The 3 most common credit card payoff strategies

When you're paying off any amount of debt, the first step is to make a plan that works with your budget.

Ask yourself what is most important: chipping away at debt over time by setting aside a small amount each month, or paying off your debt as fast as possible.

This choice depends on a few factors, including how much disposable income you have left after covering your basic expenses and how active you want to be in paying down your debt quickly.

Once you know how much you need to set aside for debt payoff every month, you can calculate how long it will take to knock out any lingering balances. And if you have debt on more than one credit card, planning also helps you focus on which balance to pay off first.

Below, CNBC Select outlines three common strategies for paying off debt. We encourage you to learn about these and other debt repayment options so that you can decide on an approach that's right for you.

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The least aggressive debt payoff method is making only the minimum payments. Experts advise you only pay the minimum when your main goals are to keep your account from falling into delinquency and to protect your credit score from being dinged if you consistently miss payments.

Nonetheless, paying the minimum is still better than paying nothing at all, and it's easy to automate your credit card payments so that you can expect the same amount to be withdrawn from your bank account each month. When you use autopay, you can guarantee your payment is made on time, which is a huge factor in having a good credit score.

The biggest downside to paying only the minimum is that you will continue to accrue additional interest as long as you are carrying a balance month to month. The longer you carry a balance, the more interest you accrue and the bigger your debt load becomes.

When you only pay the minimum each month, not all of your payment always goes toward your principal; depending on how your issuer calculates your minimum payment, a portion of it could go toward interest. This makes it harder to completely pay off your debt. 

For example, CNBC Select looked into how much it would cost the average American if they only made minimum payments on a credit card balance of $6,194 with an interest rate of 16.61%. It would take approximately 17 years and three months to completely pay off the debt and the cardholder would pay a whopping $7,286 in interest alone.

Since paying only the minimum on your credit card debt could end up costing you thousands and take years to repay, you shouldn't follow this strategy once you can afford to pay more.

Paying more than the monthly minimum helps accelerate your debt payoff and is a more active approach. 

When you pay more than the minimum each month, you are chipping away a larger chunk of your debt thus shortening the time it will take to pay off.

Unlike just focusing on one credit card balance, paying more than the minimum is harder if you are juggling multiple credit cards with revolving balances. For this scenario, we recommend the popular 'snowball' or 'avalanche' debt repayment methods. We outline each below:

• Snowball method: With this method, you prioritize paying off your credit card debts with the lowest balances first. The first balance may be small, but you feel accomplished and motivated to tackle the next one. Similar to a snowball rolling down a hill and getting bigger and bigger, you start small but your balances grow larger until all your debt is paid off.
• Avalanche method: This repayment method focuses more on your credit card interest than your balances. You prioritize paying off the credit card with the highest interest first because it costs you more. This method is often the faster way to conquer your debt, which is one reason why it's termed 'avalanche.'

There is no right or wrong answer when deciding what method works best. Choose the method that motivates you the most: seeing results quickly by paying off low credit card balances or saving money by paying down high-interest debt.

Opening a new credit card when you already have credit card debt seems counterintuitive. But a balance transfer credit card can help if you use it correctly.

For those who qualify, using a balance transfer card is the most active approach to paying off your credit card debt because it involves moving your debt to a card with a zero-interest period. Balance transfer cards offer an introductory 0% APR period that normally range from six months to up to 21 months. Your credit score factors heavily into the amount of debt you can transfer (either a percentage of your total credit limit or a set dollar amount).

To use balance transfer cards correctly, you need to make sure you pay off your debt within that zero-interest time frame; otherwise, you'll face interest charges. You will most likely need to have good or excellent credit to qualify for the best 0% APR credit cards. When considering a balance transfer, remember that most cards have a 3% to 5% balance transfer fee (or a $5 minimum).

Below are some of CNBC Select's picks for the top balance transfer credit cards.

To decide which credit card payoff strategy works best for you, consider your current finances and what you can afford.

If money is tight, only make the minimum payments on your balance each month until you're in a better financial situation. For those who can pay more than the minimum, try the snowball or avalanche methods to create a more long-term plan. And if you have good to excellent credit, you could apply for a balance transfer credit card and take advantage of a year or more of no interest.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every credit card article is based on rigorous reporting by our team of expert writers and editors. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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