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6 Ways to Pay Off $600 or $6,000 in Credit Card Debt

Holly Perez
A credit card user displays her cards in Washington February 22, 2010. REUTERS/Kevin Lamarque

Falling in debt can be easy. Getting out of debt can be significantly more challenging, but certainly not impossible. Debt reduction is an important step toward achieving a stable financial future.

Whether you have $600 or $6,000 of debt, follow these six strategies to get out of the red and back on solid financial footing.

1. Identify the debt source. Beyond fixed bills such as rent, car payments or utilities, few people have a firm grasp on where and how often they spend their discretionary dollars. Online personal finance tools can help take the guess work out of where you are spending money by aggregating your financial accounts in one place and providing a clear financial picture. Knowledge is power when it comes to your money. Once you have that visibility, identify areas where you can reduce spending or make tradeoffs. Perhaps it's eating out two days a week instead of five, making your daily coffee at home or trying to buy more household items in bulk. You may find yourself with more money to pay off your debt and establish healthy spending patterns to ensure you're never in the red again.

2. Pay off the highest interest rates first. When tackling credit card debt, take a look at the interest rates of all your cards, and sort them from highest to lowest. Many people tend to focus on paying off the credit card with the largest balance, but it's the one with the highest interest rate that can prevent you from reaching your debt reduction goal. By dedicating higher payments toward the card with the highest interest first, you'll more quickly rid yourself of the debt that has the most substantial impact on your finances.

3. Leave 'em at home. If you're working to pay off credit card debt, it's imperative you don't add any additional purchases to your existing balance. Now that doesn't mean you should race to pay off your cards and then cancel them immediately (that can actually have damaging consequences for your credit score). Ease into the mindset of using a debit card or cash for purchases you previously would have charged to credit. Leaving the credit cards at home will also give you insight into how much money you have available in real time.

4. Transfer balances. This is also known as snowballing. If you haven't reached the maximum limit on your credit cards with lower interest rates, consider transferring bills with higher interest to them. There can be fees associated with a transfer, so make sure the lower interest rate offsets the cost. This strategy also requires a fair amount of discipline to not spend on the newly cleared card while also committing to pay off the balance you transfer over. It will, however, help you pay off cards with higher interest rates in a much more timely fashion.

5. Borrow from yourself. If you're completely overwhelmed with debt, it's OK to dip (temporarily) into your savings. Just be strategic about it. Earmark a specific amount as an emergency fund that is off limits while paying down your debt, just in case anything unexpected comes up. There's nothing worse than having to go even deeper into debt when you're trying to climb your way out. If you must borrow from your savings or emergency fund, remember to replenish it as soon as the debt is paid off.

6. Look into earning more. Do you have a talent or skill in an area that people would be willing to pay you for? Try your hand at freelancing to make a few dollars on the side. You could also look into selling your unwanted possessions on eBay, picking up jobs on TaskRabbit or turning your hobby into a source of income. You might be able to generate a substantial amount of cash, all of which can be funneled to paying off debt quicker.

Debt can be daunting, but it doesn't have to be depressing. Start by incorporating these strategies into a debt reduction plan that works best for you so the process won't become too overwhelming. Taking control of your money, and sticking to a plan will have you seeing green in no time!

Holly Perez is a consumer money expert at Intuit and mint.com spokeswoman, a leading Web and mobile money management tool that helps people understand and do more with their money.

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