How bad is it that your credit card balance is $10,000?

Carrying a credit card balance is a part of life for many Americans. According to research from Motley Fool Ascent, the average American has $6,501 in credit card debt. People with credit card debt often find themselves in deeper and deeper trouble as interest charges mount.

If you have a $10,000 balance on your credit card, you may be wondering whether it's worth worrying about. Let’s be honest, so much credit card debt is a huge problem. Here's how much it might cost you and what you can do to pay it off.

Here's how much a $10,000 credit card balance might cost you

To find out how much a credit card balance will cost, multiply your balance by the card's annual percentage rate (APR). According to the Federal Reserve, the average annual interest rate on credit cards is 21.59%. If this is the APR on your card, carrying a $10,000 balance would cost you $2,159 per year.

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One of the dangers of credit card debt is that it can seem manageable when you only think about the minimum payment. The minimum payment is usually about 2% of the balance. So you can keep up with your credit card payments by paying about $200 a month. This sometimes gives cardholders a false sense of security.

But let's say you pay $200 each month on a card with a $10,000 balance and an APR of 21.59%. It would take you 129 months (over 10 years!) to pay off your card and cost you $15,779 in interest. This is assuming you haven't had any other charges charged to your card.

How to get out of credit card debt

Since credit card debt is costly, it's best to pay it off as quickly as possible. Even if you have a lot of debt, there are steps you can take to speed up the process.

Stop using your credit card

People often stay in debt longer than necessary because they keep using their credit cards. This is not a good idea. You'll need to pay interest on these new purchases, and any fees you pay will add to your debt.

Don't use a credit card when you're in debt. Take them out of your wallet and delete them from your online accounts so you won't be tempted to use them to pay. Stick to payment methods that won't accrue interest or add to your debt, such as debit cards and cash.

Cut expenses as much as possible

Take the time to look at where you are spending your money each month. For any unnecessary expenses, see if you can cut them back or cut them entirely.

Groceries are one of the most common sources of overspending. Many people can save an additional $100 to $200 or more simply by tightening their grocery spending. Streaming services are another place where you can free up some cash. You don't need to get rid of all of them. But if you're currently paying for three or four streaming services, cut that down to one for now.

When you're in debt, your extra funds should be spent on credit cards. Did you free up that much money by cutting expenses? Put it on your credit card. Earn extra income by working longer hours? Put it on your credit card.

If you're currently saving or investing any money, transfer most of it to your credit card. It's okay to save and invest a little – these are good habits, so it's best not to discourage them entirely. But you shouldn't put most of your money into it right now. You'll get a better return by paying off your credit card debt, which may cost you 20% or more in annual interest.

Research a debt consolidation loan or balance transfer card

Depending on your credit score, you may be able to refinance your credit card debt. Generally speaking, cardholders who are in their 600s or older usually qualify for a loan or balance transfer card. Here's how they work:

  • debt consolidation loan: You get a personal loan and use it to pay off your credit card debt. Loans typically have lower interest rates than credit cards, and you'll have a fixed repayment amount and term to pay off your debt this way.
  • balance transfer credit card: You open a credit card with a 0% APR on balance transfers. With some cards the introductory period may be 18 months or longer, and you won't pay any interest on the balance transferred.

Both options can help you save money on interest and pay off your debt faster. Remember, even if you refinance, it's still important to pay off as much of your debt as possible.

A $10,000 credit card balance is a huge amount of debt. But if you work hard to pay off your debt, you can get out of it faster than you think. If you pay $500 a month, you'll be debt-free in 25 months, which is just over two years. You can even pay off your debt faster if you're able to increase your payments or refinance your debt along the way.

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