Rachel Cruze: Do These 3 Things To Finally Tackle Credit Card Debt
Written by
Ashley Donohoe
Edited by
Amen Oyiboke
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
The Federal Reserve Bank of New York’s Center for Microeconomic Data’s recent report noted that credit card balances totaled $1.17 trillion in the third quarter of 2024 — an 8.1% year-over-year increase. Additionally, an October 2024 Harris Poll survey found that 28% of Americans in credit card debt from 2023 holiday spending still hadn’t paid it off.
According to financial expert Rachel Cruze, having credit card debt isn’t something to feel ashamed about, and paying it off is entirely possible. However, you must take the right approach to wipe your existing balances and not end up in the situation again.
In a YouTube video, Cruze suggested three steps for finally tackling credit card debt.
Realize the Need To Change Your Habits
“If your pain is greater than the inconvenience of changing your habits, that’s where you’re going to see change,” Cruze said.
If you’re someone who doesn’t closely monitor your finances, credit card debt might seem like an afterthought. For example, you might not feel your monthly payments hurt your finances or well-being. Unfortunately, this mindset is a roadblock to becoming debt-free.
Instead, carefully consider how credit card debt has seriously impacted your life. Perhaps you’re losing hundreds to interest charges, missing out on opportunities, and dealing with constant stress over money. Cruze referred to this as having an “I’ve had it moment” that confirms the need to make sacrifices and finally tackle your debt.
Use the Debt Snowball Method
Since credit card rates are often high and vary by card, it can seem more intuitive to first pay off the highest-rate card (regardless of its balance) using the debt avalanche method. However, Cruze advised taking the debt snowball approach to increase motivation.
“We have found that it is way more effective when you start with the smallest debt first because you will realize that in order to change your behavior like we were talking about, you have to have some quick wins,” said Cruze.
With this simple method, you’ll write down your card balances from the smallest to largest, make the minimum payment for each card and put extra funds toward the one with the lowest balance. After you pay off the first card, the next one gets the extra payments, and so on.
Cruze suggested additional income options, like side hustles, to speed up the payoff process.
Think Ahead To Avoid More Debt
Large planned purchases and emergency expenses often lead to credit card debt. However, you can financially plan for both to stay out of the credit card debt trap for good.
Cruze recommended having a sinking fund in your budget and contributing money for big expected purchases throughout the year. For example, you might start saving for holiday gifts in June to have enough cash by November.
This money would be separate from your emergency fund, which you could access if you have a large unexpected medical or repair bill or lose your job. This fund can also grow over time.
“I want you to start off with a $1,000 emergency fund, and then once all your debt is paid off, you can bump that up to three to six months of expenses,” Cruze advised.
More From GOBankingRates
