If you’re carrying variable-interest debt on credit cards or other credit products, you’ve likely noticed an uptick in interest over the past few years. The Fed implemented a series of rate hikes throughout 2022 and 2023 to help fight inflation, which caused lenders to increase the rates on their credit products. For example, the average rate on U.S. credit card accounts went from 14.71% in 2020 to 21.47% by late 2023. 

To give you an idea of how that translates, if you have $5,000 in credit card debt and a 14% APR, you’ll owe about $58 in interest charges per month compared to about $87 per month with a 21% APR. And the cost difference compounds over time. If you’re paying off the balance through monthly payments of $150, the 21% APR will cost you an estimated $1,115 more in interest than the 14% APR and will require eight more payments. 

When coupled with elevated inflation rates, today’s higher interest rates are leaving many pinching pennies. “Inflation and elevated interest rates are the ‘double whammy’ making it harder for Americans to make ends meet,” says Dan Nickele, vice president of Discover Personal Loans.

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What are the cheapest ways to get out of debt? Here’s what experts say 

If you want help paying down your debt, particularly high-interest credit card debt, you can consider a variety of options, such as debt consolidation, debt relief plans or even bankruptcy. But which route is the most cost-effective? Here are six strategies experts recommend. 

Start with your budget

“The first step that the indebted consumer needs to take is to complete a frank and honest review of their budget,” says George Vogl, JD/MBA, managing director at Stretto and former bankruptcy and consumer rights attorney. 

To reduce your debt load, Vogl says, you need to eliminate and reduce unnecessary spending. For example, you might be able to cut down on expenses like cable TV, streaming services, dining out, gym memberships and grocery costs.

“To get out of debt, a consumer needs to identify their minimal reasonable standard of living and stick to it. Any discretionary income after necessities should be paid to their debts, with the highest interest debts being paid first,” Vogl says. 

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Follow the avalanche method

Speaking of paying the highest debts first, the debt avalanche method is a popular and cost-effective way to pay down debt. 

“Snow avalanches start at the top and work their way to the bottom. The avalanche method of debt repayment follows a similar path, focusing on the interest rate each creditor is charging,” says Sean Fox, president of debt solutions at Achieve. 

To follow this method, Fox recommends the following steps:

• Make a list of all of your debts
• Rank them according to their interest rate, from highest to lowest 
• Pay the monthly minimum balance on all debts and apply any extra money to the debt with the highest rate 
• When that balance is paid off, move to the debt with the next highest rate
• Continue this process until all your debts are paid off

Use windfalls to make lump sum payments

It can feel frustrating to slowly chip away at a high balance on a high-interest debt because the interest continues to accumulate so quickly. One way to make a bigger impact is to prioritize paying down your debt balance when you receive a cash windfall. 

“Research suggests that when people reduce debt, they generally pay a substantial amount of it at once, often from a tax refund or Economic Impact Payments during the pandemic,” says Scott Fulford, senior economist at the Consumer Financial Protection Bureau (CFPB) and author of The Pandemic Paradox. 

Negotiate with creditors

Another option is to try and negotiate with your creditors. 

“Organizing all your debts and evaluating the interest costs on each is the first step to planning your strategy. Once you know what you owe and to whom, you can start negotiating with debt companies on your balances,” advised Kates. 

“A study from LendingTree found that 76% of consumers who called their card issuers to ask for a lower rate were successful in getting it reduced so it’s worth a try,” Andrea Woroch, a consumer and money-saving expert, says.

The average reduction was 6%, which could help you get back to where rates were in 2020. 

If you don’t want to negotiate on your own, you can instead enlist the help of a debt relief company, but make sure to use a reputable service. 

“There are some that make every effort to improve an individual’s financial situation and have some success. There are others who do not and are only interested in their own revenue stream. In either event, debt consolidation will have an immediate negative impact on the consumer’s credit score,” says Vogl. 

Refinance or consolidate debt 

You may also be able to save by using a lower-cost credit product to refinance or consolidate your debt, either with the help of a debt consolidation program or by using a loan. 

“Collateralized loan options like using a home equity line of credit or mortgage refinance will have lower interest rates compared to personal loans for consolidating debt,” says Stephen Kates, CFP, principal financial analyst at Launch That. 

But while using a home equity loan to consolidate debt can be a smart move, tapping into your home’s equity can also be risky. 

“This comes with a huge caveat: The consumer must then use the proceeds to pay off the debt AND change their spending habits so they don’t end up in the same situation in a few years, only now with a higher or second mortgage,” warns Vogl.

If you don’t own a home or don’t want to tap into your equity, a personal loan is another viable option. The national average interest rate on a  24-month personal loan is 12.35%, much lower that the 21.47% average on credit cards. 

“A personal loan, especially one with no origination fee, can be used to consolidate multiple debts at a lower fixed rate,” says Nickele.

Take advantage of balance transfer promos

You can also consider transferring a credit card balance to another card that comes with a promotional 0% APR introductory period. 

“Some credit card companies may offer 0% interest cards for moving a debt balance but consumers should be wary of stretching their debt beyond the end of the 0% window,” says Kates.

Depending on the card and the offer, no-interest promotional periods can last almost two years, but if you still have a balance when yours ends, the normal APR will go into effect. In some cases, the higher APR is retroactive on any outstanding balance, which can be costly, so it’s important to read the fine print and plan accordingly. 

The bottom line

While these strategies can help you get out of debt, it’s important to understand why you got into debt in the first place so you can ensure it doesn’t happen again.

“Many people get into debt due to unforeseen circumstances such as medical issues, periods of unemployment, divorce, or death of a household member. More, however, get into the situation simply by overspending and overestimating their future ability to pay the accumulated debts,” says Vogl. 

Vogl says that when the latter is the case, the debt becomes a recurring problem every few years unless you change the underlying behavior.