You have credit card debt, and you wan to pay it off as quickly as you can. We will assume that you are going to stop creating more debt. You have changed your ways. You also understand that paying credit card balances with a consolidation loan or rolling it into a mortgage isn't paying it off. In fact, paying a lower interest rate, but paying on the debt for many more years, usually means paying much more, not less.

Okay, so you really want to be rid of that credit card debt. First, you have to understand that not all debt is the same. Of course you know this. Some of your cards have a higher interest rate than others. How do you use this fact, though, to pay off the total debt in the most efficient way?

Credit Card Debt - The Way Out

Find and budget the money to start paying down those balances. If you order pizza every week, for example, you may be spending $60 or $80 per month right there. If you are serious about getting those debts paid, you may have to eat $4 frozen pizzas for now. Do what you have to do, and determine how much you can apply towards the debt each month.

Suppose you can budget $300 per month to pay the credit card balances. For this example, we'll also assume that you have four credit cards. To keep it simple, we'll say that the minimum payment on each is $45. With four cards, now, you could just divide your budget four ways, and pay $75 on each card every month. This, however, is all wrong.

Instead, what you want to do is pay the minimum payment on all the cards but one, and apply the rest of the budget to that card. Which card? The one with the highest interest rate, of course. $45 towards each of the other three cards leaves $165 to apply towards the one with the highest interest. Continue in this way until this card debt is paid in full. This is how you pay the least in total interest charges.

Now that one card is paid off, do you have an extra $165 to spend every month? Not if your serious about paying off your debts! Maintain the $300 budget, but again pay the minimums on the lower interest cards, and the rest on the one with the highest interest rate. You'll have $210 per month to pay on that one now, so things will start to get done more quickly.

Continue this process. At the end, you'll be paying $300 every month on your last credit card, and the balance will be paid quickly. If during this time, you have the opportunity to transfer balances to lower-interest cards, go ahead and do it - but keep paying that $300 per month, and keep allocating it first to the highest rate cards. This is the most efficient way to pay off that credit card debt.