Credit card use is surging once again – and so is credit card debt. Here’s what to do (and not do) about it.

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Paying your credit card off monthly to earn rewards is a smart use of plastic, but keeping a revolving balance isn’t. The same goes for ways to pay off your credit card debt – there are smart ways to do it and there are dumb ways.

The total credit card debt in America is now more than $804 billion, says recent data from the Federal Reserve Bank of New York. When you divide that by the 128 million U.S. households, it comes out to more than $6,281 each. All of that debt needs to be paid back.

1. Take out a home equity loan

Using your home for collateral is one way to pay down your high-interest credit card, but is that a risk you’re willing to take? Your home is your greatest asset. Taking out a home equity loan will give you the money you need now, but it puts you at risk of defaulting on your mortgage. If you’re struggling to pay down your credit cards, don’t gamble with your home. You’ll lose it if you don’t pay the loan back.

2. Take out a payday loan

This is just a terrible idea. So you want to consolidate your debt, but this option will cost you far more money in the long run. The average credit card interest rate is more than 18 percent. Payday loans typically charge 400 percent APR! And you’re charged fees when you can’t pay the loan back.

3. Use your car title as loan collateral

You can’t afford to pay off your credit cards so you use your car title to secure a loan. Why is this a dumb idea? Because if you can’t pay it off the repo man comes for your car. With that comes difficulty commuting to work, and you’ll soon be in hotter water than when you first got the idea.

4. Drain your 401(k)

It’s money you saved. You should be able to spend it as you wish, right? Not unless you want to pay a hefty penalty for early withdrawal. When you remove funds from your 401(k) before the age of 59 ½, you’ll have to pay a 10 percent penalty along with taxes on the distributed funds. You’ll also take away money from your future when it’s a lot harder to continue working.

5. Borrow against a life insurance policy

What you borrow is taken with interest added if you don’t pay it back. You also risk reducing the death benefit for your family members, which is often the reason people take out a life insurance policy in the first place. You also may have to pay income taxes if you don’t repay the full amount, and there’s a lapse in your policy.

Now to the smart ways…

6. Pay off the highest interest rate card

It’s called the debt avalanche. You focus your debt repayment on the credit card with the highest interest rate and typically the lowest balance. This method is great because seeing your balance go down is psychologically and monetarily rewarding. Interest is a rate charged additionally to the money you borrow.

So when you knock down that balance, it feels good knowing you cleared it and saved on the interest. Then just move right onto the next highest rate card and repeat. Before you know it the debt repayment turns from a small snowball into an avalanche.

7. Make two payments a month

With 52 weeks in a year, it equals 26 half payments or 13 monthly payments compared to 12. This will double up your debt repayment, and seeing the balance vanish will keep you optimistic toward your finances.

8. Consolidate your debt

Some debtors choose to consolidate their credit card balances through a zero-percent balance transfer credit card. But you often need a higher credit score to qualify for that option.

Fortunately, there are nonprofits that offer solutions to those who don’t have the best credit. Plus, credit card balance transfers can be perceived as a trap. If you don’t pay down the full balance by the time the zero percent APR offer expires, you’re stuck with a balance and the post-offer interest rate.

9. Hire a professional

Everyone’s debt situation is as unique as they are. A professional can help you evaluate your situation and point you to options that can help. Maybe you’re better suited for a Debt Management Program, or Debt Settlement. You shouldn’t rely on your neighbor to give you financial advice on your debt – unless that neighbor is a certified debt management professional.

10. Borrow money from a stranger

Just kidding. It’s actually peer-to-peer lending. It’s an unsecured personal loan available to those with good credit and a job. Companies like LendingClub give you the ability to consolidate your credit card debt into one loan with a lower interest rate. It also makes it easier to keep track of your debts if you have more than one card.

DIY didn’t quite get you by? Get professional debt relief help now so you can find a solution that works!

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About the Author

Joe Pye

Joe Pye

Joe Pye started writing about debt and personal finance five years ago while attending Florida Atlantic University, where he served as Editor-in-Chief of the student-run newspaper, the University Press. Before graduating with a bachelor's degree in multimedia journalism, Pye placed as a finalist for the Mark of Excellence award by the Society of Professional Journalists Region 3 for feature writing and in-depth reporting. In 2021, Pye earned First Place in the Green Eyeshade awards for "Best Blog" for his side-project Since taking a full-time position as associate editor at in 2018, Pye has become a certified debt management professional who's applied what he's learned to his personal life by paying down more than $22,000 worth of combined credit card, student loan, auto and tax debt in less than two years.

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