Paying off Credit Card Debt: What Strategies Does Research Suggest Work Best?

Many benefits come with having a credit card that is used prudently. For instance, a credit card allows you to take care of emergencies, even if you don’t have reserves. Most will allow you a grace period before you need to pay any interest. Add this to the fact that many credit cards come with rewards, allow entry into airport lounges across the world, and will protect you against fraudulent suppliers, among other benefits, and you’ll understand why many people have at least one. 

However, if you don’t avoid certain credit card pitfalls, you could slide into a slippery slope of credit dependence. A debt trap can leave you stressed and unable to control your finances. In this article, we look at strategies you can follow to pay off your credit card. These include the Snowball, Avalanche, Balance Transfer, Debt Management, Consolidation, Settlement, and Bankruptcy plans. 

We start by looking at the prevalence of debt (including credit card debt) in the United States. The article then looks at specific strategies of paying off credit card debt, and what research says about these strategies.  

Credit Card Debt in the U.S., the American debt help organization, provides some numbers that tell the story of the relationship between Americans and debt in general, including credit card debt:

  • The second quarter of 2019 saw consumer debt increase for the 20th consecutive quarter.
  • The current $14 trillion estimation of consumer debt is a record high, over $1 trillion above the previous record set in 2008.
  • The average American owns at least four credit cards, and the average American household owes $8,398 in credit card debt.
  • Credit card debt in the U.S. hit the $1 trillion milestones in the third quarter of 2019.

Why Pay off Your Credit Card Debt?


If we all could, we would want to live debt-free lives. However, there are times when we need credit, and credit cards provide relief in such times. Once you accumulate debt on your credit card, the next thing you are worried about is paying off the debt. 

For some people, once they have accumulated debt on their credit cards, they begin a vicious circle of living in debt. For others, paying off the debt is something they want to do as soon as possible. We think the latter group is in a better position. But why?

Even though credit card debt allows a grace period before charging interest, the reality is that credit card debt comes with “notoriously high-interest rates” once the grace period is over. So, those who decide to pay the barest minimum required will take many years to get out of debt.   

If credit card debt gets out of control, the resulting stress can be unbearable. A 2014 survey by the American Psychological Association “found that 72% of Americans reported feeling stressed about money at least some of the time during the past month” (Source). 

The correlation between money and stress is so strong among American citizens that APA CEO, Norman B. Anderson said, “money and finances have remained the top stressor since our survey began in 2007” (Source).

Debt Payment Strategies

The first step to being debt-free is determining your debt payment strategy. Several strategies have been suggested. Each comes with its own set of advantages and disadvantages. Which one you eventually go with will depend on your circumstances, and what works for you.  

Debt Snowball

Popularized by Dave Ramsey, the debt snowball method prescribes paying off your smallest debts first. This implies that you start by ranking your credit card debt and paying off the one with the smallest amount first. However, this doesn’t mean that you neglect all your other payments as you work on paying off one card. You still have to make the minimum repayment on all your other cards. 

The snowball method is more popular from a psychological perspective. Giving one debt all your attention means that you can register one win early. For some people, this could be an indication that their debt repayment goals can be accomplished. It also works if your smallest debt has the highest interest. 

The downside of the snowball method is that it doesn’t consider interest rates. If higher debts accrue higher interest, and if you’re paying off the smaller ones with low interest first, you leave the ones with higher interest to spiral. This means that you could end up paying more in the end.

Debt Avalanche

The debt avalanche also prescribes that you focus most of your attention on one debt: the one with the highest interest rates first. This implies that you start by ranking all your credit card debt, making the minimum payment on each card, and then putting the highest payment you can afford on the card with the highest interest.

The upside to this is that it saves you money on interest. You could use this money to pay off your other debt. However, this could result in you taking longer to pay off your debt, presenting challenges in staying motivated. 

Debt Consolidation

Debt Consolidation Loan Financial Concept

When you have multiple credit cards, keeping track of things can be a challenge. Debt consolidation may be your choice if you find yourself in this situation. Debt consolidation involves calculating the amount of credit card debt you want to repay and then taking out a loan to repay that debt. You then pay only one amount to the new lender.

If the interest rate you get from your debt consolidation is lower, this could save you money, while also making your life more streamlined. However, taking a loan to cover your existing credit card debt, without changing the habits that put you in the debt trap, will not help. If debt consolidation is to work for you, you will need to create a customized plan to get to zero debt.  

Debt Management Plan

The debt management strategy involves the inclusion of a third party – a credit counseling agency – in your debt repayment. The agency works with your creditors to come up with a repayment plan that is convenient for you, but still acceptable to the company that offered you the credit card. You then have to make one payment each month to the agency, and they would distribute your payment among your creditors. 

The main advantage of using a debt management plan is that your repayment is negotiated by professionals who know how the industry works. However, you will also have to play your part by ensuring that you reign in your spending and make the single payment you have agreed to.

Balance Transfer

In an act akin to robbing Peter to pay Paul, balance transfers involve taking out the money in a low-interest card and transferring it to a high-interest card. This method also works well with the avalanche method since it is targeted at paying off debts with the highest interest.

Debt Settlement

This strategy is recommended for individuals who are past their payment due dates, and those who can pay their creditors a one-time lump sum. You can negotiate the terms of a debt settlement by yourself, or hire a debt settlement agency to do it for you. 

Individuals who have lost their jobs, recently gone through a divorce, or have medical issues, might be eligible for debt settlement. When you agree to settle, you could pay only a percentage of the original debt and have the rest canceled. However, you may be required to pay tax for the forgiven amount.  


If all else fails, filing for bankruptcy may be your last resort. However, pleading bankruptcy is not a simple method that you can use to run away from the responsibility of paying what you owe on your credit card. It involves a court proceeding where, based on the evidence before a judge, a court judges whether to discharge the debt. In that case, you will no longer be legally required to pay those that you owe.

What Academic Research Says

Debt repayment research goes beyond the mathematics of becoming debt-free. A lot of human psychology goes on underneath the surface. Morale has been identified as a critical player in how people are successfully paying off their debts.

A 2011 University of Michigan study found that people, naturally, follow the snowball method. Being made aware of how much more interest they would pay if they stuck with that method made people switch their attention to the avalanche method (Source).

A similar study by the Boston School of Business experimented with three different strategies, and found that knocking down debts, one at a time, proved more successful than distributing equal payments towards multiple debts (Source).

Completing Small Tasks Delivers Motivation

People draw morale from seeing small tasks accomplished. A study by David Gal and Blakeley B. McShane posits that “completing discrete subtasks might motivate consumers to persist in pursuit of a goal” (Source). This supports the snowball debt payment strategy. 

Researchers from the Kellogg School published another study that supports the snowball idea. They found that “people with large credit card balances are more likely to pay down their entire debt if they focus first on paying off the cards with the smallest balances – even if that approach doesn’t make the best economic sense” (Source).

A 2016 study published in the Journal of Consumer Research contends, “Concentrated repayment strategies tend to boost consumers’ motivation to become debt-free, leading them to repay their debts more aggressively” (Source).

Focus on High-Interest Debt to Get Out of Debt  

Some scholars argue that you will find it harder to get out of debt when you don’t focus on the high-interest credit card debt. When you find it harder to get out of debt, you become demotivated and start to think that the goal is not achievable. 

The University of Michigan published an article titled, “New research debunks popular method of paying off debt.” The article refers to several studies that show that the snowball approach is misguided. It cites Professor Scott Rick, who says, “It really seems like it makes sense when confronted with multiple debts to eliminate one right away.”

Rick continues, “If the smaller debt carries a higher interest rate, it makes sense to pay it off first. When it’s reversed, when the bigger debt has a higher interest rate, you should stop doing it. But people do it anyway” (Source). This implies that for those who want to be pragmatic, the avalanche strategy is the best option.

Moty Amar, Shahar Ayal, and Cynthia Cryder, in a research paper published in the Journal of Marketing Research, conclude that it makes more financial sense to pay off debts with bigger interests first. The article claims that “focusing on, and achieving sub-goals, can actually diminish the motivation to pursue superordinate goals.” 

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