Americans are grappling with mounting credit card debt, with the average balance per person reaching approximately $6,330, according to TransUnion data. This marks a significant increase from $5,947 last year, reflecting a broader trend as total U.S. credit card debt hits a record-breaking $1.14 trillion, as reported by the Federal Reserve Bank of New York.
Ted Rossman, Bankrate’s senior industry analyst, points out that many Americans fall into credit card debt for practical reasons, not extravagant purchases. “People tend to get into credit card debt for emergency expenses and day-to-day costs,” Rossman explains. Yet, escaping the cycle of debt is notoriously difficult.
Carrying a balance month after month means consumers face growing interest charges, especially with an average credit card interest rate of 25%. CNBC’s calculations illustrate just how much credit card debt can cost over time, depending on how quickly it’s paid off. Here’s a breakdown of the monthly payments and total costs for clearing $6,330 of debt within different time frames:
| Time | Monthly Payment | Totaling | With $ in Interest |
| 1 Year | $602 | $7,200 | $890 |
| 2 Years | $338 | $8,108 | $1,778 |
| 3 Years | $252 | $9,060 | $2,730 |
Clearly, the longer it takes to pay off your balance, the more interest you’ll end up paying.
How to Tackle Credit Card Debt
If you’re looking to reduce your debt, two common strategies are the avalanche and snowball methods.
- Avalanche Method: Focus on paying off the card with the highest interest rate first. After making minimum payments on all your cards, allocate any extra funds to the highest-interest card. Once that’s cleared, move on to the card with the next-highest rate.
- Snowball Method: Target your smallest balance first. Make minimum payments on all cards, but direct any extra funds to the card with the lowest balance. Once it’s paid off, apply extra funds to the next-smallest balance.
Both methods can work, but as financial expert Matt Schulz advises, “It’s all about finding the strategy that works for you and staying committed to it.”
Regardless of which approach you choose, the key is to start taking action and stay consistent to reduce your debt burden.