Most people with debt make this costly error that can derail their finances. Here’s how to avoid it

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If you have debt, what are you doing to pay it down? If the answer is “nothing” or “just the minimum payment,” you may not be making real progress. You probably already know what needs to happen. But for many people, avoiding the issue becomes the default coping mechanism.

That habit can put your finances at risk. In a survey by fintech platform Rose Cove, nearly nine in 10 respondents — 86% — said they had stalled on a debt decision. More than one-third, 36%, blamed the delay on having too many choices.

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More than half of those in debt, 57%, said they stayed with a higher interest rate for four months or longer because comparing options seemed like too much work. That indecision has cost them money. Even when the problem felt overwhelming, 41% did nothing beyond making minimum payments.

Growing credit card debt

Credit card balances are common. According to a U.S. News survey, 57% of U.S. consumers carry a balance. In the face of ongoing affordability pressures, 56% say they use credit cards to cover essentials like gas, groceries, childcare or utilities, and 34% rely on them for emergencies and unexpected expenses.

While carrying a balance for those reasons may be unavoidable, some people also use credit cards to fund nonessential spending such as shopping trips and vacations.

Whatever the reason, many cardholders struggle to pay off the balance by the end of the month. Among those carrying debt, 22% keep it for six months to a year, 19% for one to two years, and another 19% for five years or more.

Still, there is a way to move past inaction.

The costs of carrying debt

Debt does not just create financial strain. It can also take a psychological and interpersonal toll. Financial stress can strain a couple’s relationship, especially when the debt comes from one partner’s spending but affects both people.

Debt can also trigger shame, which may lead to avoidance and delayed decision-making as a form of self-protection. WealthMind, a site that provides tools and quizzes about money habits, describes this as a “shame spiral.”

Avoiding the problem — for example, by not opening statements — can become a cycle: the debt grows, and the shame deepens.

Debt may also overload the mind. According to WealthMind, the constant background stress of financial worry can impair decision-making, reduce working memory, and make it harder to think long term, which is essential for repayment.

Those effects can make it difficult to begin looking for solutions. But once people do start, they are often hit with too many choices. Charles R. Chaffin, Ed.D., writing for Psychology Today, calls this “choice overload.”

One way to cope is to set clear limits on the time, effort and attention you allow yourself to spend on the issue. It can also help to accept a solution that is good enough rather than perfect.

Understand your debt

Getting out of debt begins with a complete and honest list of what you owe, including the balance, the interest rate and the minimum monthly payment for each account. From there, you need to find room in your budget to start paying it down.

A quick daily review of your accounts can show where your money is going. An app such as Rocket Money can help by identifying recurring subscriptions, upcoming bills and unusual charges across linked accounts.

That can make it easier to trim unnecessary expenses and redirect the savings toward your retirement fund. There is no spreadsheet to manage, no guessing and no added stress. Small habits like these can add up over time.

Rocket Money offers both free and premium tools. Free features include subscription tracking, bill reminders and basic budgeting, while premium tools such as automated savings, net worth tracking and customizable dashboards can help you stay on top of retirement contributions and broader financial goals.

Seek debt relief

If you owe a large amount, it may also be worth checking whether you qualify for a debt relief program that could eliminate a meaningful portion of what you owe.

With Freedom Debt Relief, you can speak with a certified debt relief consultant for free and learn how much you might save by working with them.

If you qualify, they may negotiate settlements with your creditors until your enrolled debt is resolved.

Build an emergency fund

After accounting for all of your debts, you can begin building an emergency fund that eventually covers three to six months of expenses. That way, unexpected costs do not have to go on a credit card.

To make the most of that money, consider keeping it in a high-yield savings account.

A high-yield account such as a Wealthfront Cash Account can be a strong place for uninvested cash, offering competitive interest rates and easy access when needed.

A Wealthfront Cash Account currently offers a base APY of 3.55% through program banks. With a new client boost and a direct deposit incentive, referred clients can earn up to 4.55% APY.

That is 10 times the national deposit savings rate, according to the FDIC report cited in the article.

With no minimum balance requirements or account fees, plus 24/7 withdrawals and free domestic wire transfers, the money stays accessible. It also offers access to up to $8 million in FDIC insurance eligibility through program banks.

Debt repayment methods

Once you have a budget and an emergency fund, you can start directing extra money toward your debts. Two common repayment strategies are the avalanche method and the snowball method.

The avalanche method targets the debt with the highest interest rate first. The snowball method starts with the smallest balance first.

If getting started is the hardest part, the snowball method may be a useful option. It is not always the best mathematically, but paying off a debt in full can create momentum, ease shame and help break the cycle of avoidance.

Paying off debt is never easy. But by taking a few practical steps, you can stop postponing the process, work through the psychological barriers and start regaining control of your finances.

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Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

Rosecove (1); U.S. News (2); Wealth Mind Tools (3); Psychology Today (4); Federal Deposit Insurance Corporation (5)