I’m retired and struggling to pay off $25,000 in credit card debt. What can I do?

Dear Credible Money Coach,

I am married and my credit card debt is approximately $25,000. Naturally, they all are high interest and paying the minimum is taking forever. These cards are in my name, not my husband’s. I probably would not be a candidate for a consolidation loan since I’m retired and only have Social Security as income. Obviously, I draw money from our joint account, but it’s killing us. We’ve been plugging away at these for years. What is your suggestion?

Thank you — Beth

Hello, Beth. I’m so sorry you’ve been dealing with this financial burden. You’re not alone in this struggle. At the end of 2020, Americans had about $825 billion in credit card debt, according to the Consumer Financial Protection Bureau.

And you’re correct that making only the minimum required payment every month means it will take a long, long time to pay off your credit card debt. Credit card issuers are required by law to include a warning on your monthly statement explaining how long it will take to pay off your balance if you only pay the minimum. The statement must also show you how much you’d need to pay each month in order to completely repay the debt in just three years.

That information can be a good starting point for formulating a plan to pay off your credit card debt. Your plan might include multiple tactics, such as following the debt avalanche method, taking out a personal loan to consolidate your credit card debt, and re-budgeting to give yourself more cash to put toward your credit card payments.

Let’s look at some strategies that might be helpful.

Before you do anything else

Gather together all your credit card statements and call each card issuer. Let them know you’re struggling and looking for other ways to pay off your balances sooner. Ask for an interest rate reduction, or a temporary payment reduction (although this last one is kicking the can down the road).

While the law doesn’t require a credit card issuer to make concessions, it’s always worth asking if the card company can help in any way. At the very least, they may suggest other options they can offer. And at best, you may be able to reduce your interest rate if there’s a promotion you qualify for.

Consider a debt avalanche or debt snowball repayment plan

Beth, you didn’t say what other types of debt you may have, but with $25,000 in credit card debt and a fixed income, any other type of debt probably also feels burdensome. You might consider employing an overarching strategy to pay off all your debts, including the credit cards.

Two options are the debt avalanche and debt snowball methods.

With the debt avalanche method, you prioritize paying off the debt with the highest interest rate. Continue making minimum payments on all other debts and put as much extra as you can toward that most-expensive debt. This will help you pay off that debt faster. Once it’s fully repaid, focus on the card with the next-highest interest rate, and so on.

The debt snowball method focuses on paying off the debt with the smallest balance first, regardless of the interest rate. Pay the minimum on all your other debts and put extra toward paying off that card. It may be faster and easier to pay that smaller balance first, and once that debt is gone you can put the amount you were paying on it toward the next largest debt, and so on.

In addition to helping you pay off the debt faster, both these methods can give you a psychological boost as you’ll have the satisfaction of seeing your debts get smaller.

Replace high-cost credit cards with a lower-cost debt

The challenge with both the debt avalanche and snowball methods is that they rely on you having some extra money to put toward your credit card debt. This can be difficult if your budget is already tight.

Turning high-cost credit card debt into a lower-interest type of debt may be a way to give yourself some breathing room to make faster progress toward paying off your total debt.

Here are two possible ways to do this:

Apply for a 0% APR credit card and transfer your balance

Some credit card issuers offer cards that come with 0% APR for a limited time when you open the card and transfer a balance from another credit card. At the end of the promotional period, a regular interest rate will be applied to any remaining balance. If you can pay off the entire transferred amount before the promotional period ends, this can be a good way to avoid paying interest charges for those months and pay down the debt faster.

Some caveats to be aware of, however:

• The 0% APR is for a limited time, often about 18 months.
• The promotional rate generally only applies to the transferred amount, not to any new purchases you may make with the card.
• You’ll typically need good to excellent credit to qualify for a balance transfer card.
• Credit card issuers generally charge a fee to transfer your balance.
• You may not qualify for a large enough balance to transfer your entire debt.

Apply for a lower-interest personal loan

Credit cards are among the most expensive types of mainstream credit. I say "mainstream" because some types of questionable loans, like payday loans, can have fees that equate to triple-digit APRs. Since you’ve said your credit card interest rates are high, you might be able to get a lower interest rate with a personal loan.

A personal loan can have several advantages over continuing to pay the minimum on your credit cards, including:

• Potentially lower interest rate — As of August 2021, the average credit card interest rate was 17.13%, while the average rate for a 24-month personal loan was 9.39%, according to Federal Reserve data.
• Definitive payoff date — It can be difficult to know when you’ll be able to finish paying off credit cards, especially when you only pay the minimum amount. Personal loans come with definitive loan terms, so you’ll know exactly when you’ll be done repaying the debt.

Although your credit card debt is in your name, there’s no rule that says you alone must be responsible for any personal loan used to repay that debt. Combining your Social Security income with your husband’s may help you meet any income requirements a personal lender may have.

As with any type of credit, though, personal loans come with possible drawbacks:

• You’ll generally need good to excellent credit to qualify for the best rates, although adding a cosigner with a higher credit score can help.
• Some personal loan lenders charge an origination fee and other fees.
• If you use the personal loan to pay off your credit cards, but continue to add new debt to the cards, you could find yourself even more deeply in debt.

Final words

You may also consider bankruptcy if you find that none of these suggested strategies are right for you. But bankruptcy should always be an absolute last resort — its financial and credit effects are significant and long term.

If you decide to go the route of transferring your high-interest credit card debt into a lower-interest form of debt, it’s critical that you comparison-shop to find the best deal. Rates and terms can vary widely from credit card company to credit card company, and between personal loan lenders.

Ready to learn more? Check out these articles …

• How to pay off $30,000 in credit card debt
• 9 of the best debt consolidation companies
• Why is it important to have good credit?
• 15 best debt consolidation loans for fair credit
• 3 expert-recommended tips to boost your credit

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About the author: Dan Roccato is a clinical professor of finance at the University of San Diego School of Business, Credible Money Coach personal finance expert, a published author, and entrepreneur. He held leadership roles with Merrill Lynch and Morgan Stanley. He’s a noted expert in personal finance, global securities services and corporate stock options. You can find him on LinkedIn.