How to Get Out of Credit Card Debt Without Ruining Your Credit

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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. And Americans have racked up a lot of credit card debt.

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 to reduce your debt without wrecking your credit. Curious? Keep reading.

Don’t Ignore the Problem

Don’t ignore it. It’s tempting just to pretend the debt doesn’t exist or rationalize that everyone has credit card debt. The sooner you address the problem, the easier it will be to fix. Here are a few ways to regain control of your financial situation.

Here are the 14 Best Ways to Get Out of Credit Card Debt

You have a lot of options. Bear in mind that the last three will get you out of debt without paying repaying your entire debt.

  • Has the statute of limitations passed?
  • Pick a strategy
  • Work with your creditors
  • Pay more than the minimum balance each month
  • Find a side hustle
  • Consult a credit counselor
  • Debt consolidation loans
  • Get a balance transfer credit card
  • Apply for a peer-to-peer loan
  • Take out a home equity loan, HELOC or cash-out refinance
  • Debt settlement
  • DIY debt settlement
  • Bankruptcy

Let’s take a look at each one.

Do you qualify for debt consolidation?

Credit Summit may be able to help.

1. Has the Statute of Limitations Expired?

The statute of limitations is a law that determines how long a creditor can sue you for debt nonpayment. The statute of limitations on credit card debt is different in each state but ranges between three to 10 years.

You can learn yours by checking your state laws or contacting your state attorney general’s office. If you think your debt is past the statute of limitations, contact your creditor and request a debt validation letter to confirm the amount of time the debt has been inactive. The clock will start from the last moment the debt was active (usually your last payment.)

Pro tip: When you contact creditors, do not agree to any payment plan. You could accidentally reset the clock on your debts.

Even if the statute of limitations on your debt has passed, the debt may still affect your credit score if it’s within the credit reporting time limit.

2. Use a Repayment Strategy

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.

Different strategies will work for different situations. A couple of things to consider when choosing a strategy are disposable income, credit score and the available time and effort you can put toward getting out of debt.

Debt Snowball Method

This debt repayment method is where you pay off the credit card with the lowest balance first. The rationale behind this is that by paying off your smallest balance first, you can stay motivated to tackle the next loan, creating a “snowball” effect where one repayment leads to the next.

Debt Avalanche Method

The avalanche method is where you first pay off the credit card accounts with the highest interest rates, working your way down from there. This strategy helps you get out of debt faster because you’re tackling your high-interest debt immediately, slowing the pace at which interest is accruing against you. Whichever method you choose, make sure you continue to make monthly payments on your other bills to avoid late fees.

Make sure to make all monthly minimum payments on your other debts.

Pro tip: You don’t have to choose either of these, but they’re good starting points. In the end, what’s most important is that you formulate a plan and stick to it.

3. Ask Your Creditors for Help

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 disappearing, possibly going into bankruptcy and then not paying anything at all.

Therefore, if you feel overwhelmed with credit card debt, contact your creditors instead of trying to dodge them. Tell them you’re having difficulty making payments and inquire about their hardship programs. 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 primarily 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 their efforts. 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. Most have programs already set up to help debtors in your position, whether dealing with being laid off, surprise medical expenses, health problems, etc.

If you can develop a repayment plan to benefit their bottom line and/or appeal to the humanity behind the corporate façade, your creditors have every reason to hear you out. Are you having trouble making progress with the current representative (i.e. person) that you have on the line? That’s fine. Hang up, call back and try again with a different representative. Remember sometimes negotiating with creditors can be a numbers game.

Credit card debt relief during COVID-19: During the height of the COVID-19 pandemic, many major credit card issuers offered credit card debt forgiveness or relief to borrowers. These programs often included more flexible repayment plans, deferred interest, and lower monthly payments. They were available to those who lost their jobs or couldn’t make payments due to the pandemic. There aren’t as many protections in place for credit card users now, but it doesn’t hurt to contact your issuer and ask. Your credit card issuer’s contact information is on their main website.

4. Debt Consolidation

Debt consolidation is exactly what it sounds like — 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 qualifying for one can be challenging if your credit is bad. Debt consolidation is a good option because it can dramatically reduce what you will pay in interest and save you money on late fees if you regularly miss payments. Most lenders offer debt consolidation loans. The idea is to get a loan with a lower interest rate and roll your debts into that bigger loan. Looking for a debt consolidation loan? Here are our top picks.

READ MORE: How debt consolidation works

5. Get a 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. This is the best option if you are ready to pay down your debt aggressively. Make sure you can pay off your transfer amount within the grace period. Why? 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 introductory period is over, the accumulated interest charges get tacked onto your total amount due. Your new total is subject to whatever variable APR 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

Interested in balance transfer credit cards? Check out our list of top picks to find other options.

6. Apply for a 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.

7. Use Your Home’s Equity

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, the 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.

READ MORE: What is a second mortgage?

8. Find a Side Hustle or Ask for Overtime

You can always try to ask for overtime at your current job. If that doesn’t work, a second job can help with some extra income to tackle your debt. Uber can be a great side hustle that fits neatly into your schedule, and what you earn can be allocated directly toward debt repayment. Delivering food for DoorDash or UberEats, shopping for Instacart, selling unused items on eBay or Facebook Marketplace — even selling shoes can be lucrative ways to earn money to put toward your debts.

READ MORE: 24 ways to make $500 fast

9. Consult a Credit Counseling Agency

A credit counselor is one of the best sources for help with credit card debt. These agencies or services can help you put together debt management plans.

While there are for-profit credit counseling agencies, it may be 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.

Pro tip: Credit counseling agencies can only help you with credit card debt. A Debt Management Plan won’t be much of a help if your debts involve personal loans, medical bills or student loans.

Here is how a credit counseling agency operates:

  • First, you choose a counselor: 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 to your agency. The agency then divvies up that payment among your creditors based on their established payment plan.
  • Then they attempt to negotiate on your behalf: 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 your interest rate, lower minimum monthly payments, etc.

Pro tip: 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.

10. Pay More Than the Minimum Payment

Unless the card issuer has temporarily deferred payments, every credit card has a minimum monthly payment due. This amount includes the principal balance and interest accrued during that period.

The average APR on unsecured credit cards is between 23.14% and 25.8%. That boils down to roughly 1.93% to 2.15% of the total monthly balance. The sooner you get your balances down, the less money you’ll pay in interest fees.

Pro tip: If you have $5,000 in credit card debt (less than the national average) with a minimum payment of about $100, it will take almost seven years to pay off the charges, if you don’t ever charge anything else on that particular card.

Ultimately, whatever debt repayment strategy you choose, don’t spend too much time worrying about choosing the right one. The key to getting out of credit card debt is steadily paying down your monthly balances. It’s up to you if you go with the highest balance, the highest interest rate, or another option.

How to Get Out of Credit Card Debt Without Paying It All

People with multiple high-interest cards or high balances can’t always get out of credit card debt independently. Fortunately, many debt-relief options, resources, and tools are available for coping with debt. Before choosing one, however, ensure you fully understand all its implications. That way, you can get the most use out of it. If you do decide that you need expert help, here are a few options to consider:

11. Debt Settlement

Debt settlement is when a lender agrees to “settle” a borrower’s debt for less than the due amount. 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 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 pretty helpful but also has a few 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:

  • Temporary 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

However, the damage to your credit score will be temporary. Once your settlements are paid, your accounts will be closed and marked as “settled.” This does not hurt your credit score, and when this happens your credit score will start to rise. You can also save a significant amount of money. The American Association for Debt Resolution says the average debt settlement customer saves 30% of their total debt after fees.

Pro tip: Though there is no guarantee that a creditor will settle, a debt settlement company will have an idea of which companies are willing to work with you.

Overall, in many cases, debt settlement can be a viable option for consumers. If you’re interested in learning more, click here.

WARNING: Watch Out For Scams

It’s natural to feel desperate or panicked when you’re struggling to make ends meet. 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 are incredibly tempting 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:

  • Charges upfront fees
  • 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)
  • It doesn’t explain or it minimizes the risks involved with using their services
  • Promises you anything that sounds even remotely too good to be true
  • Cites vague “government programs”

Be sure to vet any debt settlement provider you’re considering hiring thoroughly. Look them up with the Federal Trade Commission (FTC), the Better Business Bureau (BBB) and your local consumer protection agencies. It doesn’t take much time to do this, and it can save you time, money, and heartache.

READ MORE: Best debt settlement companies

Check out these top picks if you’re looking for a reputable debt settlement company and dealing with payday loan debt.

12. Try DIY Debt Settlement

No rule says you must hire a third party to handle your debt settlements yourself. If you are willing to do the work and research, you 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.

13. Bankruptcy

This one will hurt your credit for sure. This is the nuclear option. Bankruptcy has a terrible reputation that it only kind of deserves. It is something you certainly want to avoid, but if you’re in over your head, with no other way out, it can also be a real lifesaver. If your credit score is real bad, in the 400’s, in could potentially even raise your credit score.

There are two types of bankruptcy that you can use to get a fresh start — and remember to be wary of costs.

  • Chapter 7 bankruptcy: (AKA “liquidation bankruptcy”) Chapter 7 bankruptcy requires the petitioner to sell off all their non-essential assets and use the sales proceeds 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. Important note: 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.

READ MORE: Bankruptcy

Pro tip: 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.

Tips to Get Started

If you want to take control of your debt and stop it from dictating your life, then here’s how to get started.

Use a Debt Consolidation Calculator

First, figure out how much you pay in credit card debt each month and how much you can afford monthly payments. Calculate the total loan amount you need to consolidate everything into one payment and the loan term to keep the minimum payment required each month within your budget. These debt reduction strategies won’t work if your monthly payment is impossible for your financial situation.

This debt consolidation calculator is a great place to figure out all these numbers.

Check Your Credit Report and Credit Score

Your credit report is the official file kept on you and all your credit transactions. A credit score is attached to your file to help determine your creditworthiness and how good a borrower you are. This score is determined by your payment history on all your loans, your credit history, income, income-to-debt ratio, credit utilization and other financial details.

Essentially, the higher the score the better, and you can increase your score by making on-time payments consistently and by limiting the amount of debt you take on and apply for. The most common credit score is the FICO model which ranges from 300 to 850. Score ranges look like this:

  • Excellent credit score: 800-850
  • Very good credit score: 740-799
  • Good credit score: 670-739
  • Average credit score: 580-669
  • Poor credit score: 300-579

You can check your official credit report for free with the three major credit bureaus to see where you stand. There are also free options to view your unofficial credit score with your credit card company. Your credit score is important because it will determine most of your financial life. If you want a loan for a house, a car, or a debt consolidation loan, your credit score will be looked at to see if you qualify for the loan. 

If you find any errors on your credit reports, make sure to take the steps to repair them. The better your score, the better rates and loan terms you’ll receive. Having a poor score can cost you tens of thousands of dollars or more over the course of your life. Just one late credit card payment will stay on your report for seven years.

READ MORE: How to build credit

Why Consolidate Credit Card Debt?

Credit card consolidation offers these advantages:

  • Lower costs: consolidation can lower your interest rate.  
  • Simpler finances: replace multiple bills with a single monthly payment. 
  • Easier budgeting: one consistent payment is easier to manage than many varying payments.
  • Lower credit utilization: replacing credit card debts with an installment loan can reduce credit utilization and improve your credit score.

Credit card debt consolidation won’t eliminate debts, but it can reduce interest costs and make debts easier to handle.

READ MORE: Debt consolidation pros and cons

How Does Credit Card Consolidation Work?

The average American has three or four credit cards. That means three or four monthly bills. It can also mean large interest payments.

Credit card consolidation uses a new credit line to pay off those balances. You replace your current credit card accounts with one new account.

There are several ways to consolidate credit card debt. It’s important to choose the one that meets your needs.

Credit Card Consolidation vs. Debt Refinancing: What’s the Difference?

Consolidation and refinancing are similar. Many people get confused over the differences. 

  • Debt refinancing: Refinancing involves renegotiating the terms of an existing loan. It is usually used for large loans, like mortgages, car loans, or student loans. Refinancing can also replace an existing loan with a new one with better terms. 
  • Credit card consolidation: Consolidation replaces several old debts with a single new one. You use a new line of credit to pay off two or more existing debts. Refinancing is a one-to-one replacement. Debt consolidation replaces two or more debts with a single new credit line.

Pro tip: If you’re considering rolling one loan into a new loan with a lower interest rate, it is refinancing. If you’re using a new loan to pay off two or more other debts, it’s consolidation.

Before starting the debt consolidation process, here are some tips to ensure you’re making the best choices for your specific situation.

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 situation: Before figuring 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.
  • Set a debt payment goal: Make a goal based on how much credit card debt you want to pay off and in what time frame. Then, create a personal budget that opens up some extra cash to reach that goal. The budget should be realistic enough to follow without unnecessary stress or detracting from your quality of life. If you have multiple credit cards, list each one. Rank them in the order you want to repay them. This could be based on interest, the current balance, a low introductory APR, or anything else. Focus on one debt at a time to avoid getting overwhelmed.
  • Make a budget: Once you know exactly where your money is going, it will be much easier to reconfigure your spending into a budget. Here are some ways that you can do that.
  • Cut unnecessary spending: Nobody will 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 and 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.
  • 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 trying to pay off your debts. Still, every little bit helps.
  • Work methodically: People often forget about the big picture regarding finances and paying off credit card debt. However, even small wins like following a personal budget for a month or paying more than the minimum balance on a credit card add up.

Pro tip: Don’t worry if you make a minor financial mistake. Instead, focus on making small but regular steps towards bigger goals. Make all minimum payments on time, decrease spending where you can, and build up some savings. If your living expenses are still too high, consider getting a roommate to help out. Remember, every positive step counts towards your repayment goal.

Finally, Be Realistic

There is no reason you can’t work toward paying off your debt and still manage to have fun. In fact, you must 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 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.

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