3 cheapest ways to pay off credit card debt

March 29, 2024

The right strategy could make it cheaper for you to pay off your credit card debt.

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Credit card debt can be expensive. Depending on how high your credit card debt is, you could end up paying thousands of dollars in interest on what you owe — and the pay-off process could take decades

And, right now, your credit card debt could be costing you more than it has in the past. The federal funds rate is currently paused at a 23-year high, and rates on credit cards and other lending products are up in tandem. In turn, your required minimum credit card payments have likely increased.  

That can be difficult to deal with in today’s inflationary environment. After all, higher prices of consumer goods and services may already be squeezing your budget. And if you’re tired of carrying balances on your credit cards from month to month, you may be looking for the cheapest ways to pay off your debt. The good news is that you have multiple options to choose from. 

Find out how much money you could save with a debt relief service now

3 cheapest ways to pay off credit card debt

Here are some of the cheapest ways to pay off your credit cards

Debt relief services

Credit card debt relief companies can reduce the cost of your credit card debt in a couple of ways. First, these programs typically work to negotiate better terms with your lenders on your behalf, which could result in lower interest rates or card balances. Moreover, debt relief service providers usually create a payment plan that’s designed to get you out of debt as fast as possible. And, paying your debts off faster could lead to interest savings. 

The cost of using a debt relief service could also be cheaper compared to other routes, like bankruptcy, which can come with attorney fees, filing fees and other costs. For example, debt relief providers are prohibited from charging fees for their services until they settle your debt for less than you owe or otherwise substantially lower your debts. 

And, when you are charged fees related to the debt settlement, it’s typically a percentage of the enrolled debt. These fees generally range from 15% to 25% but can vary by debt relief service.

You may also be able to avoid fees entirely by negotiating with the credit card companies to lower your rate or balance on your own. However, do-it-yourself negotiations may not be as successful as negotiations that are handled by an expert, and the process could take some time to work through. 

Find out how a debt relief service can help you tackle your credit card debt today

Income-driven repayment plans

Some credit card companies may also offer income-driven repayment plans, also known as financial hardship programs, to customers who are having a hard time keeping up with their payments. 

“If a customer is in legitimate financial trouble, credit card companies have an incentive to offer short term relief if it means (1) maintaining the customer relationship and (2) getting paid back in the long run,” says Justin Leto, CEO and co-founder of Idea Financial. 

So, if you’re in a financial bind and can’t make your credit card minimum payments, it could help to give your lenders a call. They may be willing to reduce your interest rates and minimum payments temporarily, offering you the ability to save money while you pay your debt off. 

And, there are rarely extra fees tied to these types of hardship programs, so they can be a cheap way to tackle what you owe on your cards. However, you’ll likely only qualify for this type of program if you can show that there’s a genuine need for it. 

“Of course, there are businesses and consumers who will opportunistically seek payment relief when it isn’t justified, so lenders must institute strict policies regarding if, and when, a customer will be granted relief,” says Leto.

Home equity loans

If you own your home, your equity could be a cheaper way for you to pay off your credit card debt. For example, you may be able to use a home equity loan or home equity line of credit (HELOC) to borrow against your equity at a competitive interest rate and then use the money to pay off your credit card debt

For example, right now, the average credit card interest rate is currently over 21%, while the average HELOC interest rate is just 9.01%. So by essentially consolidating your current card balances using a HELOC to pay them off, you may be able to significantly reduce the cost of paying off your credit card debt.

And you may be able to tap into an even lower rate with a home equity loan. The average home equity loan currently has a rate of 8.59%, so using this type of loan to pay your credit cards off can offer meaningful interest savings.    

It’s worth noting, though, that you’ll typically have to pay closing costs on your home equity loan or HELOC. However, depending on the overall savings the lower rate can offer, the additional fees may be worth it to get the interest savings a HELOC or home equity loan can provide. 

The bottom line

Credit card debt can be costly, but there are ways to cut that cost. If you’re struggling to make your minimum payments, some of the cheapest options may be to reach out to a debt relief provider or speak to your creditors directly for help. Or, if you own your home, you may want to consider using a home equity loan to pay off your high-interest credit card balances to save money over the long run. 

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