How to Get Out of Credit Card Debt


Understand credit card debt so you can pay it off fast!

Top Credit Card Debt Statistics

  • $1,000,400,000,000 (that’s $1 trillion)

    the amount of credit card debt held by U.S. consumers as of February 2017

  • 157 million

    the number of Americans with outstanding balances to pay off

  • 15.7%

    the lowest interest rate you can expect on a new credit card, even with excellent credit

  • $16,748

    the average household credit card debt balance in the U.S.

Find more credit card debt statistics »

What you need to know about your debt

Eliminate debt effectively

If you’re working to eliminate high interest rate credit card debt, we can help you identify the right solution for your financial needs so you can avoid the guesswork and stop the sleepless nights.

Credit card consolidation guide

Do you need help?

Most people prefer to solve debt problems on their own, but at a certain point you may require help to get out of debt. If you’re not sure if you’ve crossed that line yet, these resources can help.

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Credit card consolidation

Consolidation is a financial process where you combine multiple debts into a single monthly payment. The primary goal is to lower the interest rate applied to your debt. This allows you to pay off debt quickly because more of each payment goes to eliminating the principal. You can get out of debt faster even though the total payment may be less each month.

Consolidate credit card debt

Understand your cards

Often credit card debt problems stem from a lack of understanding about how your credit cards work. Don’t let debt become a problem just because you failed to read the fine print!

Credit cards

Credit cards vs. other debts

Learn how credit card debt fits in with other consumer debts. The more you understand your debt, the better you can prioritize repayment and make effective plans for debt elimination.

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Reasons Why Credit Card Debt is So Tough to Eliminate

  1. Since credit cards create revolving debt, it means that the more you charge, the more you owe. As your balances increase, so does the amount of money you need to pay the bill.
  2. Minimum payments are not designed to pay off debt efficiently. You can pay month after month and never seem to make a dent in your balances.
  3. High APR means roughly 2/3 or more of each minimum payment you make goes to paying off interest charges instead of the actual debt you owe.
  4. When you get a new credit card, it often has an introductory interest rate or may have 0% APR for a period of time. That’s good at first, but once the introductory period ends your rate and monthly payments can increase significantly.
  5. If you miss a payment and penalty APR is applied it can double the already high interest rate you’re paying. In this case, the minimum payment may not even cover accrued interest charges for the month.

Read more about the reasons you can’t eliminate your debt »

Featured Ask the Expert: How Much Credit Card Debt Is Too Much?

Calculating the ideal target debt ratio

It’s important to monitor your credit card debt ratio carefully. Here is the formula:

Monthly income X 0.10 = Maximum monthly credit card payments

All your credit card bills combined should exceed no more than 10% of your income. Now consider the average household credit card balance us currently $16,748. On most credit cards the minimum payments equal out to around 2.5% of your current balance. Using that schedule and an average APR of 16%, the minimum payments would be just under $420.

If you stick to only making the minimum payments, it would take 342 months to eliminate the debt in-full. During that time, you would pay $18,718.82 in interest charges. The total cost $35,466.82. As you can see, interest charges effectively more than double the cost of this debt. It also takes 28.5 years to repay what you owe, and that’s only if you never make another charge.

Working backwards, this amount of debt is only sustainable if you make $4,200 per month or more. Otherwise, you have too much debt for your income level. Look into options for relief, such as consolidation or talk to a credit counselor.

However, even if you make $4,200 per month it may be time to find a better way to pay back what you owe. In fact, let’s say you make $5,000 per month in take-home income. That means you can afford to pay $500 per month on your credit cards. Instead of paying minimum payments, you pay $500 every month until you pay the balance off.

In this case, it would only take 35 months or just about 3 years to repay the debt. Total interest charges would be $5,588.81, reducing the total cost to $22,336.81.  That’s a much better repayment plan because you can get out of debt in less than five years.  However, interest charges still increase the cost of your debt significantly. Using an option like consolidation can reduce that cost, making your debt more affordable overall.

Why lower interest has such a big impact

A primary goal in seeking credit card debt relief is to lower the interest rate applied to your debt. Ideally, you want to get as close to zero as possible. In most cases, reducing interest rates to less than 10 percent can provide the benefit you want.

Taking the example above, let’s say you take out an unsecured debt consolidation loan. You keep the term at 36 months, so you pay off the debt in the same 3-year period. The monthly payments would be roughly the same, at around $502 per month. However, since you have excellent credit with the loan you could qualify for an interest rate of 5%. Instead of paying over $5,500 in interest charges, you would only pay $1,322. Thus, the total cost of repaying your debt would be $18,070 instead of $22,336.81. You saved $4,266.81 by consolidating your debt at a lower interest rate.

Learn more about interest rates »