A’shira Nelson spent most of her adult life in credit card debt, carrying a $7,000 credit card balance before accounting for the interest she racked up.
It started when she got her first credit card in college. The card had a $5,000 limit, and Nelson, now 32, fell into the all-too-common risk of relying on it to meet her monthly expenses, such as groceries and utilities. Throughout college, she made minimum payments each month to get by. Eventually, she’d max out the card and only pay the balance off in full once a year when she received her tax refund.
“What caused my credit card debt was becoming overly dependent on my credit card,” says Nelson. “I would max out the card, pay it off with my refund, and then max out the card again.”
After she graduated, the debt cycle was too deep to get out of. Nelson, an Ohio-based certified public accountant and founder of personal finance blog Savvy Girl Money, had a steady income after college. But her tax returns — which she had depended on to pay down debt — became much smaller, and she no longer prioritized paying off the maxed out card balance she had accrued. In fact, she began accumulating more debt, eventually maxing out another $2,000 limit on a retail credit card.
It’s a story that’s all too familiar for many Americans. As of 2020, around 75% of cardholders have a card balance that’s greater than $0, and the average credit card debt balance is about $5,315, according to the latest Experian data.
For years, Nelson continued to make only minimum payments toward her credit card balances each month. But at age 28, she realized she was capable of paying off all her debt, including her student loans, credit card debt, and an auto loan, after a conversation with a coworker.
“He was telling me how his girlfriend was able to pay off her student loans,” she says. “Just hearing the idea that somebody was taking charge of their debt, I remember going home and thinking, ‘Well, why can’t I do that?’”
Nelson decided to pay off her student loan balance first, which totaled $25,000 and took two years. Then, nearly a decade after she first started carrying the high-interest credit card debt — and accruing more interest charges over that time — she shifted focus to her $7,000 card balance.
Ultimately, she paid down her card balances in just seven months. Here’s step-by-step guide on how she did it, and Nelson’s advice for anyone else who might be in a similar situation:
Step 1: Look at Your Budget and Create a Plan
Nelson knew she had to make a plan and get organized if she wanted to eliminate her credit card debt, starting with a budget. She created a budgeting spreadsheet, wrote down her monthly income and expenses, and had all her financial information laid out in front of her. It allowed her to see where she needed to cut back.
“During the budgeting process, I did find ways to eliminate my expenses,” she says. “I didn’t even realize that I had money going toward the craziest things, like three beauty subscription boxes.” Auto insurance was another easy way to save. She cut the cost of her policy nearly in half — from $175 to $85 per month — by switching to another company.
But there were more difficult sacrifices Nelson says she had to make, too. “I decided during my journey to go natural, which a lot of African Americans or minorities understand,” she says. “That meant embracing my natural curls, not going to the hair salon, and using that money to put toward my credit card debt.”
To stay on track, Nelson hung her new budget on the wall as a reminder, and used Mint, the mobile budgeting app, to track expenses. That way, she could regularly evaluate each category and see where she had room to spend and where she needed to cut back. Based on her budget, she calculated her monthly payments and formed a plan to pay off her credit card debt with her remaining monthly income.
“Doing a budget showed me that I had $1,000 I could dedicate just to my credit card debt,” Nelson says. “I didn’t even realize I had that $1,000 before writing out my budget and plan.”
Step 2: Choose a Debt Repayment Strategy
Once Nelson developed her spending plan, she needed to figure out the best way to use the additional payments.
“I used the avalanche method,” she says. “I decided to pay off the credit card with the highest interest rate, which happened to be the credit card with the lowest balance.”
The avalanche method is a common debt payoff strategy because it helps you save money by eliminating higher-interest debt first. You put all your extra payments toward the account with the highest APR, or interest rate, while making minimum payments on all the others. Once the card with the highest APR is paid off, you move onto the following highest-interest account. The cycle continues until you’re debt free.
A common alternative is the snowball method, in which you instead make higher payments on the account with the lowest balance while paying the minimum on your other accounts. Then, you’d roll those payments over toward the next lowest balance, and so on. You may end up paying a bit more in interest over time, but this strategy has the psychological benefit of eliminating certain balances more quickly.
Although Nelson didn’t use a balance transfer credit card to pay down her debt, it can be another useful tool for paying down high interest debt. A balance transfer card lets you move your debt from one card to another, and pay down your principal balance without accruing interest over an introductory 0% APR period.
A balance transfer card can be a strategic way to pay down debt, but make sure you have a plan in place to pay down your balance in full before the intro period ends. Without one, you may be tempted to spend even more.
Because of the better terms, it allows you to catch up on your payments and pay down your debt, without interest accruing for a time. NextAdvisor’s top picks for balance transfer cards include the U.S. Bank Visa® Platinum Card, Citi Simplicity® Card, and BankAmericard® Credit Card, among others.
There’s no such thing as a “right” or “wrong” debt repayment strategy; the key is to pick the one that makes the most sense for you and stick with it.
Step 3: Revisit Your Plan and Adjust as Needed
Once Nelson started her debt payoff journey, she kept track of her plan to make sure it continued to work for her lifestyle and adjusted as needed.
For Nelson, that meant monitoring her budget closely to ensure she didn’t exceed certain spending categories. “Once I had my plan in place, I really had to work on controlling my expense categories within my budget. There were certain categories that I had a hard time managing in the beginning, like eating out and groceries,” she says.
Nelson didn’t have any unexpected expenses during the seven months she was aggressively paying off her credit card debt. But emergencies can happen at any time, and set back your progress, so it’s important to have a well-stocked emergency fund.
If you don’t already have an emergency fund, consider contributing to your savings even while you pay down your current debt, so you’re not caught in another debt cycle following an unexpected expense after your balances are paid. Once you are debt-free, you can direct the money that was going to debt payments toward building your savings. Aim for at least three to six months’ worth of expenses and simplify the process with automatic transfers. Even if you can only add a few dollars each week or month, it’ll grow over time.
Step 4: Be Consistent — and Find Ways to Stay Motivated
Paying off debt doesn’t happen overnight, so while you’re tracking your plan, keep an eye on your successes, too.
Staying consistent and motivated while paying off debt looks different for everyone. For Nelson, the motivation to pay off her credit card debt came after she had initial success paying off $25,000 in student loans. She says social media helped her connect with other people who were also trying to get out of debt. And by sharing her struggles and successes on her blog, Savvy Girl Money, she built a community of people who kept her motivating and on track.
But while consistency is critical, you should expect setbacks and challenges throughout the process, too.
“I had to learn how to say ‘no’ to my family and friends,” Nelson says. “I come from a really big family, and we always do things together, but during that time, I needed to stay dedicated and disciplined.”
Nelson says staying focused and determined, and leaning on her like-minded community, helped her along the way.
“I remember making my last credit card payment in the middle of the night — it was probably 4 o’clock in the morning,” she says. “I knew that was the day. I was so excited to make it, and I just got it out of the way.”
Step 5: Use Credit Cards as a Tool, Not a Crutch
Paying off debt is one thing, but staying debt-free can be just as challenging. Credit cards can be a powerful tool or a crushing financial burden on your shoulders — it ultimately depends on how you use them.
Nelson used credit cards as a crutch for a long time. Now that she’s free of credit card debt, she no longer relies on credit to cover essential bills, and instead uses her credit cards as a financial tool to build credit and earn rewards.
“I’m still using my credit cards; I just make sure I’m paying my balance in full every month and show a zero balance,” she says.
Nelson was able to figure out a plan that worked for her, and in seven months, paid off a credit card balance that she had been carrying for almost a decade. If you’re trying to pay down credit card debt, the best thing you can do is make a plan and get started.
“It was a huge sacrifice, but it was worth it. I would do it again,” says Nelson. I’m now using the $1,000 I was putting toward extra credit card payments to build wealth and invest. The whole experience just helped me out so much.”