big savings on interest compared to your current credit card interest rates.

If you have good credit and can get a lower interest rate, this could be a good deal.

4. Use a debt consolidation service

Pros: It’s simple — just repay your debt to the consolidation company

Cons: Must read and understand the fine print. Potential for scams.

Traditional debt consolidation is pretty easy concept to understand. The debt consolidation company agrees to pay off your credit card debt, and in exchange, you repay the debt consolidation company. It’s similar to student loan consolidation in the sense that you pay one bill instead of many.

However, before you sign on, you need to make sure you understand the terms. While the interest should be lower to make it a good deal, that’s not all you should look at. Make sure to check any other fees you might pay. And make sure the payments are realistic or you could have penalties if you miss payments.

No matter which option you choose, there’s no substitute for committing to paying down credit card debt rather than racking up more. Be sure to use the options above with a plan to pay off your debt instead of just enabling yourself to end up deeper in the hole.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

2 Important Disclosures for Citizens Bank.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with Citizens Bank at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, Citizens Bank checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
5.29% - 14.24%1$5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
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Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.