How to pay off 20k credit card debt

Courtesy of Annika Hudak

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Annika Hudak knows how easy it is accrue a load of credit card debt, and how hard it is to pay it off. After all, she’s done both twice.

Initially, she fell into credit card debt covering everyday expenses in college to make ends meet. She had four credit cards and $20,000 in credit card debt in the span of a year. After graduation, she aggressively paid off her debt in less than a year. But she landed back in debt when her emergency fund wasn’t enough to cover the expense of a cross-country move.

The first time her credit card debt built up, the 25-year-old YouTube creator and Disney product manager from Oregon says she didn’t track her spending or pay attention to her balances each month. And she avoided making payments. When she did pay, she would sometimes pay less than the card’s minimum monthly payment — a practice which can quickly lead to high-interest debts and fees.

She avoided looking at how much she was spending and relied on her credit cards to cover living expenses to finish college. But when Hudak graduated, she finally took a detailed inventory of her total debt balance that she knew she had to pay back. When she saw how much she owed, she knew it was time to get serious about paying it off.

“When I saw the total, that’s when it really hit me because before, all [I saw was] the smaller balances spread across different cards and different accounts that I wasn’t even checking frequently,” says Hudak. 

Though Hudak was able to pay down the $20,000 she owed from her time in college, the unexpected costs of a cross-country move set her back and left her with another $10,000 in new credit card debt . Now, she’s working toward becoming completely (and permanently) debt-free, and sharing her advice for anyone just starting to pay down debt: 

Figure Out Your Total Debt Balance

Once she forced herself to stop turning a blind eye toward her spending and credit card accounts, Hudak says facing the debt was the hardest part. Based on her own experience, Hudak recommends that you start by looking at all of your balances to see how much you owe in total. 

Identifying what got you into debt in the first place can help you pin down what lifestyle changes to make so you don’t repeat the mistake in the future. Ignoring your balances and continuing the spending habits that led to credit card debt will only exacerbate a cycle of debt and overspending. 

Once Hudak forced herself to start paying down her credit card debt, she made a spreadsheet listing all of her outstanding balances, due dates, and interest rates — including $209,000 in student loans, and another $10,000 loan that she forgot about. That was in addition to the $20,000 in credit card debt spread across four credit cards. At the start of her journey, three of Hudak’s credit cards totaled an estimated $9,000, and another card had an $11,000 balance with a nearly 27% interest rate. 

Set a Budget

One of the first things Hudak did was turn to personal finance experts and online creators talking about their own debt payoff journeys for advice and inspiration. She started by saving $1,000 in an emergency fund, then started paying off her debt by following the snowball method — paying off her balances smallest to largest because it was more motivating and easier to digest, she says. 

When making your debt payoff plan and budget, don’t forget to include the everyday expenses and bills that will impact how much you’re able to contribute to pay off your debt. Also factor in any savings or investments you’ll need to budget for. It’s smart to have at least a few months’ worth of expenses saved in an emergency fund in case you take on unexpected costs or financial hardship, even while you’re paying down debt.

“Everyone needs a budget. Bottom line. You need to know how much money is coming in and you need to know how much money is going out and where it’s going,” says Hudak. If you’re not tracking your spending, it can be easy to overspend and fall behind on your payments.

Get a Side Gig 

To help tackle her $20,000 credit card debt, Hudak also worked to increase the amount of money she had coming in. 

In addition to her full-time remote job, she used skills from her prior internships to start a temporary side gig helping to manage social media accounts for small businesses, and worked as a digital instructor for a summer tech camp for three months. She also created a YouTube channel as another source of income for a few extra bucks, which she would do on weekends. 

“I was basically just doing as much as I could and filling up my time with any possible way I could bring in more income,” says Hudak.

A side gig that suits your personal finance goals, interests, and availability can be a great way to bring in more income, which you can put toward your debt. And you don’t have to keep multiple income streams forever. You may decide to keep the side gig as a steady income for savings, or you may choose to only work the extra job until your debt is paid off, like Hudak did.  

“I’ve definitely been feeling the burnout and that’s the biggest factor,” says Hudak. “I was so focused for a year of my life that I now feel like I need a bit of a breather.” She plans to pick back up on her side gigs after giving herself some time off. 

Use a Debt Payoff Strategy 

There are several ways to pay off credit card debt. Some experts recommend the avalanche method to pay your largest debt first, while others say it’s best to pay the smallest debt off as fast as you can. You may also choose to transfer your balance to a loan or balance transfer card with a lower interest rate to save money.

Pro Tip

When paying off your debt, a balance transfer card with an introductory period can help you save money on interest. If you go this route and supplement your income, you may be able to pay off your debt faster while saving money.

With the additional income and a balance transfer card, Hudak was able to pay off her $20,000 credit card debt in 11 months. She started by paying $9,000 stretched across three cards to pay off the small balances first. Then, she transferred an estimated $6,000 from the credit card with the biggest balance to a balance transfer card to pay less interest. She paid the remaining $5,000 using her additional income. 

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Regardless of your strategy, there are a few tips to keep in mind when paying off your debt:

• Pay more than the minimum monthly payment 
• Make multiple payments toward your balance each month 
• Use any additional income from tax refunds, job bonuses, or gifts to pay off your debt faster 
• Cut any expenses possible and don’t make any unnecessary purchases to avoid accumulating more debt

Pro Tip

Even though Hudak’s credit card debt is paid off, she’s still paying off student loans, but using some of her learnings from her credit card debt payoff journey to pay off her remaining $168,000 in student loans faster.

“I suffer through burnout, and often, it’s just endless,” says Hudak. “And since the balance is so high it feels never ending, so I have to give myself baby rewards.” She sets milestones to reward herself after paying off $10,000 with a pair of pants or shoes to keep her motivated.

If you’re paying off debt, it’s best to avoid new purchases to avoid more interest and debt. If you’re facing burnout on your debt payoff journey, there are a few ways to help stay on track — such as joining a community online or in-person for motivation and accountability.

Prepare for the Unexpected 

At the start of Hudak’s debt payoff journey, she moved from Florida back home to Oregon for a few months to save money and be with her family during the pandemic. After she paid off her credit card debt, she decided to move back to Florida for in-person opportunities for her job. 

But the move came with several unexpected costs, and Hudak landed back in high-interest debt when her expenses exceeded her emergency fund savings. Before moving back to Florida, Hudak budgeted for her moving costs, but it quickly spiraled into more — such as the first month of rent, security deposit, furniture, and food. She also overspent with clothing and other nonessential purchases, she says. 

The expenses quickly added up to an additional $10,000 in credit card debt in just three months. Despite her previous success paying down her credit card debt, these unexpected expenses showed Hudak just how easily she can stumble back into debt.  

“To be honest, it’s a huge emotional journey … it was really rough on me mentally knowing that I made such progress up to that point, then having a setback,” says Hudak. “It took me a couple of months to actually add it up because it’s almost shameful.” 

Eventually, she did work up the courage to figure out her total debt and start to pay it off again. This time around, she used a year-end bonus and her income to pay the balance in two months. 

“The feeling I got when I paid off my last credit card was incredible,” says Hudak. Now, she uses that feeling to help her avoid taking on more debt. “If I need help getting back on track, I go on YouTube and look up videos of people paying off their last bill, their last loan, paying off their car, or whatever it is. And that gets me back on track.” 

How to Avoid Getting Into Debt and Carrying a Balance 

There are plenty of reasons you might go into credit card debt, whether you need to pay an emergency expense and don’t have enough in savings, you experience financial hardship, or simply due to overspending.

The best way to keep yourself out of credit card debt, and avoid the interest charges that come with it, is to charge only what you can afford to pay off, and pay your balance in full and on time each month when your statement is due. Not only can you save money on interest, but you’ll also get the full value of any rewards you earn on your spending.

An emergency fund can also help you be better prepared for unexpected expenses, so you don’t have to turn to credit cards. If you do find yourself in need of financial help, consider less expensive options that may be available, like a personal loan, borrowing money from a friend, or even asking for an advance on your paycheck. If you have to lean on a credit card for expenses or emergencies, remember to make a plan to pay off your balance as quickly as possible. 

“I’m still having to be frugal and I have to watch for lifestyle creep,” says Hudak. “But sharing and being open about it was probably the best decision I could have made.”

Now, Hudak says she pays off her credit cards as soon as she uses them. She still uses her credit cards for airline miles and rewards, and has the same five credit cards, including the one she opened to complete her balance transfer. 

“I try my best to not let them [credit cards] carry a balance ever,” says Hudak. “I won’t say it never happens because it does. But when I see those balances starting to creep up a little bit, then that always brings me back to life.”