Tips for Battling High-Interest Debt and Other Debt that Won’t Go Away

Debt is a bad baby. Stubborn, high-interest debt is probably one of the worst demons to fight. I’ve spoken about how to overcome credit card addiction but Josh, our guest writer today will be hallmarking the main ways for people to constructively deal with stubborn debt. The nuts and bolts are below and I hope you find it helpful!

Battling High-Interest Debt

By Josh Wilson, a Millennial working to become his generation’s personal finance thought leader. Josh dreams of a day when all Millennials can thrive through financial literacy and patience. His new blog, Family Faith Finance, is the first step towards his goal!


It has happened to the best of us, experiencing shell shock after checking our monthly credit card statement. Even for those of us that stick to a strict budget, sometimes emergencies happen, holidays get out of hand, and a missed bill catches up to us in the worst way. Obviously, the best solution to quickly rectify high-interest debt is to pay it off in its entirety, but sometimes this just isn’t feasible. What then? While it may seem daunting to face a formidable debt month after month, there are solutions out there that are both straightforward and specific.

The following methods are less obvious suggestions to tackling the mounting pressure of debt, and they are ones which many people don’t consider. When undertaken, these recommendations can exponentially reduce the time and money it takes to return your balance down to zero.

Using a Balance Transfer Credit Card

Never heard of a balance transfer credit card? The concept is simple. open a new low-interest credit card (aim for at least 10 percent below your current credit card interest rate) and transfer the balance from your high-interest credit card to your low-interest card. Although it may seem counter-intuitive to suggest opening yet another credit card, even when some of these have an annual charge, it can save you thousands of dollars in interest payments.

Consider a simple example; a $10,000 credit card debt with an unfortunately typical high-interest rate of 19.99 percent. Even if you can make a substantial monthly payment of $500 month after month, this debt is going to take 25 months to pay off and cost you an additional $2,264 in interest payments alone! Transferring this substantial debt to a low-interest credit card, let’s say 5.99 percent, will save you over $1,700 in interest payments and shave off three months! Even if the annual fee for the credit card is $100, this is still saving you hundreds of dollars in interest.

Also, many people don’t realize there are plenty of cards out there that offer 0 percent interest for a given period of time. These cards can save you paying any interest at all if you plan ahead and pay off the balance within the time frame. Before setting up the low-interest credit card, make sure to fully understand all the restrictions, limitations, and fees.

The Debt Consolidation Method

Not all consolidation services were made equal, and they were not made for every situation. However, under the right circumstance, debt consolidation can be extremely beneficial. Typically, debt consolidation under one low-interest rate works best for those who are literally drowning in debt and for those who are willing to change bad spending behaviors. Making one large, straightforward payment every month at a lower rate than your current debts can be incredibly empowering: so long as you stop using the newly cleared credit cards or opening up other lines of credit. If you keep using the same old cards, you will end up right back to where you started.

Debt consolidation is sometimes referred to as refinancing; this alludes to the fact that you are basically restructuring your previous debt. As mentioned earlier, you are signing up for a new interest rate, new payments, and new repayment terms which means you’re signing up for a new financing deal. Such a product is typically offered for credit card debt (as mentioned above), student loans (offered by private lenders on the market), and mortgages (also by private companies). Every year, plenty of people take advantage of refinancing and consolidation. Since the market interest rate is constantly changing, many borrowers can refinance for better interest rates all in the hopes of spending less.

The Debt Avalanche Method

Another suggestion applies to those who are facing a handful of debts with a variety of interest rates. The idea behind the avalanche method is to stack your debts in order of priority, targeting the highest interest debts first, and work your way down to the lower interest debt. The balances with the highest interest rates are the most expensive debts weighing on your conscience and your wallet. By working towards these first, instead of targeting the lowest interest rates or the lowest account balance, you are saving yourself exponentially in interest payments.

The theory contends that as you pay the first and highest debt down, you simply roll that same monthly payment over to the next balance. Considering it is a lower interest rate, this payment will go much farther than it did for the first debt you targeted. The hardest aspect of this method is mentally pushing through the first and most demanding repayment schedule. It can be hard to see the end goal when you get started. If you are interested in calculating exactly what the avalanche method will look like in your specific case, try using an online debt calculator.

Related: How I Killed $20,000 in Student Debt in 8 Months Working Part Time.

The Debt Snowball

Alternately, there is another method that ignores the methodology of the avalanche method for another system. The debt snowball method targets debt with the lowest balances while making minimum payments on higher-interest debt. The procedure works similarly. You pay the lower balances first, move to the next lowest afterwards, and finish up with the high interest debt. It may be easier to knock off the lower interest debt at the start, but on most occasions, the snowball method probably costs more than the avalanche method.

I know this is hot debate in the personal finance community but what is your preferential payback method? I see the bright side of both snowball (less messy) vs avalanche (saves interest) but if you had/have debt, which one would you choose?

Remember to check out Josh @ Family Faith Finance and have a happy weekend everybody! Kisses!

12 thoughts on “Tips for Battling High-Interest Debt and Other Debt that Won’t Go Away”

  • Yeah! Debt stinks!! I think most of us agree that the best thing to do about debt is to get rid of it ASAP! I’m a numbers person, so when I was paying off student loans I tackled them highest interest rate first. I could have kept my low-rate (<3%) ones around a little longer and used them to leverage higher yielding investments, but having lived through '08 I am not that kind of girl. I sleep well at night knowing everything I've got is actually mine.

    When I used my Christmas paycheck (so. much. overtime.) to kill off my last student loan, my credit score actually dropped ten points! Yet I don't give a darn about building credit: I have no need for a credit score because I am not planning on buying anything I can't pay for.
    Meow @ Money with Meow recently posted…How to Protect Grandma from Scams

  • I favor the snowball because I like seeing quick results. It’s so personal, though, and it depends on how much debt you have and which ones are high interest.

    The main thing is to work hard toward eradicating debt — don’t kid yourself with half-hearted measures that allow you to feel as if you’ve done something, when in reality you’re not dealing with the core problem.
    Mrs. Groovy recently posted…Thank You Taxpayers

  • I’ve never had to pay back any debt (fingers crossed!) but I have friends who’ve been in that situation. I think debt consolidation is a great option if you’re at a point where you don’t think the other two will work. It’s overwhelming, but possible!

    I think a lifestyle change and commitment to that lifestyle shift is really important to keep in mind too, when tackling debt. Gotta get to the root of the problem, otherwise you’ll just be right back where you started after you pay off all that debt!

  • I kind of like the debt snowball. It feels so good paying off debt that it really is motivating. I think early wins are important when facing a lot of debt. When me and the wife got hitched 4 years ago we had credit card debt, a car payment and about 30K in student loan. We were using the debt snowball but it just so happened we would have gone in the same order using the avalanche method. My advice on debt is to throw out the spreadsheet and just go nuts attacking that stuff. I thought it would take us 18 months to have everything paid off but we ended up getting it done in 5 months.
    Grant @ LifePrepCouple recently posted…Stop Saying “I Don’t Have Time”

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