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What’s the best way to pay off credit cards fast? Let us count the ways.

The Great Recession may have slowed them down, but Americans are once again piling up credit card debt as the economy improves.

According to the latest figures from the Federal Reserve, consumer credit card debt grew by 3.7 percent in 2014, to $890 billion, and is on track to break the $900 billion mark for the first time since 2009.

When credit card debt gets to the point where it’s unmanageable, it can overwhelm your finances and wreck your credit score. Here are seven keys to repaying credit card debt before you find yourself in a jam.

Create a budget. While it seems a simple step, many households are operating without a working budget. To formulate a budget, identify your monthly expenses. This includes not only fixed items, such as rent, car payments and insurance, but discretionary items like dining out and entertainment. Create a spending diary to track all monthly income and spending. Earmark a portion of your income that’s reserved for repaying debt. Set limits on how much discretionary spending is reasonable without straining to the budget to pay it back.

Pay more than the minimum. When it comes to credit cards, the lender sets the interest rate, but the consumer can minimize interest payments by managing their monthly balance. If possible, pay the full monthly balance each month, and you’ll eliminate any interest payments. If you can’t pay off your full balance, make sure to make more than the minimum payment to reduce the total amount of interest paid over the life of the obligation.

Transfer balances. If you have a credit card with a lower or zero interest rate, consider transferring high interest balances to this card. By doing so, you can pay the principal down faster and keep your interest payments low.

Snowball method. This method involves paying the minimum on all cards except the one with the highest interest rate. The account with the highest rate should receive the biggest payment you can afford each month. Once that account is paid off, employ the same strategy to the account with the next highest interest rate. The snowball method minimizes interest payments by paying down high interest loans first.

Consolidate debt. Check with lenders who can help you consolidate your debt. This might be in the form of a personal loan. Just be sure to compare the interest rates. The new loan’s interest rate should be low enough that you can pay down the principal quickly. Also, if possible, find a loan without a prepayment penalty. Then you will not be financially penalized if you are able to pay off the loan sooner than expected.

Build an emergency fund. While it’s important to repay debt quickly, it shouldn’t be done at the expense of your savings account. Your budget should allocate a portion of your monthly income to savings. After you have enough savings to cover a minimum of six months of expenses, you can start using the money you’d allocated for your emergency fund to pay down high-interest debt.

Evaluate potential income streams. Even the best budget cannot produce income. Explore ways to generate additional income streams, such as higher paying job options or adding to your skill set to become more marketable.

The Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2014 reveals that about one in three Americans carry a monthly balance on their credit card. Among that group, 81 percent paid interest on their credit card debt during the previous 12 months.


Source: Federal Reserve, Report on the Economic Well-Being of Households 2014.

But 23 percent of Americans don’t even have a credit card and, among those that do, 56 percent always pay their balance in full each month. By following these steps, you can join the majority of Americans who don’t make interest payments to credit card companies.

Credible is a marketplace where lenders including Avant, LendingClub, PAVE, Prosper and Upstart compete for your business. You can compare personalized loan offers from multiple lenders on without sharing your personal information with lenders or affecting your credit score. Tracy Sherwood-Knepple is a business and finance writer. She holds a degree in mass communications from Indiana University.