Reducing Credit Card Debt

By Kaitlyn Szabo • June 17, 2019

Racking up credit card debt is a common phenomenon in the United States, as the Federal Reserve found U.S. households owe $1.04 trillion in credit card debt. In Minnesota, the average credit card balance is $5,961.

That is a lot of money, and for far too many credit card debt is burdensome. If you have struggled with credit cards, you are not alone. Here’s how to develop a debt repayment plan that works for you.

Step 1: Assess your current situation

Gather your latest credit card statements to determine the total balance, minimum payment (and its due date), and the interest rate for each. Write down all these figures in one chart.

For example, here is a breakdown for three credit cards with a total balance of $5,000.

Credit card	Balance	Interest rate	Minimum monthly payment
A	$2,000	18%	$35
B	$1,300	22%	$25
C	$1,700	15%	$25

Step 2: Choose a repayment strategy

After listing out all your information, choose a debt repayment strategy.

Debt avalanche: prioritize debt by the interest rate. List your credit cards from highest interest rate to the lowest. This method saves you more money in the long run because you’ll pay less interest over time. For example, this strategy would prioritize credit card C, then A, then B.
Debt snowball: prioritize debt by balance. List your credit card from the smallest balance to the largest. This strategy can help keep you motivated, as you will eliminate the smaller debts faster and build confidence. For example, this strategy would prioritize credit card B, then C, then A.

Step 3: Determine your monthly commitment

Be sure you are paying the monthly minimums on all your credit cards, not just paying on your prioritized debt. For our example, the regular monthly commitment is $85.

Identify how much more you can contribute to your debt beyond the minimums by reviewing your budget and finding areas to save money. Add the extra money to your targeted debt, and once that’s paid off, add what you were paying on the first to the next. Do this until your debt is gone!

If you choose debt avalanche, this extra money would go toward credit card C first, then A, then B.
If you choose debt snowball, this extra money would go toward credit card B first, then C, then A.

Need more help? LSS Financial Counseling provides free, confidential debt and budget counseling. They can also consolidate your debt into one monthly payment through their Debt Management Plan for a fee.