How to Get Out of Credit Card Debt: Here are 12 Options

Credit cards can be both a blessing and a curse. Being able to fund whatever you need in the moment can truly be helpful, especially during emergencies. Unfortunately, it is much harder to pay off the debt you’ve racked up than it was to build it.

Here’s the good news: there are ways to get out of credit card debt that don’t require you to pay back every penny you’ve spent (along with some hefty interest charges). Here’s the better news: these methods should be able you to reduce your debt without wrecking your credit. Curious? Keep reading.

Do-It-Yourself Debt Relief Options

DiY isn’t just for minor home repairs or crafting projects. If you have the time and energy, you can put in the work to reduce your credit card debt all by yourself. If you’re more of an independent operator, here are some things you can try.

Work With Your Creditors

Creditors are just trying to look out for their bottom lines. And they know that getting you to pay something is much better than you disappear and not paying anything at all.

Therefore, if you feel overwhelmed with credit card debt, you should contact your creditors instead of trying to dodge them. Tell them that you’re having a hard time making your payments. Ask to renegotiate your interest rate or, if you are really hurting, a settlement. While you do this, though, you need to keep two things in mind:

Lenders are a Business

And businesses exist, in part, to make money. The goal for any business — including credit card companies — is to optimize the amount of money they bring in, in exchange for the efforts they put out. They know that going through the long collection process or suing you isn’t cost efficient. They will recover more money if they work out a deal with you before turning to those other options.

Lenders are People

It’s so much easier to think of them as faceless corporations just trying to get one over on the little guy. Here’s the truth: Most don’t want to take advantage of you. In fact, most of have programs already set up to help debtors in exactly your position, whether it’s dealing with being laid off, surprise medical expenses or health problems, etc.

If you can come up with a repayment plan that will benefit their bottom line and/or appeal to the humanity behind the corporate façade, your creditors have every reason to hear you out.

Debt Snowball Method

This is where you pay off your debt with the smallest balance first, and then tackle the next smallest, and so on. You’ll still make the minimum payments on your other debts, but dedicate as much as you can afford to paying off your smaller debts. The hope is that by paying off your smaller debts, you build momentum to help you tackle the larger ones. Sort of like how a snowball rolling downhill gets bigger and goes faster as it rolls. The process will repeat until you’re debt-free.

Use this calculator to figure out how much you could save

Debt Avalanche Method

The debt avalanche is the opposite of the debt snowball. With this method you tackle the credit card with the highest interest rate first and then continue in descending order of interest rate (instead of balance due). You’ll continue to keep making the minimum payments on your debts with lower interest rates. This method is popular because it reduces the amount of money you pay in interest charges over time. It can be cheaper in the long run to use this method.

Want to know more about the differences between debt snowball and debt avalanche? Check out this video:

Consult a Credit Counseling Agency

One of the best sources for help with credit card debt is a credit counselor. These are agencies that can help you put together debt management plans.

While there are for-profit credit counseling agencies, it is better to opt for one that is nonprofit. Their services won’t be 100% free, but they will be vastly more affordable than what you’d pay a for-profit agent.

Here is how a credit counseling agency operates:

Choose a Service Provider

Hiring a credit counseling agency to create your debt management plan basically puts the responsibility of your credit in the hands of a trained professional. Every month you will send a payment into your agency. The agency then divvies up that payment among your creditors for you based on the payment plan they’ve established.

The Provider Attempts to Negotiate

What’s great about hiring a credit counseling agency is that they take over all the management of your accounts for you. Part of this will involve negotiating with your various creditors on your behalf. They can help reduce the interest rate you pay, lower minimum monthly payments, etc.

You should know that, though it is possible to save money with a debt management plan, that savings is seen in reduced interest rate payments. You will still likely be responsible for paying the full balance of what you’ve spent so far.

That means that a debt management plan is rarely the absolute cheapest option available to you, but they are the best option if you want to keep your credit score healthy, because your creditor won’t have to settle for less.

Debt Consolidation

Debt consolidation is exactly what it sounds like: it is when you use one bigger loan to pay off multiple smaller debts. This is usually done via a consolidation loan or a balance transfer card. Both have strict requirements and, if your credit is bad, qualifying for one can be tough. Debt consolidation is a good option because it can dramatically reduce what you will pay in interest and can save you money on late fees if you’re regularly missing payments.

Here are a few options available if you want to go the debt consolidation route:

Balance Transfer Credit Card

Credit card refinancing can be a relatively quick and inexpensive way to tackle your debt. Look for credit cards that offer a 0% interest rate on balance transfers for a set amount of time. These are the best option if you can aggressively pay down what you owe. Just make sure that you can pay off the amount you transfer within that grace period.


Because while you will not have to pay credit card interest charges during the grace period, those interest charges can still accumulate (it will depend on the terms of your contract). Once the grace period is over, the amount of accumulated interest charges gets tacked onto your total amount due. Your new total is subject to whatever interest rate is stated in your contract.

There are a couple of drawbacks: The credit card issuer will charge a balance transfer fee that usually averages between 3% to 5% of the amount transferred, so you’ll need to make some calculations to figure out whether savings will offset the fee. Also, you’ll need to have good credit to qualify for a new credit card.

Best Credit Cards With a 0% APR Offer

Check out this list from Bankrate to find other options.

Personal Loan

Traditionally, a personal loan is obtained from a bank. Your approval and the amount of interest you will be charged will depend on your credit score, income, etc.

It can be tempting to take out the first loan that you qualify for. Resist this urge! Take some time to shop around to make sure you get the best options. For example, credit unions often have better rates than traditional banks.

Debt Consolidation Loan

This is basically just a personal loan that you take out for the express purpose of paying off your other debts. Ideally the interest rate would be lower than what you’re currently paying. Add up all of your credit card balances and other debts you want to consolidate. The amount you apply for will be based on your total debt due, and your credit score, etc. will be used to determine whether to approve you and what interest rate you will be charged.

Peer-to-Peer Loan

P2P loans are a great option when you need to take out a loan, but your credit is bad. Instead of asking a bank or a credit union for approval, you will submit your application to individual lenders or investors. It is usually easier to be approved for a P2P loan, though many of them carry larger interest rates and steeper fees than traditional personal loans.

Home Equity Loan or Line of Credit

If you own your own home, you can borrow against the amount of equity you’ve built up to help pay off your debts.

“Equity” is calculated by comparing the amount you would get if you sold your house today for its fair market value and how much you still owe on your mortgage loan. However, much you’ve built up in equity will serve as your credit or borrowing limit.

You will use the loan to borrow one lump sum that you then use to pay off your other creditors. This will require some discipline tomake sure that once the money hits your bank account, it immediately goes toward paying off your debt. If the money gets spent on other expenses and you’re left with a large amount of credit card debt, and no home equity, you could end up putting your home at risk.

Debt Settlement

Debt settlement is when a lender agrees to “settle” a borrower’s debt for less than the total amount due. Typically, lenders only agree to this if they believe that they won’t be able to get more from you via other methods (collections, etc.).

There are for-profit companies out there that will act as a sort of “middleman” between borrowers and creditors. They negotiate with creditors on the behalf of borrowers and try to get them the best deals possible. If this sounds like it is too good to be true that’s because it almost is.

Debt settlement companies can be quite helpful, but they also have many drawbacks. The biggest is that they require their clients to stop making payments on their debts during the negotiation process. Doing this causes the borrower to deal with the following:

  • Damage to their credit because of the missed payments
  • Penalty payments and interest charges continue to accrue during the non-payment period, increasing the amount the borrower owes

Debt settlements stay on credit reports for seven (or more depending on where you live) years.

On top of that damage, there is no guarantee that the debt negotiator will be successful.

And, if that isn’t enough, the amount that gets forgiven is considered “taxable income” for the borrower, which can wreak havoc in multiple areas of their lives.

Watch Out For Scams

When you’re struggling to make ends meet, it’s natural to feel desperate or panicked. There are a lot of scammers out there just waiting for the chance to take advantage of you when you feel like that.

Debt settlement plans provide an especially tempting opportunity for predators to make money off desperate people. To make sure that you don’t get taken advantage of, stay away from any debt settlement provider who does any of the following:

  • Asks you to pay them before they start settling your debt (this is illegal)
  • Promises that they will be able to settle your debt(s)
  • Doesn’t explain or waves off any of the risks involved with using their services
  • Promises you anything that sounds even remotely too good to be true.

It is also important that you take the time to thoroughly vet any debt settlement provider you’re considering hiring. Look them up with the FTC, the BBB, and your local consumer protection agencies. It doesn’t take much time to do this, and it can save you a lot of time, money, and heartache.

If you’re looking for a reputable debt settlement company, check out these top picks.

DIY Debt Settlement

There is no rule that says you must hire a third party to handle your debt settlements yourself. If you are willing to put in the work and do the research themselves can do everything a professional would do.

That said, DiY debt management and debt settlement are not risk-free. Experts usually have an easier time navigating the process. Individual borrowers also often find the amount of work that is involved intimidating and nope out before the process is complete. This is understandable since debt negotiation can sometimes take several years to complete.


Bankruptcy has a terrible reputation that only kind of deserves. It is something you want to avoid but if you’re in over your head, with no other way out, it can also be a real life saver.

There are two types of bankruptcy that you can use to get your fresh start.

Chapter 7 Bankruptcy

AKA “liquidation bankruptcy.” Chapter 7 bankruptcy requires the petitioner to sell off all their non-essential assets and use the proceeds of those sales to pay off (or down) their unsecured debts. If the proceeds from the sale don’t pay off all the debt, whatever is left over is written off by the court.

Chapter 7 is only available to people who make less than $84,952 per year in net income.

Chapter 13 Bankruptcy

If you net more than $84,952 a year in income, you might not qualify for Chapter 7 bankruptcy. In those cases, Chapter 13 is the way to go.

Chapter 13 gives petitioners 3-5 years to “work off” their debt. In this case, “working off” means using whatever money you have that doesn’t go toward absolute essentials (rent, food, that kind of thing) is used to pay off your debts. At the end of the repayment period, whatever is left over is written off.

Chapter 13 won’t save you as much money as Chapter 7 does, but it also looks better on your credit and has less of an effect on your credit score.

Bankruptcy is not a decision to be made lightly. If you’re considering this, be sure to consult a bankruptcy attorney. Many offer a free initial consultation and can advise you on filing types and fees.

Before You Take Action

Don’t just jump on the first debt reduction method that feels good. Take your time and make sure that whatever method you choose, it’s the best one. Here are steps to help you do that.

Evaluate Your Financial Situation

Before you can figure out how to tackle your debt, you must understand how much you are already spending. Track every penny you spend for at least a month.

You can use whatever method you want for your tracking. Jot expenses (itemized, of course) down in a notebook, create a spreadsheet, or even use an app like Mint or TrueBill. Just make sure that you can easily understand what you have coming in and where it’s going as it goes out.

Free Up Cash With a Budget

Once you know exactly where your money is going, it will be a lot easier to reconfigure your spending into a budget. Here are some ways that you can do that.

Start an Emergency Fund

After you set money aside for your monthly necessities like your rent, utilities, and food, you should start tucking money away in a savings account to help build up an emergency fund. You don’t have to set much aside, especially while you’re trying to pay off your debts. Still, every little bit helps.

Set a Debt Payment Goal

You know yourself best. What will be the most motivating for you—the debt avalanche approach? Or do you need the motivation of the debt snowball? Choose one and organize your debts accordingly.

Cut Nonessential Spending

Nobody is going to tell you that you can’t pay off your debts and have fun at the same time. You absolutely can! You just must be more careful about where you find your entertainment. You can get books, movies, even music from your local library. Your local park might have a free movie night. Instead of spending money on stuff you don’t need, find what you want for free and then put the money you would have spent on it toward your debt.

Work Methodically

It would be awesome if you could come into a windfall that will magically pay off all your debts and leave you with enough left over to live comfortably. In lieu of that, however, taking a slow and methodical approach to your debt repayment is best. It will be better for your financial health in the long run.

Be Realistic

As mentioned above, there is no reason you can’t work toward paying off your debt and still manage to have fun. In fact, it is essential that you do this. If you cut too much of your spending and deny yourself too much, you’re more likely to “binge spend” and undo all your hard work. Instead, set aside a small amount of “mad money” every month for impulse purchases or something fun just because you want it.

The Bottom Line

Spending is easy. Repaying debt is hard. Still, there are ways that you can do it and even save money while you do! Use the methods mentioned here to help yourself do exactly that.


What Happens if I Stop Paying My Credit Card Bills?

Your credit score will tank, your credit history will look bad, and you’ll have a hard time doing much of anything that requires credit for a long time. A good credit score will help you qualify for the best interest rates, get a new cell phone, rent an apartment and could even come into play when you’re looking for a new job.
In addition, though you will not go to jail for defaulting on debt payments, a lender or credit card issuer could turn you over to a collections agency or could sue you, and you could end up having your wages garnished.

How Does Debt Reduction Affect My Credit Score?

As you pay your debts down, your credit score will go up. This is because your credit utilization ratio will decrease and you’ll have fewer late payments marring your credit score. One late credit card payment will stay on your credit report for up to seven years.

What Should I Do if the Debt Collector is Harassing Me?

The FTC has a lot of tips to help you if you are being harassed. In the short term, though, tell them that you are contacting your lawyer. This will scare off the scammers.