The Ultimate Guide to Paying off Credit Card Debt
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Credit card debt can feel heavy, and if you’re carrying some, you’re not alone. With high interest rates, it’s easy for balances to grow and hard to stay on track with your financial goals. On top of that, debt often brings stress and shame, making it even tougher to manage. But there’s a way forward. In this post, we’ll walk you through a step-by-step plan to pay off your credit card debt, so you can lighten the load and focus on what really matters to you.
Why Paying Off Credit Card Debt Should Be a Top Priority
Credit card debt is some of the most expensive debt out there, with interest rates often hitting 20% or more. Every month you carry a balance, a chunk of your money goes to the credit card company—money that could be building your wealth instead.
The good news? If you think of paying off debt as an investment, every dollar you use to pay down a credit card with 20% interest is like getting an instant 20% return. That’s way better than the 5% you might earn in a high-yield savings account and even higher than the long-term return from most diversified investment portfolios.
There’s also the emotional lift that comes with paying off debt. Almost everyone we’ve worked with has described feeling a huge sense of relief after clearing their balances. That sense of freedom alone makes it a goal worth pursuing.
So, how do you do it? How can you pay off your credit card debt for good? Let’s walk through it step-by-step.
Step 1: Know Where You Stand
The first step is getting a clear picture of your current debt situation. You can’t make a plan without knowing exactly what you’re working with.
Here’s what you need to figure out for each credit card you have:
- Current balance: How much do you owe?
- Interest rate: What is the interest rate being charged?
- Minimum payment: What is the minimum amount you’re required to pay each month?
Write everything down in one place, whether it’s a spreadsheet or just a list. Seeing it laid out helps you face it head-on and gives you a starting point for creating a plan.
Step 2: Track Where Your Money Is Going
Next, it’s important to take a close look at your budget. The goal here is to both figure out where your money is going now, and what adjustments you could make to help you pay down your credit card debt even faster.
Start by tracking your spending—both fixed expenses (like rent and bills) and discretionary spending (like eating out or subscriptions). This helps you identify what you need and where you might be able to cut back, even if it’s just temporary change.
If possible, try to find at least a little bit of room for extra payments on top of the minimums. Every extra dollar you pay will save you money and accelerate your path to debt-free.
Step 3: Balance Your Other Financial Needs
With that information in hand, it may be tempting to throw every spare dollar at your credit card debt. But before you dive in, take some time to check on your other financial goals to see if anything else might need to be prioritized first.
Here are some things to consider:
- Do you have an emergency fund? A small emergency fund of $1,000–$2,000 can protect you from having to rely on credit cards for unexpected expenses.
- Are you maxing out your employer’s 401(k) match? If your employer offers a 401(k) match, it’s essentially free money that is often an even better return than paying down credit card debt.
- Are there other near-term needs? If there’s a big expense coming up in the near future, you might consider setting money aside so that you’re ready for it.
These steps should often come first before going all-in on debt repayment. They create security and help build a foundation for future financial success.
Step 4: Pick Your Debt Payoff Strategy
Now that you know your numbers and have a budget, it’s time to choose your repayment strategy. There are two popular methods.
With the debt snowball strategy, you prioritize paying down the card with the lowest balance first. Once that card is paid off, you prioritize the next lowest balance, and so on. This strategy can be motivating since it gives you quicker wins.
With the debt avalanche strategy, you prioritize paying down the card with the highest interest rate first. Once that card is paid off, you prioritize the next highest interest rate, and so on. This is the most efficient strategy since it prioritizes the cards that are costing you the most.
Both strategies are great, so I would focus on choosing the method that you feel like will be easiest to stick with. The best plan is the one you consistently execute.
Step 5: Automate Your Payments
Consistency is key, and automating your payments helps you stick to the plan without thinking about it.
Once you’ve chosen your strategy, set up automatic payments for the minimum on all cards. If you have extra money each month to put towards your credit card debt, add that amount to the automatic payment for whichever card you’re attacking first. And once one card is paid off, add that payment to the automatic payment of the next card.
By automating everything, you reduce the room for human error and make it more likely you’ll stay on track, even during busy times.
Step 6: Stay Disciplined and Review Regularly
Paying off credit card debt takes time, so it’s important to stay disciplined. Regularly check in on your progress, whether that’s monthly or quarterly, and adjust your plan as needed.
Has your income changed? Have you cut back on spending in certain areas? Are there any new expenses to take care of? Can you increase the amount you’re putting toward repayment? The more you can throw at your debt, the faster it will disappear.
Remember, this is a marathon, not a sprint. It’s okay if progress feels slow at first. As long as you’re moving forward, you’re making progress.
Step 7: Use Extra Money to Supercharge Your Debt Repayment
Whenever extra money comes your way – whether it’s side income, a bonus, or RSU proceeds, put it towards whichever credit card you’re currently prioritizing.
I’ve seen windfalls like that save members thousands of dollars in interest and knock months, or even years, off their repayment timeline.
Step 8: Celebrate Your Wins
This can be a long process and it can be hard to stay motivated. Which is why it’s important to celebrate your wins along the way!
Whether it’s paying off a card, getting below a certain balance, or simply increasing your monthly payment, those are all big moments. Find ways to recognize your progress and celebrate those wins (without racking up more credit card debt)!
Taking time to reflect and feel good about the progress you’re making is really important. You deserve it.
One Step at a Time
Credit card debt can feel like an impossible burden. I’ve talked to plenty of people who feel like they’ll never get out from under it.
But you can do it. If you follow the plan above, you will be debt-free eventually. It may take time, but every payment you make is one more step towards financial freedom. Stick with it, make adjustments as needed, celebrate along the way, and you will get there.
And if you need a hand, Fruitful’s financial guides can help you make a plan that fits your specific goals and situation. Don’t hesitate to reach out!
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Frequently Asked questions
How is personalized investing part of the Fruitful membership?
Fruitful is a financial wellness membership that provides access to:
1. Expert advice and support from a dedicated Fruitful Guide, who is a CERTIFIED FINANCIAL PLANNER™ Professional that helps with all aspects of your finances and builds you a tailor-made money system.
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Why might this be better than other investing options?
Many available investing options can present challenges in a couple ways. You can either:
1) pay someone a lot in asset management fees to “manage” your investments, hopefully in line with your goals and risk tolerance; or,
2) go it on your own with robo advisors, hoping you clicked the right boxes to get the investments that align with your goals and risk tolerance immediately and over time.
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Wait, there are no management fees?
No, we don’t charge management fees on your investment accounts. Fruitful’s membership cost covers all member benefits. We think the absolute worst place for an investment firm to charge their fees is from your investment account because it can slow down the potential growth of your investments, and also requires that more of your portfolio is kept in cash (to be able to pay the fees) — potentially slowing it down even more. Translation - by removing the management fees the money you set aside for investing can be fully working for you, all the time, and your returns will not be eaten away by management fees, allowing them to grow more over time.
What investment options do I have?
Your Fruitful Guide will work with you to recommend the account type and asset allocation that’s right for you based on several factors, including your goals, risk tolerance, and future plans. Our investment approach is data-backed and straightforward. We build low-cost, highly-diversified portfolios primarily using exchange-traded funds (ETFs) and index funds, and may include some mutual funds. Individual stocks and bonds are not included in Fruitful’s investment strategies.
What are the advantages of using Fruitful vs. a robo-advisor?
Robo-advisors often make portfolio recommendations without the full context of your larger financial picture and how that changes over time. For instance, if you told a robo-advisor you have $10k to invest in a brokerage and need the money in 15 years, it might recommend an asset allocation that addresses only that information. That may not be helpful and aligned with the other parts of your financial roadmap. Fruitful believes it’s important to take a step back and ask, “Hey, what else is going on? Do you have credit card debt to pay down, are you buying a house soon, how have you been saving for retirement?” Our financial Guides help you navigate decision making at every step by understanding your entire financial world and optimizing your investment approach accordingly.
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Our Guides tailor members' investment approaches to their personal goals, lifestyles, timelines, and risk-tolerances. Our portfolios are built from a carefully curated list of low-cost index, mutual, and exchange traded funds to minimize expenses and maximize diversification, providing members with broad exposure to different asset classes including domestic, non-US developed, and emerging stocks as well as corporate, government, and international bonds. Our core aim? Striking the risk-reward balance that's right for each member and their unique financial journey.
How do the Fruitful Guides help?
Your financial Guide is like your holistic financial wellness guru — they get a picture of your entire financial life, what’s going on now, and what’s coming down the pipeline to determine how to optimally allocate and invest your money to balance the many priorities you may be juggling. Your Guide will help you choose the right approach based on your goals, tolerance for risk, and timeline, among other factors.
Can I change my investment strategy over time?
Yes, and this is expected and accommodated as your financial goals and priorities shift over time. Your investment strategy is a part of your larger financial strategy that you and your Guide will work on together.
What kinds of accounts are available to Fruitful Members?
Fruitful supports and manages individual, joint, and trust non-retirement accounts as well as Roth, traditional, rollover, simple, and SEP IRAs. We can also provide strategy, ongoing advice, and support on investments not directly managed by us. Fruitful also offers a high-yield cash account. Learn more here.
What are the expense ratios on Fruitful portfolios?
An expense ratio is a yearly fee that mutual, index, and exchange-traded funds charge. If a fund has a 1% expense ratio, you're shelling out $1 for every $100 you put in. High fees can eat into your returns big time. Fruitful managed investment portfolios have an average expense ratio of just 0.048%. That’s really low - around 1/10 of the average expense ratio across the fund industry, which was 0.47% in 2022.¹
¹Mutual fund and ETF expense ratio averages sourced from Vanguard. Link here.
Can I transfer or rollover my existing investment accounts to Fruitful?
Yes! Talk to your Guide about this process and what it means for your current holdings. At Fruitful, our investment approach is built around diversification, so we don’t hold individual stocks or bonds in our Members’ accounts. Not only does this align with our advice, but it helps us keep our costs low and our service seamless. Any positions you transfer in will be sold and reallocated based on the asset allocation you determined with your Guide.
I currently own stock in my employer. Can I transfer that to Fruitful, too?
Our portfolios are designed around diversification using exchange-traded funds, index funds, and sometimes mutual funds. If you want to maintain some employer stock, you should keep that outside Fruitful. That said, your Guide may recommend diversifying some of those holdings, and in that case, you can make a transfer of some stock to Fruitful, where it can be sold and allocated based on your personalized portfolio.
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Fruitful Cash accounts are held at our sponsor bank – Emigrant Bank, Member FDIC, which was founded in 1850, and is one of the largest privately held banks in the United States.
Fruitful is a financial technology company, not an FDIC-insured bank. Funds in your Fruitful Cash account(s) are held at Emigrant Bank, an FDIC-insured institution. While there, your funds are FDIC insured up to $250,000 and covered in the event of the failure of only Emigrant Bank. Fruitful must meet and satisfy certain conditions for pass-through deposit insurance coverage in the event of Emigrant Bank’s failure.
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¹ The people in these videos are real Fruitful Members who were paid in cash for their time and participation in this series. We think that is fair. Each testimonial reflects the individual Member's experience as an advisory Client and is not intended to represent any other Member's or Client's experience. We believe in the integrity of this approach and that, outside the conflict of interest present due to compensation, no other conflicts apply to these testimonials. These Client testimonials were given in October 2023, represent the opinions of each Member at that time, and may have been edited for brevity and clarity.
² Cost of traditional advisory firms sourced from The Kitces Report, Volume 2, 2022, Figure 61. Distribution Of Typical Annual Retainer Fee.