U.S. Credit Card Debt Just Surpassed the $1 Trillion Mark. Here's How to Whittle Yours Down

Consumers routinely rely on credit cards to pay for ongoing expenses and sudden purchases alike. But during the second quarter of the year, U.S. credit card balances climbed by $45 billion. Because of that, they now top the $1 trillion mark, according to the Federal Reserve Bank of New York.

Part of that may be due to lingering inflation. Although living costs have decreased gradually this year, they're still elevated from pre-pandemic times.

But either way, credit card debt is a problem. Not only can it cost you a lot of money in interest, but it can also cause damage to your credit score if you have too much of it. So if you're grappling with credit card debt, it's best to try to pay it off as quickly as possible.

You may be thinking, "Okay, right, I'll just snap my fingers and make a pile of money appear to do that." And that's fair.

If you're carrying a hefty credit card balance, clearly, a lack of available funds has contributed to that scenario. And so your debt is frankly probably not something you can pay off in a couple of months and be done with it.

But there are steps you can take to be debt-free sooner than you'd be at your current pace of repaying your credit cards. And those are worth taking.

First, consider consolidating

Consolidating your debt could make it a lot easier to pay off. For one thing, you're making a single payment every month instead of juggling multiple due dates. And in many cases, consolidating your debt could lower its interest rate.

Let's say you opt to take out a personal loan for debt consolidation purposes. You'll be locking in a fixed interest rate on your loan, and that rate may be lower than the various interest rates your credit cards are imposing.

If you own a home, consolidating your debt into a home equity loan could work, too. You get the same benefit of a fixed interest rate on your debt and predictable monthly payments.

Now, you may be tempted to consolidate your debt via a balance transfer, especially if you qualify for a 0% introductory rate on a new credit card. But remember, you'll only enjoy 0% interest on your debt for so long, after which your rate could soar. So a personal or home equity loan may be a better bet.

Next, figure out where the money's going to come from

Consolidating your debt might make it easier to manage. But if your goal is to whittle your balance down to $0, you don't just want to manage your debt -- you want to get ahead of it by accelerating your payments.

The money to do that will need to come from somewhere. So think about the steps you can take to free up cash. And warning -- they probably won't be so easy.

One way to free up extra money to pay off debt is to cut back on spending. But in doing so, you're likely committing to buying fewer things and going out less frequently.

You may also be committing to downsizing your home or taking other big steps that give you access to money. Or, you might need to work a second job to come up with that money if cutting back on spending isn't feasible (such as if you're already living very frugally and there are no corners to cut).

These are tough things to do. But the good news is that you don't have to do them forever -- just long enough to make headway on your debt.

To put it another way, you might pay off your debt in five years if you stick to your current path. If you make sacrifices, you might be debt-free in 18 months. That might then allow you to enjoy the next three and a half years of life more comfortably.

Clearly, the timing of your payoff will depend on your specific circumstances. The point, however, is that making some tough choices in the near term might get you out of debt sooner, thereby improving your finances in the long term.