Pay Off Credit Card Debtt | Mission Fed Credit Union

So, you’re in debt. It happens to the best of us. Maybe you had some unexpected life expenses came up. Or you stumbled upon a sale you couldn’t pass up. Most of us keep credit cards so we have some extra wiggle room when these situations arise. But what happens when you want to pay off that debt?

Debt consolidation is an approach that can help you streamline your monthly payments and chip away at your overall debt. However, debt consolidation can also result in a lower credit score while you work to pay off your debt. Some methods have less impact on your credit than others.

In this article, we’ll cover:

How to consolidate credit card debt without hurting your credit:

Debt consolidation loan or lower-interest personal loan
Low or no-interest balance transfer card
Borrowing from a 401k
Debt management plan

Other ways to deal with credit card debt

Debt snowball strategy
Debt avalanche strategy

Managing finances while paying off debt

Lower your cost of living
Create and stick to a budget
Add on a side hustle
Avoid late fees

How to consolidate credit card debt without hurting your credit

Debt consolidation loan or lower-interest personal loan

With this strategy, you pay off your debts with a debt consolidation loan. This may seem counterintuitive, but this type of loan typically has far lower interest rates than credit cards do. So, even though you are essentially replacing one debt for another, the burden is lower and the debt payoff more manageable. Not to mention, the payoff period is typically between three and seven years. Talk to your local Mission Fed Credit Union about how to consolidate debt and apply for a personal loan.
Low to no-interest balance transfer card

This is a great option if you have good to excellent credit. All you do is transfer your outstanding credit to a single card that offers a no or low introductory annual percentage rate (APR) over a certain period. These offers typically have a balance transfer fee so review all the terms; however, if you stick to your payoff plan you will still end up paying less in interest and fees. Find one with an introductory APR period of 12 to 18 months to give you sufficient time to pay off your debts. The advantage is clear; now you only have one monthly payment to worry about without interest during the introductory period.

Conveniently, Mission Fed offers 1.99% introductory APR credit cards for 12 months on balances transfers in the first 90 days of account opening. After that, your standard APR will be as low as 11.99% – 17.99% for purchases and as low as 11.99% – 17.99% for balance transfers, depending on the card you choose and the rate you qualify for.*
Borrowing from a 401k loan

If you are ahead of the game and have an employer that sponsors a 401k plan, this may be an option for you. It is recommended that you only pursue taking a loan out on your 401k if you have already ruled out all other methods. However, one benefit of doing this is that it does not impact your credit score. Not to mention, the interest rate is quite low.

Be careful though, the penalties for failing to repay this loan are quite severe and you won’t be earning interest on the amount you borrow on which could impact your retirement.
Debt management plan

If your circumstances prevent you from pursuing all of the above strategies, hope is not lost.Mission Fed has free financial wellness resources to support you including financial education from our partner Balance and free financial coaching for members. Additionally, there are nonprofit credit counseling agencies that can help you design a debt management plan, to get you on your way to a smoother path to repayment.

These nonprofits serve as mediators between you and creditors and in some cases may negotiate new terms with creditors to consolidate your debt. You will then pay the agency a fixed rate each month, instead of dealing with interest-heavy credit card payments.

Other ways to pay off credit card debt

Paying off credit card debt may seem intimidating at first, but fear not. If your process of paying off credit card debt tips the scale from being mildly stressful to practically impossible, there are still some actions you can take to remove some of the weight off your shoulders.

Here are three different strategies to make this whole process less overwhelming:

The Debt Snowball

The debt snowball strategy focuses on winning small battles first. The key is to start by paying off your lowest balance. Be sure to continue paying the minimums on your other debts too. Once you have tackled that first balance, move on to the next smallest debt.

The benefit of this plan is that you feel confident with each balance you pay off. However, be aware that this strategy does not take into account interest rates, which means you pay more in the long run.

The Debt Avalanche

This strategy turns the debt snowball method on its head, this time focusing on paying off the balance with the highest interest rate first (while still paying off other minimums). This is an extremely effective method of debt payoff and offers long-term savings because you will be tackling the loan you are paying the most interest on.

Tips for managing finances while paying off debt

Whether you are under mountains of debt or a small foothill, here are some extra tips to make your debt repayment plan faster and easier.

Lower Your Cost of Living

Now that you have debt to pay off, you will need to cut down on some of your expenses. The logic is simple: the less money you pay each month in bills, the more money you can apply to your debts, and the faster you can pay it off. Remember that due to credit card interest rates, time is of the essence; the faster you pay off your debt, the more money you save in the long run.

Create and Stick to a Budget

This tip is important at all times, but especially when you are working on debt repayment. Whether it’s eating out less, or cutting down on streaming subscriptions, understanding your budget and sticking to it is essential.

Pro tip: While working on your debt, make it a habit to check your account every day, so you are always aware of your spending.

Add on a Side Hustle

If your day job is not cutting it, put your hustle hat on and increase your earning power by picking up a few side jobs. Whether it’s selling second-hand clothes online, or grading college admissions essays; a side job that is remote with flexible hours is ideal for making extra money. With this additional income, you can make additional payments to your lender and get one step closer to getting rid of those expenses.

Avoid Late Fees

Automate your account payments to ensure that you are always paying, at least the minimum payment on all your debts. This will ensure that you avoid adding more debt due to unnecessary late fees.

Closing Thoughts

Dealing with rising credit card debt is stressful, but you are not alone. While there are many benefits of having a credit card, it is important that you pay off your debt in a timely manner. Mission Fed offers a variety of valuable resources to help guide you through your financial journey, including free financial coaching for members. Use these tips on how to pay off credit card debt and start eliminating that debt now!

Must meet membership and account criteria. Mission Fed partners with Balance to provide financial education and counseling services to our members. This is a free member benefit. Mastercard and the Mastercard Brand Mark are registered trademarks of Mastercard International, Inc.

*Products and APRs are current as of 3/13/24, for the most current rate information see Rates | Mission Fed Credit Union. All loans subject to credit approval\. Terms, conditions and restrictions apply. Offer is good for new Credit Cards. Balance transfers are for non-Mission Fed Credit Cards. Introductory APR will apply on balance transfers posted within the first 90 days of account opening, ending on the closing date of the first billing cycle after the account is open for 12 months. In order for your balance transfer to qualify for the 1.99% introductory APR, you must conduct the balance transfer by using a Cashier’s Check issued by a Mission Fed Branch or the Contact Center. Electronic balance transfers do not qualify.

Preferred Platinum and Preferred Platinum Rewards: The balance transfer and cash advance fee is 2% of the amount of each item ($2 minimum). The foreign transaction fee is 1% of the amount of each transaction in U.S. Dollars. Premier World Mastercard®: The balance transfer and cash advance fee is 3% of the amount of each item ($3 minimum). The foreign transaction fee is 0% of the amount of each transaction in U.S.

Maximum $20,000 in balance transfers per member. Late payment fee up to $25 for the first late payment in any 6-month period then up to $35 for each additional late payment within the same 6-month period. Returned payment fee up to $22. Programs are subject to change without notice.

The content provided is intended for informational purposes only and should not be considered financial advice. Consult a qualified financial advisor. Mission Fed Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article does not constitute endorsement, control or warranty by Mission Fed Credit Union.