Avoid These 5 Credit Card Debt Repayment Traps

Credit cards are useful little gremlins. 

They can help you build credit, be a lifeline in stressful situations, and buy things or experiences that genuinely improve your life. But if you’re not careful, they can also become one of the easiest ways to feel financially stuck.

One emergency becomes a balance. > That balance turns into interest. > And even though you’re making every payment, your balance barely moves.

If you’re working to pay off credit card debt, watch out for these five common traps.

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‍The 5 Biggest Debt Repayment Traps:

1. Making only the minimum payment

2. Continuing to use the card

3. Paying more than your budget can handle

4. Ignoring lower-interest options

5. Repaying without a clear plan

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1. MAKING ONLY THE MINIMUM PAYMENT

Minimum payments keep your account in good standing, but they’re designed to keep you paying for…ever. 

Years ago, a minimum payment was typically 5% of a balance. Today, many are closer to 2%. Wearing rose-colored glasses, that looks pretty good for consumers. Who couldn’t use flexibility in their monthly budget? That’s your mortgage payment to keep the roof over your head or your car loan to get you to the job where you can keep earning the cash you need to pay all these bills

The problem is credit card companies make more profit on revolvers–people that carry a balance, and that low monthly bill stretches repayment over years while interest continues to build and build.

DO THIS: If you have extra money available, put it toward your balance whenever possible. Even small additional payments can shave months, or years, off your payoff timeline.

See how long it'll take to pay off your balance with our Credit Card Payoff Calculator.

Now, all of that calculation is based on the assumption that you never use your card again after the initial $2,000. That leads us to number 2.

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2. Continuing to use the card

Trying to pay off a balance while continuing to swipe the same card is like trying to drain a bathtub with the faucet still running. 

Yes, yes, I know. The rewards points! But rewards points are only worth it if you’re paying your balance in full every month. Otherwise, you’re basically paying more in interest than you’re earning in rewards–making earning points pointless.

DO THIS: Make it harder to use the card while you’re paying it down.

• Leave it out of your wallet.
• Store it somewhere inconvenient. 
• Freeze it in a block of ice if you need to.

Don’t close the account unless there’s a good reason. Keeping the account open can help your credit history. Just make it difficult enough that using it becomes a deliberate decision instead of a habit.

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3. Paying more than your budget can handle

Paying off debt aggressively sounds great. Until it blows up in your budget. 

If you’re putting every extra dollar toward debt but constantly relying on your credit card for groceries, gas, or unexpected expenses, you’re simply replacing old debt with the new debt.

DO THIS: Choose a payment amount you can realistically stick with every month. Consistency beats short bursts of motivation.

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4. Ignoring lower-interest options

Game the system! Corporations aren’t the only ones that can use the system to their benefit. Credit companies, banks, and credit unions (yes, us too!) all want your business, and they’ll make some great deals to earn it. 

Balance transfer offers, large purchase plans, and low-rate personal loans may all help reduce the total amount you pay over time. Don’t let the fear of submitting an application or working with a new lender keep you from taking advantage of something like a low balance transfer offering 0% with a fee lower than your monthly interest.

DO THIS: Stop walking promotional mail straight from the mailbox to the dumpster, and compare the numbers. A lower rate could save you hundreds, even thousands, over the life of your repayment plan.

Check the numbers and see how consolidating credit cards and other high-interest loans can save you hundreds with a low-interest personal loan.

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5. Repaying without a plan

It all really boils down to this one. Without a plan, nothing’s gonna go quite right, and that’s a lesson you can apply to pretty much anything in life. 

DO THIS: Follow these steps before making extra payments: 

• Decide on your budget. How much can you afford to pay each month?
• Decide on a timeline. When do you want this paid off?
• Decide on your payoff method. Are you going to use a balance transfer to another credit card? A personal loan?
• Decide on how to make payments. Are you going to set autopayments?

Credit card debt doesn’t appear overnight, and it usually isn’t paid off overnight either. 

Focus on making consistent progress, avoiding new debt, and finding ways to reduce the amount of interest you’re paying. Small improvements add up faster than you think. 

If you’re feeling stuck, you don’t have to figure it out alone. A trusted financial advisor can help you explore your options and build a plan that fits your budget.

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