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4 Ways to Reduce Your Debt

Many Americans have some form of credit card debt. The Federal Reserve bank reports that in 2024 credit card debt sits at more than $1 trillion. If you find yourself in debt, don’t feel bad — here are four practical steps you can take now to help you pay off credit card debt.

1. Consolidate credit card debt

The first step you should take is to consolidate credit card debt. That basically means combining multiple balances onto one, low-interest loan or credit card. United Federal Credit Union’s U First Visa^® credit card allows you to transfer balances from other high-rate cards onto one card with introductory rates as low as 0% APR for six months. Why is this helpful? Well, the benefits of consolidating debt include:

• Multiple payments become one convenient payment;
• Eliminates higher interest rate debt;
• Reduces the risk of late payments;
• Encourages confidence; and,
• May improve your credit score

By reducing your interest rate through consolidation, you can pay more toward the principal balance each month and might even be able to reduce minimum payment amounts. Debt consolidation can be an excellent and multipurpose financial strategy but only if you discipline yourself not to accumulate more debt.

You can use our “Should I Do a Credit Card Balance Transfer” financial calculator to see how much you could save by moving debt from a high-interest card to a new card with a zero intro rate.

2. Pause your spending

It might seem like a no-brainer, but one of the easiest ways to help reduce your credit card debt and pay them off faster is to stop using them for purchases. This could mean not charging large expenses like vacations or holiday gifts, to even finding enough cash to pay for gas, dinners, or any other day-to-day purchases that might rack up your credit card balance.

3. Tackle high-interest debt first

High balances on credit cards can be a significant source of financial stress. It can be even harder to pay off debt with high interest rates. A smart approach is to pay the minimum on all your cards while directing any extra funds toward the card with the highest rate. This method helps reduce the principal balance more effectively, allowing you to eliminate high-interest debt faster.

4. Make a financial plan

You might be asking “what is a financial plan?” While it sounds like you need a finance degree to figure this out, that’s not the case. Creating your own financial plan can be easy. Start by writing out a budget. This will help you stay on task by visually showing where you are spending your money. Check in on your budget each month and adjust when needed.

Next, create a plan for consolidating your debt (as mentioned in step 1). Identify which credit card has the highest interest rate, which one has the highest balance, and which one you might be able to take care of easily using the Snowball Method. By writing out your budget and your plan for paying off credit card debt, you will improve your chances of success.

You can also use our financial calculators to see how much you should pay each month to eliminate credit card debt.

Bottom Line

Once you’ve tackled your credit card debt, focus on staying that way. Make a plan to live within your means and try to use credit cards less often by using cash or debit card more frequently. Even when your credit card is paid off, keep the account open but don’t use the card as much. Having a paid off credit card will help your credit utilization ratio which plays a big role in how your credit score is calculated.