"I'll put a little extra on it next month."
If you've said that about a credit card, here's what waiting costs: at 22 percent, a $3,000 balance picks up about $55 in interest in a single month.
That $55 goes to the card company instead of shrinking what you owe. You don't need a big raise to change that, and the four steps below work with whatever extra you have this month, even if that's $25.
If you have even a little money left after rent, food and other essential bills, start with Step 1. If nothing is left, skip to the section called "What if you have no money left over?"
And when you're ready to invest what you used to owe, join our free investor livestream on November 17, where CEO Jaspreet Singh shows how to use ChatGPT and Claude to research stocks like a pro.
Step 1: List Everything You Owe
Start by getting every debt out of your head and onto paper, so you can see exactly what you owe and which debt costs the most. For each one, write down four numbers: the balance, the interest rate, the minimum payment and the due date.
APR, or annual percentage rate, is the yearly interest rate on your balance. Copy this table and fill in a row for each card or loan:
| Debt | Balance | APR | Minimum payment | Due date |
|---|---|---|---|---|
| Card A (example) | $3,000 | 22% | From your statement | From your statement |
| Card B | ||||
| Other loan or buy now, pay later plan |
Step 2: Stop the Debt From Growing
Before you pay anything down, stop the balance from getting bigger. Pause new charges on the cards you're paying off, because a $100 payment doesn't shrink a balance that picks up $100 of new purchases the same month.
A small savings cushion helps here too, since without one the next surprise bill goes right back on the card. The Climb to Wealth class puts the first $2,000 before extra debt payments for that reason, and our guide on how to save your first $2,000 shows how to build it.
On a low income, that $2,000 can take a while. While you build it, you pay the minimums and the card keeps charging interest, which is the trade-off of going in this order.
Step 3: Find Your First Extra Dollars
Next, find some extra money to put toward the debt. Extra money can come from three places: spending less, paying less for the same bills or earning more.
A budget shows where you can spend less and which bills cost the most, and our guide on how to lower your monthly bills has a call script for phone, internet and insurance. Extra income, even from a few hours of work a month, is the third way.
The 75/15/10 split the class teaches is the goal to work toward: at most 75 percent of take-home pay on lifestyle, at least 15 percent invested and at least 10 percent saved. On a low income, essentials can take more than 75 percent at first.
If rent and bills take $2,000 of a $2,400 paycheck, that's about 83 percent. Spending less, lowering bills and earning more are how to bring that number down.
Investing involves risk including loss, and past performance does not indicate future results.
What an extra $50 does
Here's what a bigger payment does in an example with take-home pay of $2,400 a month and $3,000 on one card at an example rate of 22 percent a year:
| Monthly payment | Months to pay off | Total interest |
|---|---|---|
| $100 | About 44 | About $1,395 |
| $150 | About 26 | About $771 |
| $200 | About 18 | About $541 |
Finding $50 more a month cuts the payoff from about 44 months to about 26 and saves about $624 in interest. These figures assume a fixed 22 percent APR divided by 12, equal end-of-month payments and no new charges or fees, so your own card's numbers will differ.
The pay and the rate are examples, not averages.
Step 4: Pay One Debt at a Time
Once you have extra money, put it on one debt at a time. Pay the minimum on every debt, then put every extra dollar on one of them, and when that one's gone, add its payment to the next one.
Some people pick the highest interest rate first, which costs less in interest. Others pay the smallest balance first so one debt is gone sooner, and our guide on how to pay off credit card debt step by step walks through both.
What if You Have No Money Left Over?
If nothing is left after your essential bills, your lenders and a nonprofit credit counselor can still help. Avoid debt-settlement companies that demand fees before settling any of your debts. A legitimate credit counselor may charge disclosed fees for counseling or a debt management plan.
The four sections below cover how to get out of debt with no money to spare, or debt you can't afford on your current pay.
Call your lenders
The FTC says to explain your situation to the companies you owe and ask for a payment plan with smaller payments that fit your budget. A lender may or may not agree.
Talk to a nonprofit credit counselor
A good counselor goes through your income, bills and debts with you and helps build a plan. The FTC says a counselor may suggest a debt management plan, where you make one monthly deposit with the counseling group and it pays your unsecured debts, like credit cards, on a schedule set with your creditors.
The FTC also warns that being a nonprofit doesn't make a group free, affordable or legitimate. Ask about every fee before you sign anything.
Look for local help with the basics
Experian points readers to the 211 network and to programs like SNAP or emergency rent relief. Help with food or rent can free up money for debt payments.
Watch for scams
The FTC says only scammers collect fees before settling any of your debts, and only scammers guarantee to settle all of them. The FTC also warns that debt settlement can be risky and that any savings from debt relief could count as taxable income.
Questions People Ask About Getting Out of Debt
How do I pay off debt if I live paycheck to paycheck?
Start by pausing new charges and finding even $25 or $50 a month to put on one debt, using Steps 2 and 3 above. Our guide on how to stop living paycheck to paycheck covers what to do when the money runs out before payday.
Are there government grants to pay off debt?
No. The FTC says in a consumer alert that government grants aren't given out for personal needs, and offers of grant money to pay off debts are a sign of a scam.
Your Way Out, One Debt at a Time
- List every debt, pause new charges and build a small cushion so surprises stay off the card.
- Find extra dollars, even $50, and put them on one debt while paying minimums on the rest.
- If nothing is left over, call your lenders and a nonprofit credit counselor before paying anyone else.
Fill in the debt table tonight, then look for $50 a month for one card. In the example above, going from $100 to $150 a month on $3,000 at 22 percent pays it off about 18 months sooner with about $624 less interest.
To keep learning how to manage your money and tell good debt from bad debt, join our free investor livestream on November 17, where CEO Jaspreet Singh will research stocks live with ChatGPT and Claude.
