With cost of living rising and layoffs seemingly everywhere, more and more people are wondering how to tackle credit card debt.
Credit cards have some of the highest interest rates in the US. Even with a strong credit score, you can have an APR of 20% or more. High interest rates keep people trapped in debt, since the balance can grow due to the accumulating interest each month.
Paying off credit card debt is always a good thing, for your financial life and your mental health.
Here’s how to tackle credit card debt in 2025.
Know The Lingo
It makes managing money easier when you understand the language that financial professionals use.
APY– Annual percentage yield. This percentage refers to the amount or interest, you earn on the money you keep in a bank account over one year.
APR– Annual percentage rate. Commonly referred to as your credit card interest rate, this is the amount you’ll pay on the balance you carry month to month on your credit card.
Due Date– the date each month your payment is due.
Minimum payment- the minimum you have to pay each month to keep your account in good standing (aka to not be reported to a debt agency.) The minimum payment is lower than the total balance.
Total balance- The total you owe on a card. You may have a minimum monthly payment of $36, but a total balance of $400.
Pick a Credit Card Debt Payoff Strategy
There are two common and popular ways to pay off debt.
Debt Snowball
List out all your debts from the lowest balance to the highest balance. Focus on paying off the lowest balance first! Make the minimum payments on all the others until the smallest is paid off.
Once it is, roll over the extra money you were putting towards that smallest debt to the next smallest. Repeat until debt-free!
Debt Avalanche
List out all your debts from highest interest rate to lowest. Focus on paying off the highest interest first! Make the minimum payments on all the others until the highest is paid off.
Once it is, roll over the extra money you were putting towards that highest interest debt to the next highest. Repeat until debt-free!
Do a Financial Audit
Once you pick a debt payoff strategy how to tackle credit card debt becomes more personal.
You need to start by doing a financial audit to see where your money is spent each month AND how much you’re spending on credit card interest.
I like to use Empower, a free financial dashboard. It gathers all your financial accounts in one place so you don’t have to log into your bank, your credit card companies, your investments, etc.
Here’s a screenshot of my Empower dashboard. You can see on the left it has all my bank accounts. In the middle it tracks your net worth (your assets minus your liabilities), and your monthly cash flow.
This kind of information is crucial to making a budget that actually helps you pay off debt.
We need to know the real numbers you’re bringing in and the real numbers you’re spending.
If you guesstimate that you spend $200 a month on groceries and eating out, but you’re really spending $400, you will never pay off your debt. You’ll always be $200 in the hole because you don’t even realize you’re spending that on food.
So, use something like Empower to help you do a financial audit.
Create a Budget That Includes Debt Payments
Once we understand our cash flow, we’re ready to make a new budget that includes money specifically for debt payoff.
Just like you budget for groceries, gas, and concerts, we’re going to add debt payoff to your monthly expenses.
I use Empower as a dashboard, but I actually track my personal expenses in a spreadsheet. You can use Empower to budget as well, if you’d like to keep it all in one place. I’m just a spreadsheet nerd.
Here’s a screenshot of my budget. You can see I have line items for everything I spend, and different sections for needs, wants, and debt.
Notice that I have two budget lines: BUDGET and ACTUAL SPEND.
Sometimes we think something will cost $50 and it ends up costing $40.
In order to have a strong budget, we need to account for that extra $10. Where does it go?
When you’re wondering how to tackle credit card debt, that extra $10 could be an extra debt payment. But if we don’t budget well, it could easily be lost in the sauce, and spent on something random.
That’s why I also include tracking formulas in my spreadsheet. See below!
The spreadsheet tracks all my spending and calculates it against my income so I know how much I’ve earned, spent, and have left over each month.
I sit down weekly and fill in my spending on my budget. I get that spending information from Empower. So you can see how they both work together in my financial life!
Here are a few easy to read guides on common budgeting problems:
How to budget for unexpected expenses
4 tips to budget for big expenses
Debt Payoff Tips
Here are a few tips to help you speed up your debt payoff process!
Use “found” money to payoff debt: Things like tax refunds, family gifts, or bonuses from work can go towards debt payoff.
This type of money is perfect for debt payoff because it doesn’t count against your regular monthly income. You don’t have to re-arrange your monthly budget to find more money for debt payoff.
Make small payments throughout the month: Credit card interest accumulates daily. That means if you can interrupt the accumulation, it has to reset and start all over again.
Rest it by making multiple payments a month. They can be small! An extra $10 works as well as an extra $300 to reset the interest.
And because you made a payment towards the principal, the interest that begins again is now on a smaller amount. That means you’ll pay even less in interest!
Set milestones to celebrate: If you’re paying off a large amount of credit card debt, give yourself moments of celebration along the way.
Say you’re working on paying off $17,000 in credit card debt. Every time you pay off $5,000, take yourself out for a nice $50 solo dinner.
This is a way to stay motivated to keep going, while also being a small enough spend that you’re not going to rack up more debt.
Personalize your milestones! Make them things that you enjoy!
I’m rooting for you as you learn how to tackle credit card debt.
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