Sep 03, 2024
If you feel you’ve been relying too much on borrowing recently, you might be looking for ways to pay off credit card debt.
You’re probably not alone. The average credit card balance in the U.S. was $6,501 in 2023. For Gen X—those consumers in their 40s and 50s—the average balance was more than $9,000. Overall, credit card balances rose 10% from 2022 to 2023.1
Now is a good time to learn how to tackle those balances and pay off credit card debt. By following the tips below, you may be able to reduce your debt and strengthen your financial situation.
Before you can pay off credit card debt, the first step is to understand how much you owe and how much it is costing you each month. This will help you get started on a plan.
For example, if you have a $15,000 balance on a credit card with an annual interest rate of 21%, you would pay $409 each month to pay it off in 59 months, or just less than five years.
Your total credit card interest charges would be $9,173 by the time you paid off your balance. That assumes you don’t make any new purchases on the account. In all, you’d shell out a total of $24,173 to pay off that debt, more than 50% over your original balance.
It may seem daunting to make a list of everywhere your money goes each month. But it’s also important, especially if you are dealing with any financial anxiety. A complete picture may help you see areas where you may be able to cut spending and use the extra money to pay down your debt. Comparing your expenses to your income is a vital step in helping you improve your spending habits.
Here are some important things you can do once you know what you spend.
There are really no tricks to paying off credit card debt. It takes patience and consistent effort. It also helps to choose a method. The best way to pay off debt is the one that works for you and your financial situation.
For example, the debt snowball and debt avalanche methods are two time-tested strategies. With the snowball strategy you pay off your smallest balances first and work forward from there. The avalanche method has you start by focusing on balances with the highest interest rates.
No matter which approach you take, there are additional steps you might consider taking to reduce your credit card debt.
Keep in mind that you can always pay more than the minimum each month or even make a payment more than once a month. You’ll pay off your credit card debt faster, which means you’ll pay less in total interest.
Sometimes you can lower your interest rate by talking to the credit card company. If so, you could save some cash and maybe even pay down your credit card debt faster. But be prepared: the company might not agree, and it could be frustrating.
With a balance transfer you can pay off one credit card balance with a separate card that has a lower interest rate. It is not unusual, though, to be charged a balance transfer fee of between 3% and 5% of the amount, which would reduce the amount you save. Also, introductory rates eventually expire and are often replaced by higher standard rates.
Staying tied to revolving debt means that each new purchase will increase your balance and the amount of interest you accrue.
A fixed-rate personal loan for credit card debt consolidation might be a better solution. The benefits include:
Maybe the best part is that you could save money on interest for that higher-interest debt when you consolidate to a personal loan with a lower fixed-interest rate. In fact, 93% of surveyed debt consolidators said they saved money or time by taking out a Discover® personal loan.*
Want to see how that works? Our debt consolidation calculator will show you how much you could save in interest.
Some personal loans come with fees, like origination fees and closing costs, or prepayment penalties if you pay off the loan early. But with a Discover personal loan, make your payments on time and you can forget about fees altogether.
Once you decide on a personal loan for debt consolidation, you should compare offers for personal loans just as you would for any major purchase.
You’ll want to keep these five factors in mind.
Once you start making a dent in your credit card debt, take note of how far you’ve come. It’s a big milestone, and you should be proud.
Then, keep your momentum going by sticking to your budget, paying off your credit card balance in full as often as you can, and increasing your savings.
You could see your credit health soar and join over 2 million people who have reached their goals with a Discover personal loan.
Want other actionable tips on how to get out of credit card debt faster?
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover Bank or its affiliates.
*ABOUT SURVEY
All figures are from an online customer survey conducted September 14 to October 3, 2023. A total of 1,191 Discover personal loan customers were interviewed about their most recent Discover personal loan with 550 of them using the funds to consolidate debt. All results @ a 95% confidence level. Respondents opened their personal loan between January and July 2023 for the purpose of consolidating debt. Agree includes respondents who ‘Somewhat Agree’ and ‘Strongly Agree’.
