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Strategies for credit card debt consolidation and payoff

Learn more about the strategies to find the right option for you.

Woman working on a laptop with a credit card in her hand, thinking about credit card debt consolidation, with her family in the kitchen behind her.

If you have credit card debt, you’re not alone: USA Today estimates Americans are carrying an average credit card balance of over $6,200. The credit bureau Experian mentions that the typical American holds four credit cards. Experts say that a middle-class lifestyle is more expensive with healthcare and education costs outpacing wage growth. This has resulted in more households relying on credit cards to cover emergency and daily expenses.

Here are a few tips that may help manage credit cards and debt in your household.

  • Create a budget. You’ll find that creating a budget and documenting what you spend and what you take in is a good first step. A budgeting worksheet will help you lay out your fixed, variable and miscellaneous expenses. This will help you get an idea of what discretionary income you have left at the end of each month. Knowing this will help in your debt repayment plan.
  • Establish a debt payoff budget line item. Even if you don’t have much leeway in your budget, try to include a separate line item dedicated toward reducing your debt.
  • Avoid adding new debt. If at all possible, do not use your credit cards or take additional loans.
  • Prioritize debts. Pick the loan or credit card with the smallest balance or with the highest interest rate, and focus extra resources on paying off that first. Then move on to the next smallest one or next highest interest rate loan or credit card. A credit card payoff calculator is helpful.
  • Consolidate — if it makes sense. Balance transfers and cost effective loan consolidation can be a good way to both reduce your interest rates and streamline your payment strategies. If you have a good credit score, you may be able to qualify for a zero- or low-percent balance transfer. Be sure to consider interest rates, costs and fees. Using a consolidation loan calculator is helpful as well.
  • Pay a set amount or more than the minimum amount due. Once you prioritize your debts , try to pay over the minimum or even double the minimum due to pay down the balances and principal faster.
  • Put extra income or resources to work. Apply bonuses, tax refunds and any other money you make, such as a second job, to work on your credit cards and loans.
  • Take small steps and know that every contribution matters. It’s easy to get overwhelmed when you have debt — especially multiple loans or credit cards. Try to make progress each month, even if it’s a small amount.
  • Watch your statements and monitor your credit report. Keeping a watchful eye on your bank statements, credit card statements and credit report is a way to help you see if your hard work is paying off. Credit monitoring allows you to keep tabs on account activity. You'll also be immediately tipped off about any fraudulent activity.

Calculators and worksheets

Give these tools a try to help reduce your debt.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.




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