How to Pay Off $20k of Credit Card Debt in a Year

If you’re struggling with credit card debt, just know that you are far from alone.

I know that when I was in the midst of dealing with all of my maxed out credit cards and personal loans, it felt embarrassing to talk about because it seemed like that I was the only one going through it.

People don’t like to talk about money, and they definitely don’t like to talk about debt.

But did you know that the average household with credit cards has over $16,000 in credit card debt (according to NerdWallet statistics)?

So trust me, you are most definitely not alone. It’s a common occurrence in the United States.

In fact, I refused to settle for “average” and racked up over $21,000 in credit card debt in just a couple of years. I know, I’m such an overachiever. 

Related: The Worst Purchases I Made in My 20s

But guess what? I also managed to get out of all of that debt in less than a year. 

And it definitely wasn’t by chance or accident that I crawled my way out. I learned tons of lessons along the way that I want to share with you, if you are looking to dig yourself out of your credit card debt. 

But first, some back story.

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My Experience With Credit Cards and Debt

My First Credit Card

So I got my first credit card when I was 20. I was getting ready to study abroad, and I wanted a card I could use internationally without fees. My mom sat on the phone and helped me pick out a credit card that had a $500 limit and 1% cash back. 

(quick shout out to my mom, who had already set my credit score up for success by putting me as an authorized user on her credit card).

To be honest, I had no idea how credit cards even worked. What was that $500 limit? Was it monthly? Annually? What is interest and APR? How does someone “max out their credit card”? These were all questions with answers that literally made no sense to me. 

Yet somehow, I managed to pay off my balance in full on my credit card for almost 2 years. Which looking back, I have no idea how I managed that, but I digress.  

It wasn’t until my senior year in college when I started to realize that my living expenses were WAY more than my income. 

For some reference: I was vegan, ate a lot of expensive food (including chipotle every day). I lived alone in an apartment and had no idea what budgeting even was. To top it off, I worked part time at Starbucks making less than $10/hour. 

Looking back at it now, there was no way I could have kept my head above water with that. I wasn’t even making enough to cover rent. 

For the first few months I was able to manage with my student loan refund and help from my parents (which I recognize is a HUGE privilege that not everyone has).

Something that I think is important to mention is that I know at any time I could have gone to my mom. If I had explained that I was falling behind, and she would have helped in a heartbeat. My mom has always been there to help, even when I didn’t ask. But I didn’t want her to feel obligated and I didn’t want MY money issues to become HER money issues. So needless to say, I pretty much just didn’t talk about it. 

When I Started Going into Debt

After that I started carrying a balance with no real understanding of what that meant or how interest worked.

In fact, I remember the exact moment I realized that I wouldn’t be able to pay off my credit card in full. I was sitting in the parking lot of Home Depot trying to google what interest meant. I remember thinking that since my APR was 23%, I would have to pay $230/month on my $1,000 balance. And I was relieved when the monthly interest charge wasn’t nearly as much as that. 

Although, as my available credit increased, I very quickly started to max out that amount. By the end of that year, I had maxed out the $5,000 limit I had. 

So then, I discovered Upstart after listening to my favorite podcast. From there, found out that I could refinance my loan for a whole hell of a lot less interest. And I swore that I would never carry a balance again. Spoiler alert: I definitely carried a balance within a month after getting this loan.

That loan was $6,000 because I wanted it to cover the fees they took out and still have enough to pay off the credit card in full.

Well then we moved to another apartment, and shockingly I maxed out my credit card AGAIN. There went another $4,000 personal loan. 

You would think I learned my lesson, right? Nope. I like to make the same mistakes over and over to really make sure that they are actually mistakes. 

When I Finally Hit Rock Bottom

So finally in January of 2020, I was sitting at work with a stalled out vehicle, no money in my bank account and a maxed out credit card. I had literally no idea how I was going to pay the bills, along with the car battery. 

So in a last ditch effort to free up some money, I took out another loan for $9,000 (at this point my credit card company had increased my limit to $8,500. Sneaky bastards.). 

Here’s a look at all of my loans:

I wish I could say I never carried a balance again, but for a short period of time I carried a $1,000 balance on my credit card. Apparently I just wanted to round it out to an even $20,000.

Luckily, not long after that, I finally made the decision that I needed to change how I managed my credit cards. Although, honestly it was a janky way of trying to go about it. But it kinda worked. 

Any time that I spent money on my credit card, I would transfer that amount into my savings account (since I literally had no savings at this point in time I knew that my savings account should match the balance on my credit card). 

But even then, I wasn’t actually budgeting. While I never carried a balance again, I wasn’t really managing my money. 

So needless to say, I don’t really recommend that method. It was confusing and time consuming and didn’t help me to learn anything about managing my money.

Finally in April of 2020, I sat down and learned about personal finance and how to budget. At this point I had used tax refunds and side hustle money from Poshmark to throw anything I could at my debt. So by then, I had the first loan paid off and most of the second loan.

I had also been making payments on all of the loans, so the balances had gone down over time. 

It wasn’t until June of 2020 that I was able to finally declare myself personal loan debt free! I paid off $20,000 in credit card debt in under a year. 

And trust me, if I can escape the hole of credit card debt, you can too. 

Disclaimer: I am not a financial expert. All of the information here is my opinion, based off my own experiences. This should not be interpreted as financial advice. 

How I Paid It All Off and You Can Too

Consolidate and Refinance Your Debt

For me, this is one of the biggest steps towards paying of credit card debt that I took. It was confusing to try to keep track of spending on the card and paying it down at the same time.

Not only did refinancing help me manage the debt, it also offered me WAY lower interest rates.

Luckily, as I mentioned above, my mom set me up for success when it came to my credit score, so I was able to cut my interest rate by more than half by refinancing each of my loans.

But don’t worry, even if you have a shitty credit score, you can still refinance. Upstart is definitely a place to look if you don’t have ideal credit.

They take more into account than just your credit score, including education and job experience. I used Upstart for my first loan and third loan, and never had any issues. 

My second loan I used Lending Club. This was great to be able to compare prices, loan amounts and APR from different companies. Again, I had no issues with this company either.

Now it should be said, I do NOT recommend you take out a personal loan unless it is saving you money on debt you already have. 

I would only do this if it is truly financially beneficial for you. Take into account the fees you will have to pay to refinance, and what you will be paying overtime.

It’s not right for everyone. And I don’t recommend taking out more than you need, just to have some extra cash on hand. 

Now obviously, I had to refinance a few times because I kept falling back into the same habits. Therefore, I definitely think that this next point is equally as important.

STOP Using Your Credit Card While You Pay Off Debt

I know that this may be shocking considering my history with credit cards, but I actually love credit cards now. (I know that sounds stupid, but when you know how to use them correctly, there are tons of benefits).

However, chances are that if you are just coming out of credit card debt, you don’t know how to use credit cards efficiently. If you did, you wouldn’t be in this mess. And obviously I had no idea what I was doing with credit cards, so I get it. 

I really believe that during your debt pay off journey, you need to stop using credit cards. I wouldn’t have gotten into half the debt I did if I had listened to that advice. 

Take it from me who did it TWICE, it is so easy to tell yourself that you have changed. You think you can use them responsibly. Then you end up just slipping back into the same old habits. 

I highly recommend that you stop using credit cards while you pay off your debt. That’s what I did in April, and it’s the reason I had so much success.

I don’t think that you need to cut them up or close them completely. (I actually really DON’T want you to do that for the sake of your credit score). Just take them out of your wallet for the time being.

You totally can (and in my opinion, should) reevaluate your relationship with credit cards AFTER you have come out the other side. 

Just remember, credit card rewards are only rewards if you aren’t giving the credit card companies your money through interest. 

Your Available Balance is NOT Extra Income/Spending Money

This was something that took me a while to grasp. I kept treating my credit card limit as extra spending money instead of what it really is, debt.

If you don’t have the money in your account to pay for what is going on your credit card, then you are going into debt for that purchase.

It may sound obvious, but it most definitely was NOT obvious to me. I saw that as extra money I had to spend now and worry about later.

And it seems like that is a really common way to view credit cards! Sadly, that is the thinking that gets so many people into a mess that is so hard to get out of. You can’t get out of credit card debt if you continue to see that large available balance as possible spending money. 

For me, I had to pretend that it didn’t exist. Even still I pretend it doesn’t exist. My budget tells me what to spend, not my credit card limit. 

Related: The Worst Purchases I Made in My 20s

Start Budgeting

Now looking back, it’s really no surprise that I kept going back into debt. Yes, technically I would clear my credit card balance, but I had no real plan on how to change my spending to reflect my income. 

At the time, my income was extremely variable, yet my spending never changed. It just constantly remained high.

That’s why I truly believe that in order to get out of debt you need to budget. Notice the use of the word budget as a verb, not a noun. A budget means that you could make a plan for spending and then immediately forget about it and never follow through.

Budgeting, however, is an action, something that you are constantly doing. When I decided to make budgeting an ongoing action, I was able to save and pay off debt rapidly. A budget shouldn’t be a-set-it-and-forget-it thing,

If you are wondering what your options are for budgeting, and which budgeting method is the best for you, check out my blog post on here. I outline tons of different methods, and give you the pros and cons, so that you can decide which one works best for you.

Personally, I use YNAB. YNAB was a huge game changer for me. It’s based off of a zero-based budgeting method where you track all of your money. This might sound excessive, but trust me, it works. And I never felt deprived.

If you use this link you’ll get it for free for 34 days along with access to their amazing workshops (also always free). They also have an amazing  YouTube that has videos on everything that you need in order to learn the YNAB method and get started budgeting.

I rave about them in pretty much every post, and there is a reason why. In just the few months that I have used YNAB, I have saved over $6,000 and paid off all of my personal loan debt. What a dream. 

No matter what budgeting method you go with, I really recommend that you just be realistic with it.

Figure out how much you actually spend in each category. Then decide what is realistic to cut out and what you need to keep in to feel sane. 

Budgeting sucks whenever you keep overspending in categories because your goals were never realistic in the first place. Trust me on this, you will pay off more debt if you are realistic in your budgeting journey.

Related: Budgeting Basics: What is Budgeting?

Decide Your “Why”

Okay. So you’ve consolidated your debt if necessary, put a hold on using those credit cards for now, and started a budget. Look at you. You’re a rockstar. But now what? 

Come up with your “why”. Your “why” is the entire reason that you are doing this. It’s not something like “to be rich” or “to be debt free”. WHY do you want to be rich? WHY do you want to be debt free?

In case you are curious, this is my why:

I budget for me, my partner and our future. When I look at where I was us to be 10, 20, 50 years from now, debt gets in the way of my dreams for us. I want to be able to see the world with her, and go on adventures. I want to live life without the stress of debt and constant money concerns. If we live far away from family, I want us to be able to fly to go visit often. And ultimately,I want us to live a life where we can retire early, so we have more time to put toward the things that actually matter.

Just typing that out gets my mind racing with dreams and thoughts of the future and gets my heart pumping. That’s what your why should do. There should be emotion behind it. Because trust me, when times are tough and you feel like getting out of debt is going to be impossible. “Being rich” is not going to be enough to motivate you to keep going. 

So stop here and figure out your why. I’ll wait. Don’t worry. 

Okay you got it? Great. Now write it down somewhere that you can see it. Somewhere that you’ll get to look at it daily to be reminded of why you are doing this in the first place. 

This is such an important step in your journey. Without your why, I can pretty much guarantee you that you will fall back into the same habits you had before. 

There is no way I would have paid off $20k worth of credit card debt in a year without a solid “why”.

Decide on a Debt Repayment Plan

There are two main ways to tackle debt, the Debt Snowball and the Debt Avalanche. 

It’s totally up to you on which one you decide to use (you can also mix both of them together throughout your journey. But here is an overview of both in case you haven’t heard of them! 

Debt Snowball

The Debt Snowball was first introduced by Dave Ramsey. The idea is based more on psychology and human behavior and less on the mathematics of budgeting. 

With the debt snowball, you list your debts from least to greatest, pay the minimum balance on each of them, and throw all you have at your smallest debt. 

This method doesn’t take interest into account. The idea is that once you start attacking your debt and have the satisfaction of watching your debts drop off one by one, you will be more motivated to stick to paying off your debts faster. 

Once you fully pay off that first debt, you take the minimum payment amount from that first one and put that toward your second smallest debt. PLUS you are now throwing any extra income at that debt.. 

With this method,  if you have some bigger, higher interest debts, you’ll end up paying more in interest than the next option. So this is definitely better suited for those who needs those constant “wins” and aren’t too stressed about the exact amount that they will end up paying. 

If you are someone who needs that extra psychological motivation to keep budgeting, then go with the Debt Snowball.

Debt Avalanche

However, if you want to tackle your debt as fast as possible and pay less in interest over time, then you may want to go with the Debt Avalanche instead.

With the Debt Avalanche method you will list your debts in order of the highest to lowest interest rate, rather than total balance. So you will start by tackling your highest interest rate debt first.

The same idea applies here that you will throw everything you have at that highest interest debt balance while paying the minimum payments on all of the others. 

This is great for those of you who are extremely focused on the numbers. With the debt avalanche, if you stick to it, you will pay less over time and pay off your debt faster than you would with the debt snowball. 

So it’s all about personal preference.

Personally, I went with the snowball method (without really knowing that’s what I was doing). 

I need that motivation of seeing my debts drop off one by one, even if it doesn’t make the most sense mathematically speaking. 

Find Ways to Throw More Money at Your Debt

Now let me preface this part with a few things. Firstly, I completely understand that not everyone is in the position to pick up a side hustle, sell things online, or take in extra income. There is a lot that goes into all of those things, and it’s just not realistic for some people. So this part isn’t necessary. 

I also don’t think that you should completely overwhelm yourself with work and selling things in order to pay off debt. I believe that you should still live a life you love while becoming debt free. That means taking time to just be a human, not a money making machine. 

With that being said, if you are someone who is in a position that you could pick up a side hustle or sell some things around the house, that is super helpful during your debt payoff journey. 

For me, my first step toward making extra income to throw at debt was selling on Poshmark, eBay and Mercari. 

When I first set out to pay off $20k in credit card debt, I realized I needed to be making more money. I loved selling on Poshmark, and in about 6 months I made close to $2,000 selling things around the apartment with my partner. 

We still sell some things here and there, but I’m not as dedicated to it as I once was. The big drawback for me is that you constantly have to be sharing your items that you are selling. And I have a LOT of items on there. So for me, it just wasn’t worth my time anymore.

But they make the shipping and selling process relatively simple, and I love that the buyer pays a set shipping fee and you can use any size box (up with 5lbs).

I also used Mercari and sold about $500 worth of things on there. I highly recommend that if you are going to sell your stuff on one, go ahead and post the sames things on the other. Some things did really well on Mercari that had no interest on Poshmark, and vice versa. 

It’s a great way to clear some things out of the house, and you can put all of that money toward debt. 

I also had a brief stint of driving with DoorDash with my partner. We actually LOVED this. And we averaged about $30-40/hour. 

Just don’t forget that you will need to keep track of mileage and expenses come tax time. 

If you want a side hustle you can do on nights and weekends whenever you feel like making some extra money, that is perfect.

If you are someone who gets bonuses at work, or works for tips, you can also put those toward your debt! 

Putting extra money toward debt is a great way to speed up the debt payoff process, without having to give up all of the extra spending and live like a recluse.

I think the biggest part of my debt payoff journey was making sure that I didn’t feel deprived, and that I still allowed myself to have fun money. 

Just remember that you’re in this for the long haul, so whatever you are doing should be relatively sustainable. 

Some Context for My Journey

So that’s it on my end. Those were the main things that I did to pay off $20,000 worth of credit card debt in a year, and still feel like I was living a life that I loved. 

But I also think that context is important when looking toward other’s experiences with debt payoff.

So here’s my story.

I’m 24, live with my partner and our two cats in a medium cost of living area. We don’t have any kids. I have a relatively higher paying job and a master’s degree. 

Due to that, I also have $70,000 worth of student loan debt that I am now working on paying off. My daily expenses are pretty low and my car is paid in full, so I don’t have to make car payments. I also got help from my mom during the last portion of my debt payment journey so that I could pay off the last part of my loan while putting the money I had saved up to pay it off toward savings instead. 

I definitely didn’t do this journey on my own. And I am so lucky to have had tons of support from my mom and my partner, which definitely gave me a leg up. But without these steps that I outlined above, there is no way I would have gotten out of my debt hole that quickly. 

If you want more ideas on how to save more money and pay off debt (without feeling deprived), check out my blog post here. If you are new to budgeting, you can also check out my Budgeting 101 series! 

Leave a comment down below and let me know how your debt free journey is coming along! 

I can’t wait to hear all about it. 

XO – Lexa