If you’re carrying debt on your credit card, know that you’re not alone. Americans owe $1.13 trillion in revolving credit card debt as of the fourth quarter of 2023, according to the New York Federal Reserve’s 2023: Q4 Household Debt and Credit Report, which is the most recent data available.
Having a plan to pay off your debt is a smart money move. You can use our calculator to see how long it will take you to pay off what you owe and how increasing or decreasing the amount you pay monthly will affect that goal.
If you’re seeking inspiration on how to find ways to pay off your debt more quickly, consider creating a debt reduction plan. Or if you’re feeling overwhelmed by the amount you owe, see Forbes Advisor’s guide to debt relief.
How To Pay Off Credit Card Debt
There are several approaches to paying off credit card debt. The simplest way for those who have the funds available is to pay off the entire balance in one lump sum. But for those who have debt that feels unmanageable, making a plan is the best way to start.
Two popular approaches are the debt snowball method and the debt avalanche method. With the snowball method you’ll pay off the card with the smallest balance first, then move on to the second card with the next-smallest amount and repeat until the debts are paid off. Some find this way gives them the psychological boost they need to stick to their debt repayment plan.
With the avalanche method, you’ll make the biggest payments to the card that has the highest interest rate. This may take you longer than the snowball approach, but over time you’ll pay less interest.
One other approach is a debt consolidation loan, which is where you take out a new, lower interest loan and use it to pay off existing debts. Then you have just one monthly payment to make at a lower interest rate.
How Long Will It Take To Pay Off My Credit Card?
The amount of time it takes to pay off credit card debt depends on a combination of factors including how much debt you have, the interest you’re paying on that debt, how much you can afford to pay towards it and the debt pay off method you choose. You can use our calculator above to test out various pay-off scenarios.
What Is Credit Card Debt Consolidation?
Credit card debt consolidation involves combining all of your credit card loans into one balance. This can make it easier to track since there is just one monthly payment and if the new balance is at a lower interest rate, it can help you pay off your debt faster too. Common debt consolidation loans include shifting your balance to a new card with a 0% APR offer or taking out a personal loan to pay off the credit card balances.
How Does Credit Card Debt Impact Your Credit Score?
How much debt you have measured against how much available credit you have—also known as a credit utilization rate—is the one of the most important factors used to evaluate your credit score. Keeping this ratio below 30% is advisable to maintain great credit, but we recommend trying to keep it as low as possible—below 10% for best results. We also offer a credit utilization calculator.
Out-of-control debt that may lead to missed and late minimum payments can also negatively affect a credit score, as payment history is the most important factor used in the calculation of a credit score.
Tips for Staying Debt Free in the Future
The most effective strategy for remaining debt-free is never spending money you don’t already have. This can be tough, if not downright impossible at times, but using other loan products to secure funding is often cheaper than carrying a credit card balance. If you need to borrow money for longer than a billing cycle and you don’t have a foolproof plan for using a 0% introductory APR offer on a credit card to do it, use a different financial product whenever possible. Our list of the best lower-interest personal loans may be helpful.
Paying bills on time, in full every month, is also critical to remaining debt free. Late payments and interest can quickly cause major issues and cause balances to snowball out of control. Habitually maintaining safe spending and payment practices can help you stay away from debt problems in the future.
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Frequently Asked Questions (FAQs)
How can I consolidate my credit card debt?
Credit card debt consolidation is where you combine multiple credit card balances into one balance. This can make it easier to keep track of since there is just one monthly payment due. The most effective use of a debt consolidation strategy is to transfer your debts to a credit card with an intro 0% APR offer or a lower APR than what you’re currently paying on your balances. This can help you pay down your debt faster and with less interest.
What happens when you pay off a credit card balance?
There’s no downside to paying off your credit card debt. But how much of an impact it will have on your financial life will depend on a few factors, like how much debt you have and how much of your total available credit that debt is taking up (i.e. your credit utilization). If you have a $10,000 total credit limit and you pay off a debt of $8,000, that will have a greater impact on your score than if you have a $10,000 limit and pay off $100 in debt.
How do you calculate your credit card payoff date?
To find your credit card due date, consult your statement. Since your payoff date will depend on how much you pay each month beyond the minimum, you’ll choose your payoff date in our calculator above by inputting the desired number of months to pay down the debt.
How do I pay off credit card debt faster?
Several strategies around paying down credit card debt can help you optimize your payment strategies and potentially save money on interest, including consolidating debt by utilizing balance transfer opportunities and paying down high-interest balances first. While these can save additional money and time, paying down as much debt as you can, as quickly as you can, will still yield the best results when it comes to climbing out of debt.
When should you pay your credit card bill?
You should always pay your credit card bill on time. Ideally you’ll pay it in full each month but at the very least, you should make at least the minimum payment by the due date. Other than making sure you aren’t late with your payment, there’s different schools of thought surrounding when you should make your payment in your card’s billing cycle.
Paying right on the due date can give you the highest degree of flexibility with your money. But if you carry a balance, credit interest is typically charged using the average daily balance method which means that the earlier in the cycle you make a payment, the less interest you’ll be charged. And, if you are carrying a balance, paying earlier means a lower balance is what will get reported to the major credit bureaus which in turn can help your credit score.
What happens if I only make minimum payments on my credit card?
Even though minimum credit card payments may sometimes seem helpful, they’re almost always a mistake in the long run. Making minimum payments repeatedly instead of making headway towards your balance can potentially hurt both your credit score and your wallet.
As your credit card balance increases, your credit utilization will also go up—which can have a negative impact on your credit score. And, it’s expensive to carry credit card debt as the interest will keep accruing and cost you more to pay off the longer you wait.
Can I negotiate my debt with the credit card company?
Negotiating your own credit card debt could be a better choice than a less-reputable debt settlement company. Debt settlement companies may advise you to stop making your minimum credit card payments which can result in late fees, a higher penalty APR and ultimately more debt to negotiate. Many debt settlement companies are also for-profit, meaning they operate to make money off of you, not to resolve your debt.
If you don’t think working it out on your own with your credit company is right for you, choose a reputable debt settlement company, ideally a non-profit or one that fully discloses any and all fees.
When should I seek debt relief?
If you’re feeling overwhelmed by your debt or you can’t find a way to make progress on a repayment plan, it might be time to consider a debt relief program. This may involve speaking to a non-profit debt management company and having them help you create a plan that’s right for your circumstances.
How do I pick a repayment plan?
There’s no one right plan when it comes to debt repayment. For some, a debt consolidation plan where you consolidate several debts into just one payment per month can help with staying organized and on track. For others who can’t meet the minimum monthly payments, a debt management plan may be a better option.
With debt management, a credit counselor or a debt relief program advisor can potentially help you negotiate lower rates on your loans or even settle for a smaller amount than you owe. There are pros and cons to any debt management program, so be sure to explore your options and pick what’s best for your circumstances and budget.
