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Have Over $25,000 in Credit Card Debt? Here's How to Pay It Off

Lyle Daly, The Motley Fool

You don’t need to feel helpless about tackling your credit card debt anymore.

Stressed woman with handful of credit cards looking at laptop.

Image source: Getty Images.

Credit card debt is always difficult to deal with, but it’s a whole different ballgame when you’re paying back more than just a few thousand dollars. If your total credit card balances are $25,000 or higher, they’ll go up by hundreds of dollars every month because of interest, and it could cost you $1,000 or more just to make minimum payments.

Most consumers will take several years to pay off that much debt and end up paying more in interest than they originally charged. Fortunately, there is a way to cut how much interest you pay and get your debt paid off more quickly.

It all starts with making calls to your credit card companies.

Negotiate your interest rates

Many consumers don’t realize you can do this, but it is possible to negotiate a lower interest rate with your credit card companies. All you need to do is call the number on the back of your card and ask. It will help your cause if you’ve never missed a payment and have built a good history with the card.

Even though you may not be successful with every card you have, any deal you get on a credit card interest rate could save you hundreds to thousands of dollars as you pay off your debt.

How to eliminate credit card debt with balance transfer cards

Here’s how you can get rid of your credit card debt with strategic balance transfers:

1. Apply for a balance transfer card.

2. Transfer as many credit card balances as you can to the balance transfer card, starting with the ones that have the highest interest rates.

3. Pay as much as you can towards your balance transfer card every month until it’s paid off.

4. Apply for another balance transfer card and repeat the process.

Now let’s take a closer look at how this works.

First, you need a balance transfer card, so check out the best balance transfer cards to find one that works for you. There are two things to look for here:

  • The length of the intro period -- A longer intro period will give you more time to pay off the balances you transfer.

  • The card issuer -- Card issuers don’t let you transfer balances from one of their cards to another. So if all your balances are on American Express cards, you couldn’t choose an American Express balance transfer card.

You’re probably not going to be able to transfer all your credit card debt onto your balance transfer card because it’s doubtful you’ll be approved for a high enough credit limit. That’s why you’ll start by transferring your highest-interest credit card debt.

Next, you need to pay off your balance transfer card as quickly as possible. Only make minimum payments on your other credit cards, and put every cent you can towards your balance transfer card.

Once you’ve paid the balance transfer card in full, you can apply for a new one.

By following this method, you’ll continually be refinancing your highest-interest credit card balances at a 0% intro APR. This will maximize how much you save and how quickly you’re able to pay off your debt.

What if you can’t qualify for a balance transfer card?

Like all the top credit cards, the best balance transfer cards are typically only available for consumers with good to excellent credit. If your credit score isn’t at least near 670, you could have trouble qualifying.

In that case, you’re better off applying for a debt consolidation loan. While you won’t be able to get a 0% intro APR offer, you may be able to:

  • Get a loan large enough to cover all your credit card debt.

  • Use your loan to pay off all your credit cards.

  • Pay back your loan in fixed installments at a lower interest rate than you had previously.

You’ll need to find a lender with minimum requirements you can meet, but there are plenty of excellent personal loan lenders available to fit almost anyone’s income and credit score. If your credit isn’t the best, Avant and LendingPoint are two lenders that focus on borrowers with poor to fair credit.

Going from deep in debt to debt-free

Make no mistake about it -- there’s no magic bullet to wipe out over $25,000 in credit card debt. Even with balance transfer cards, you’ll need to be diligent about paying as much as you can every month, and the process could still take years.

But this method does help you in a few key ways:

  • It dramatically cuts down how much interest you’ll need to pay.

  • It gives you a clear target to pay off each time you get a balance transfer card.

  • It allows you to chip away at your debt and see the progress you’re making as you pay off one balance transfer card after another.

If you can stick with it, this is the smartest way to pay off a large amount of credit card debt.

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