The Best Way to Pay Off Multiple Credit Cards

Many Americans have multiple credit cards. And while this increases your total available credit and maximizes your rewards potential, it also puts you at risk of racking up debt and missing monthly payments. 

In this article, you’ll learn how to manage multiple cards responsibly and discover the best way to pay off multiple credit cards. Hint: It’s not the same for everyone.

Stop taking on new credit card debt 

Before you can chip away at your credit card bills, you must decide not to take on any new credit card debt. Even if you can make the minimum monthly payment on every card, credit card companies still apply interest charges to the unpaid balance, thus increasing your overall debt.

People are often enticed by credit cards that offer 0% APR for an introductory period. However, if you don’t make the minimum payment or make a late payment, the intro period ceases, and credit card interest begins to build. In addition, the credit card issuer may charge late fees or penalty APRs, which can quickly add up. 

Consider your current credit card balances as your “peak” and commit to not opening new accounts or charging more on your credit cards until you pay off your existing balances. 

If you’re unsure you can resist opening new credit cards on your own, consider freezing your credit. You can freeze your credit at no charge through all three credit bureaus — Experian, Equifax and Transunion — and unfreeze them anytime.

And if you wish to avoid any new charges on existing credit cards and need help, you can freeze each credit card. Many credit card companies allow you to freeze them yourself online, but some may require you to contact customer service to freeze your card.

Create a budget and stick to it

If you don’t have a budget for your finances, look at your last six months of spending and identify your necessities. These essential expenses include things like your rent or mortgage, utilities, groceries, car payment, health insurance and student loans.

Create a budget to determine the amount of extra money you have left each month after paying necessary expenses. You can use a free monthly budget calculator from companies like Quicken to make this easier. Then, decide how much you want to put toward paying down your debt. For example, you might want to cut out all discretionary spending or buy a cup of coffee once a week instead of every day. 

Whatever you decide, remember that the quicker you pay off your debt, the more you’ll save in the long run since you’ll cut down on your total interest payments. 

Use the debt avalanche method

Many financial experts consider the debt avalanche method the best way to pay off multiple credit cards. With this approach, you first pay off the credit card accounts with the highest interest rates while making the minimum payments on your other accounts. 

Once you pay off the card with the highest interest rate, you move to the card with the next-highest interest rate until you reach the card with the lowest rate. 

Each time you pay off an account, you’ll have more money to put toward your next debt payoff. Note that this method works for all forms of debt. Your credit cards are the riskiest debt, so pay those off first. Once you do so, you can pay off other high-interest loans like student loans. 

For instance, let’s say you’re paying $25 in minimum monthly payments to three cards and $125 each month toward the balance with the highest interest rate, for a total of $200 per month. When you pay off one account, you’ll free up $125 to put toward the account with the next-highest interest rate. Now, you can pay $150 ($125 in leftover funds plus $25 for previously allocated minimum payments) each month toward the next account. 

It may seem as though nothing is happening at first. But once you pay off the first account, you can move on to paying off your remaining debts. 

Use a balance transfer credit card 

Another of the best ways to pay off multiple credit cards is with a balance transfer card. Using a balance transfer card is a debt consolidation technique that moves all your credit card balances to one low-interest (or no-interest) credit card.

Although lenders may make the occasional exception, you usually need a good credit score to qualify for balance transfer cards. The lowest interest rates on balance transfer cards are reserved for those with FICO scores of 670 or higher. 

Balance transfer cards are convenient because you only have one due date and one monthly credit card payment. They also typically have a 0% interest rate for the first year or two. Using a balance transfer card with this low intro APR allows you to pay down debt aggressively without collecting interest. 

There will probably be a balance transfer fee of 3% to 5% of the total transfer amount. But if your current credit cards have an APR higher than this fee, you’ll save more money in the long run compared to your existing cards and collective interest. 

Use the debt snowball method 

Unlike the debt avalanche method, which pays off the credit card with the highest interest rate first, the debt snowball method focuses on paying off the account with the lowest balance first. 

The theory behind the debt snowball method is that you can quickly gain momentum by securing “small wins” by paying the smallest balance first. This can motivate you to keep going and pay down your other balances. 

The snowball option leaves your accounts with the highest interest rates for last, which means you may collect more interest charges while paying off your smaller debts. Still, if your debts are small enough that you can complete repayment quickly, you may want to consider this approach.

This method may improve your credit score by lowering your credit utilization and reducing the number of accounts you have with outstanding balances. 

Use a debt consolidation loan

Another one of the best ways to pay off multiple credit cards is with a debt consolidation loan. This personal loan is designed specifically for paying off high-interest credit card debt. The terms will vary by the lender, but many will wire the money into your bank account, then you can pay off your credit cards with this cash.

Some lenders, however, will require you to let them relay your credit cards for you. Others may give you the option of taking cash or allowing them to repay your debts. If you choose the latter, some also offer a reduced interest rate.

A beneficial side effect of a debt consolidation loan is it converts your revolving debt (the credit card debt) to an installment debt. This can dramatically lower your credit utilization rate — the amount of credit card debt on your credit report relative to your credit limits — and could help your credit score.

The best way to pay off multiple credit cards is up to you 

The best way to pay off multiple credit cards for one person may not be the same for another.

For instance, you might want to consider the debt avalanche approach if you’re worried about long-term interest charges. Or, if you’d rather pick up a few quick victories to get you going, you might try the debt snowball method. And if you have a good credit score, a balance transfer card or line of credit might be the best option. 

Before you get started, make a conscious decision not to open any new credit card accounts and create (and stick to) a budget. Once you do so, you’ll be well on your way to paying down debt and putting extra money into a savings account for retirement or a big purchase.