Life is expensive. Living the life you truly desire is even more expensive. Consumerism is at its highest, and it’s normalized to use credit cards or payment plans to pay for purchases. Instead of saving or earning a higher income, Americans are taught to rack up more and more debt. It doesn’t have to be this way. Learn how to pay off credit card debt in your 20’s in 5 simple steps.
Some debt is good; taking out student loans for education, taking a mortgage out on a house, or using a credit line to fund a business. These are all investments. I’m going to show you how to pay off the high interest credit cards that are affecting your life. I personally have been able to get out of $10k+ credit card debt at 21 years old using the following tips.
1: STOP USING CREDIT CARDS
Seems obvious, but the first step to paying off credit card debt in your 20’s is to stop using credit cards. Unless it is an absolute emergency, only use your debit cards from now on. If you can, turn off your credit cards and transfer any and all automatic payments to your debit card. Even if you don’t have the money for all of your bills, don’t use your credit cards. It will keep you stuck in this endless cycle of using credit cards, paying interest, and never being financially free. You can negotiate other expenses or request government assistance to get your current bills paid with the money you earn each month.
2: Calculate Your Credit Card Debt
The second step is to add up how much debt you actually have. It might be excruciatingly painful to look at your credit accounts at this time, but it is essential. Write down each credit card name, the minimum payment, the APR (Interest Rate), and the dollar amount you owe on each card. It’s important to get a visual of what your debt really looks like, especially if you’ve been avoiding it. Once you have listed the cards you need to pay off, add the balance of each card to get a grand total.
See Example:
Chase: Minimum $230 – 29.5%APR – $4,396
Capital One Silver: Minimum $125 – 28.9%APR – $3,562
Capital One Platinum: Minimum $49 – 29.9%APR – $1,679
Discover: Minimum $25 – 0%APR(For One Year) – $2,457
Total: $12,094
3: Create a Debt Payoff Plan
I want you to take a close look at your life, and think about how much credit card debt has affected you. Have you been stressed about money? Does it affect any of your relationships? Does having this debt affect your credit score and limit you from possibilities in the future? In order to pay off your debt, you need to have a strong reason. Why are you paying back all this money, when it’s much easier to avoid it and just pay the minimum payments (or nothing at all!). Write your reason on top of a blank page. This will propel us into your debt payoff plan.
Next, write down the total amount of credit card debt, and decide when you want this debt to be fully paid off. You can do this by using a debt payoff calculator like this one. Put in all of the credit card information and figure out how much money you want to pay on top of your minimum payments. This will tell you how long it will take to pay off your debt. Be reasonable and hold yourself to an actionable date.
Once you have a Debt Payoff Date and know how much you want to contribute monthly in addition to your minimum payments, write it down. Then, re-list your credit cards in the order you would like to pay them off. I recommend starting with the one with the highest interest rate, so you can reduce the amount of interest you are paying. You can also order them smallest to largest, using Dave Ramsey’s Snowball Method. Use your extra monthly payments to put towards the top credit card in the list until they are all paid off.
Finish this, and you have your debt pay off plan.
I will have a 750 credit score to get a loan to fund a business
Debt: $12,094 Extra Payment: $500 Pay Off Date: August 2026
Capital One Platinum: Minimum $49 – 29.9%APR – $1,679
Chase: Minimum $230 – 29.5%APR – $4,396
Capital One Silver: Minimum $125 – 28.9%APR – $3,562
Discover: Minimum $25 – 0%APR(For One Year) – $2,457
4: Stick to a Budget
This is where you really get to buckle down and take accountability. I want you to write a new budget with the goal of prioritizing your debt payments to use hand in hand with your debt payoff plan.
First, calculate your income. If this budget is for you and your spouse, add up all of your household income. Next, add all your current monthly expenses. This will include everything that you spend in a month including rent, debt payments, utilities, shopping, outings, gifts, car payments, etc. If you are unsure, you can look at all your purchases and payments from the last few months online. Add your extra monthly debt payment. If you want to save for a vacation, emergency fund, or a new car, add that number as well. Subtract your expenses from your income and see what you are left with.
Does your income cover all your expenses? If it’s not, we need to make some adjustments. Can you cut out some spending habits? Work more hours? Pick up a second or third job? Remember why you want to pay off your debt and use this as motivation. Adjust your income and/or expenses until you can follow through on your Debt Payoff Plan. Then write out your new budget.
Budget Example for a Couple:
Income: $6,500
Expenses: $6429
Rent: $2,200
Utilities: $100
Car Payment: $400
Verizon Wifi + Internet: $200
Groceries/Toiletries: $500
Gas/Transportation: $200
Gym Membership: $75
Car Insurance: $500
Pet Supplies: $250
Clothing/Essentials: $50
Laundry: $75
Entertainment: $500
Minimum Credit Card Payments: $429
Extra Payment: $500
Other Costs Savings (Vet Bills, Co-Pays, Car Maintenance, Parking Tickets, Etc.): $250
Emergency Fund or Retirement Fund: $200
If you find that your income is too low for your expenses, consider asking for government funding. EBT, Section 8 housing, FASFA, and many other forms of government assistance are available to low income individuals/families who need help. It can be painful to ask for help, but it might be the exact thing you need in order to get out of debt.
5: Staying Out of Credit Card Debt
If you make it this far; Congratulations! Reward yourself for your dedication and hard work. Once you pay off all your credit card debt, you need to make a plan for how you’ll use credit cards in the future. It’s all about your mindset and the personal relationship you have with credit cards. You can save them for emergencies, work to pay them off every month, or cut credit cards out all together if you feel the available credit is too tempting. The journey ahead is up to you; you know yourself best. Imagine what you want your life to look like moving forward, and use that as motivation to stay out of debt.
That’s it. 5 daring steps and you are on your way to living your best life. Thank you for reading my guide to paying of credit card debt in your 20’s. I believe in you and all your dreams. Don’t let any credit card companies or anyone else stop you.