Debt-Free in 5 Months? Our Guide to Paying off a Bunch of Credit Card Debt

Americans carry $829 billion in credit card debt, according to data released in August from the Federal Reserve Bank of New York.

It’s just there. Like a clingy child who won’t loosen his grip on your legs. A kitten weaving between your feet, occasionally tripping you up.

It’s annoying, it’s stressful, it’s weighing you down — and it’s time to pay it off.

Chances are, you’re already — err, hopefully — making monthly payments. But it might feel like you’ll never pay off that mountain of debt. (Thanks, interest rates.)

Keep trekking. We put together a guide to help you craft your perfect debt-payoff plan.

Start Now By Laying the Groundwork

First, it’s time to map out an official month-by-month plan. Take a couple of steps today to help you figure out where to start.

Figure out Exactly How Much You Owe

To find each of your debt-carrying accounts, try a free service like Credit Sesame. You’ll receive a free credit score and tap into your “credit report card,” which provides a free debt analysis.

Credit Sesame offers personalized advice on how to work on your credit score, so you might pick up some debt-payoff tips as you explore the site.

Decide What You Need to Work on Most

Status Money is an app that allows you to anonymously compare your financial situation with your peers without asking those awkward, prying questions. Link an account to tap into this database and you’ll be able to compare your income, debt, interest rates, credit score, spending… you name it.

By seeing how others are doing in the debt department, you can see what you need to work on most — or where you can sit back a little and just breathe easy.

Month 1: Reduce Your Interest Rates

 

Every month, you make payments toward your credit card debt. But you never seem to make a dent. It’s because of those sky-high interest rates — as much as 24% interest. It can feel impossible to get ahead.

But MoneyLion could help you find offers to cut your interest rate by 70% as soon as tomorrow.

Here’s how it works: MoneyLion can match you with new loan offers at a lower interest rate — as low as 5.20% APR*. That’s 70%* lower than the average credit card interest rate. And it’s the key to finally getting ahead.

You can use this new loan to pay off all your existing credit card debt, leaving you with one (cheaper) monthly payment that will help you get out of debt faster.

If you have a credit score of at least 620, you could get up to $50,000. With no collateral. And terms go up to 144 months.

Worried you won’t qualify? Take two minutes to check online and see if you could cut your credit card interest rate by 70%.

*Based on creditworthiness. Average credit card interest rate is 24.72% as of 8/14/24, according to Forbes Advisor’s weekly credit card rates report.

Month 2: Find Extra Money to Put Toward Your Debt

Focus on cutting your expenses this month, so you can shovel extra money toward your payments.

There are a ton of ways to save money on everyday expenses, but we like to start by scrutinizing those unavoidable monthly bills we all face.

For that, we found an app called Empower. It’s like having a personal financial assistant in your smartphone, and it has this cool “find free money” feature.

Once you link your bank account, Empower will help you set up a monthly budget and monitor your account to see whether you’re paying too much for your bills and look for opportunities to save.

To tackle your bills, call in a bot.

If you’ve had to chat with a representative from your internet/cable company recently, you know how long you can sit on hold. The negotiation bot Trim will negotiate your cable or internet bills down for you.

It works with Comcast, Time Warner, Charter and other major providers.

You can sign up simply with Facebook or your email address. Then, upload a PDF of your most recent bill, and Trim’s AI-powered system gets to work. If at first it doesn’t succeed, it’ll keep negotiating until it can save you some money.

Also, if you have any outages, Trim believes you deserve a credit, and it’ll handle that for you. Trim takes 25% of the savings tab, and you get the rest.

Month 3: Prioritize Your Payments

It’s time to employ some snowy metaphors — and prioritize which cards you want to pay off first.

One option is to use the debt avalanche method. This method of paying off debt requires you to prioritize your debt payments, paying off one balance at a time. The key, however, is to pay off your debt with the highest interest first.

Why? The longer these high-interest-yielding debts sit, the more you’ll owe. Start by ranking your debt with the highest rates first, then work your way down that list.

On the other hand, there’s the debt snowball method. With this method, you pay off the smallest balances first. Sure, your cards with higher interest rates will linger, but if you’re the type who craves immediate gratification, this might be for you.

As you strike the smaller balances off your list, you’ll feel more accomplished and more confident moving forward and handling the big stuff.

Month 4: Up Your Income With Flexible Gigs

This month, your goal is to put as much money as you comfortably can toward your debt.

Here a couple of ways to boost your income, even if you only have a few extra hours a month.

Hang out With Pups

On Rover you can choose to offer a variety of services, including dog walking, overnight boarding at your home or theirs, and daycare. Rover says sitters can earn as much as $1,000 a month — just for snugglin’ pups!

Earn $17.50 an Hour as a Proofreader

If you have an eye for typos and a serious dedication to the laws of grammar, you could be a perfect candidate for a side hustle in proofreading.

The average per-page rate for freelance proofreaders is 35 cents, according to Proofread Anywhere founder Caitlin Pyle. If you read at an average pace of 50 pages per hour, Pyle says you could make $17.50 an hour.

Learn how to find freelance clients in Caitlin’s free seven-day introductory course for proofreaders.

Month 5: Prepare for the Future

As you whittle away at your debt, start taking steps to ensure a debt-free future. One tactic? Build an emergency fund.

You might wonder how you can put away savings while putting all you’ve got toward your debt, but it’s possible.

Try setting up an automated savings account through Digit.

Link Digit to your checking account, and its algorithms will determine small (and safe!) amounts of money to withdraw into a separate, FDIC-insured savings account.

Additionally, savers will receive a 1% bonus every three months.

If you need that money sooner than expected, you’ll always have access to it within one business day. Digit is free to use for the first 30 days, then it’s $2.99 per month afterward.

Carson Kohler ([email protected]) is a staff writer at The Penny Hoarder. She’s cheering you on from St. Petersburg, Florida.