It is tempting to use credit cards to cover emergencies and make minimum payments, but this can lead to financial hardship. In addition, if you are late on your payments, the interest rate you have to pay will only increase your debt. So, paying off your credit card balance is a never-ending process. Here are some ways to speed up the process.

Pay Off Credit Cards Faster by Following These Steps

Just some basic tried and true steps:

• The first step to reducing your debt is determining how much you can afford to pay off each month. It is also useful to estimate how long it will take to pay off your credit cards. It is important to realize that paying over the minimum payment is the way to get out of debt faster. If you pay exactly the minimum payment, it may take you as long as 7 years to get out of debt, that’s assuming you did not swipe that card at all during those 7 years. However, if you pay twice to three times your minimum payment, you are reducing the time to pay off to as little as two years or less. Having a good repayment plan is key to the avalanche pay off debt approach. Your monthly payments are a static number though, and it could feel like a daunting task.

• You are better off selecting the credit card with smallest outstanding balance first, because you will reach $0 in interest rates from that card the quickest. It is also motivating along the way to keep eliminating cards, it gives you a sense of accomplishment. This is called the snowball repayment plan, and it’s a wise approach to become debt-free. Alternatively, choosing the highest interest rate card to get to paid-off status first will save you more money in the long run. Either approach you take, you owe what you owe, and you must repay it quickly, so that it doesn’t become a drag on your personal finance.

• The cost of living in your area is another factor that will affect the length of time it takes to pay off your debt. The higher the cost of living, the longer it will take for you to make payments. The lower your payment amount, the sooner you will be able to eliminate the debt. Alternatively, you can lower your payments or reduce the amount of your debt that you can afford each month. This really goes towards how much money you have to work with monthly, but I thought I’d mention it. Some of you may be ambitious and committed enough to actually move to a lower rent apartment or even get a roommate in order to come out of debt sooner. If you are one of those people, I applaud you!

More Aggressive Payment Strategies

While doing things the slow and steady way builds out your credit history the most, if you need to move faster, you have other ways of paying off credit cards available to you in today’s competitive financial market.

• Credit card consolidation. This should be your last resort, as this method will definitely impact your credit score in the negative way. However, if you must, you can research debt consolidation companies. The long and the short of this strategy is in that you walk away from your credit cards all together. Bear in mind, it will take you a long time to build back up your credit file from scratch. But the benefit you get with this major inconvenience is that you get to negotiate only partial payoff and get one loan with one payment. This is probably the fastest way of getting to no credit card debt, and the lowest amount you would have to pay. Personally, I don’t advocate this method unless you are facing really difficult choices, since you lose your credibility with the lenders. At times though, it may be unavoidable.

• Get a personal loan to pay off credit cards. This is a creative way to save money, and if done right can be a win-win for you. You will save substantially on interest, and you will have only one monthly payment likely lower than what the credit card bills you currently have. You may need to jump through a few hoops to get this loan, but it’s well worth the effort.

How Well Are You Doing?

Other than the obvious desire to have no debt and pay nothing in interest, sometimes it’s good to stay aware of how you fare against the average American household. Knowing this will allow you to understand how critical your situation is. Below is a quick overview of some major market stats.

If you have a credit card, you know how easy it is to rack up credit card debt. In the last three years, consumers have averaged over six thousand dollars in balance on their cards. In the first quarter of this year, the amount of credit card debt American households owed was $930 billion. Despite the increase in credit card balances, the debt incurred per person has decreased by more than fifteen percent since the peak in the fourth quarter of 2019. Let’s call this the silver lining.

Credit Card Debt By Income Levels

Americans with incomes between $25,000 and $160,000 have significantly more debt than those earning under $25,000. The average debt for households in the top percentile was over $12,600, while those at the bottom earned only $6,940. Higher income people carry higher balances on their credit cards than those with lower incomes. In addition, people with college degrees have higher average balances on their credit cards, compared to those with no or limited education.

In addition to the rise of credit card debt, the number of American households with multiple credit cards has increased as well. As of March 2019, nearly 50% of adult Americans have a credit card. More than half of those with multiple cards increased their balances because of the pandemic. The rate of credit card debt is rising at a soaring rate, even surpassing the amount owed during the Great Recession of 2008.

Despite the rising level of debt, American households still have a high standard of living. The average salary for an adult with a bachelor’s degree is almost double that of an American with a high school diploma. Stay in school, kids! According to the Federal Reserve Survey of Consumer Finances, the highest credit card debt was held by whites, while the lowest was held by Hispanics.

Despite the increase in credit card debt, the average amount of debt held by American households has continued to decline. During the recession, banks had to cut back on consumer lending to combat the recession, and the Dodd-Frank Wall Street Reform Act increased regulations on credit cards. However, the numbers are still worrying. On average, a single American family owes $8,315 on a credit card.

Credit Card Debt Stats in 2021

In the second quarter of this year, the average American household with a net worth between $25k and $100k had an average debt of $6,800. As the number of high-income households increased, the average credit card debt of those with higher net worth rose even higher. For example, a household with a net worth between hundred thousand and five hundred thousand dollars had an average balance of $7,400. In the third quarter, the balance of households with a net value between five hundred and five thousand dollars was even higher at $8140.

Americans and the World

The average debt in the US is higher than the average debt in the other countries. It is estimated that the average debt in the US is about ten percent higher than in the UK. Despite the fact that the US has a higher income than the other nations, this still reflects a large share of the population that struggles with credit card debt. In fact, the statistics are not that surprising. The United States is the fourth largest country in the world, with a median balance of $5,315.

I hope this helps you determine where you sit in comparison to your peers.

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