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Resolved to pay off card debts? These four steps will help

Dawn Papandrea

Tackling credit card debt – and avoiding it in the future – are common themes of four of the six top financial goals for 2017 in a survey by Experian and Edelman Intelligence. While the top financial resolution is to save more, card-focused goals include paying off a credit card and not opening a new credit card.

Why is card debt — paying it off and avoiding it in the months ahead — at the top of our minds now? I have three theories.

1. The timing of the survey.
The survey by Experian and Edelman Intelligence was conducted in October when people are gearing up for a higher spending mode related to the holidays. The last quarter of the year is prime time to start worrying about not only debt that is lingering, but – especially in December – the new bills that will be coming from the use of credit cards for all those holiday gifts and trimmings.  In fact, in a survey by MagnifyMoney, more than 1 in 4 (26 percent) Americans said they expected their holiday debt to linger for more than a month.

2. The desire for change.
When we flip to a new calendar year, it’s like we’re giving ourselves a psychological reset. We have this collective notion of a clean slate, a universal chance to start over, and therefore, we have good intentions to make improvements in our lives.

3. The improving economy.
While it might not apply to everyone, it seems that in general, people are finally feeling some relief from the recession. The job market has improved, people may even be getting small raises again, and learning frugality during the lean years has resulted in people making smarter financial decisions. The next natural step now that there’s a bit of breathing room is to conquer debt demons once and for all, and hopefully, never look back.

Wanting to slay your card debt demons and doing it are two different things, however. It’s not enough to simply make slightly higher payments when there is money left over (since that rarely happens without planning). To wipe out your debt, you need to have a purposeful payback plan.

If debt repayment is your No. 1 resolution, here are four steps to help you achieve your goal this year:

Step 1: Go through all of your accounts and write down the balance and the interest rate for each. This big picture look will give you a good idea of what you’re facing. The plan: Continue paying the minimums on all of your accounts, except for one. You want to choose one balance to target and throw as much extra money as you can toward that debt. After that first balance is paid off, you can move to the next account on your list and begin again.

Step 2: Prioritize the debts you will pay off. In other words, decide which debt you should slay first. There are two main schools of thought on how to come to this conclusion, and ultimately, it’s a personal decision. Here’s what you need to weigh:

  • Snowball method: Do you get easily sidetracked and/or require motivation to follow through on a goal? If so, choose the “snowball method.” This term made popular by financial guru Dave Ramsay refers to the idea of focusing on your smallest balance first, and working your way up to your largest. The idea is that achieving faster victories along the way will encourage you to stay the course. Recent studies suggest throwing a snowball at debt may be more effective for many people.
  • Avalanche method: Are you a “by the numbers” logical thinker? If that describes you, go with the “avalanche method.” Mathematically, high interest debt is what’s costing you the most money, so this method requires you to start with your highest interest rate account and work your way down. Once you’re paying less interest, you’ll see the balances start to shrink.

Step 3: Whichever debt repayment method you choose, stick with it. During your payoff journey, plan to put any money windfalls that come your way toward your debt (i.e. tax refunds, work bonuses, birthday money, etc.). To fast track your goal even more, trim your expenses and seek additional sources of income. Leave a little room, though, in your budget for the occasional treat – otherwise, you’ll get frustrated and give up. Finally, plan to live a cash-only lifestyle for a while so you don’t rack up any new debt.

Step 4: If you feel as if things aren’t moving as quickly as you’d like, or you are struggling to keep up with payments, you can look into other options such as balance transfers, debt consolidation or speaking with a credit counselor. Just be sure you crunch the numbers and have a plan before you start shifting money around, or you could end up in deeper trouble.

If debt repayment is your top resolution and you’ve got the financial means, the steps above really do work. Set a goal that’s realistic and doable, and as you watch your debt decline, take pride in your progress.

Is tackling card debt your top resolution? Tell me how you plan to make it happen – email me at or tweet to me @DawnPapandrea.

See related: Card debt resolutions abound for 2017

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