For individuals, the average balance is about $6,330. Trans Union DataThis is up from $5,947 during the same period last year.
But Americans aren't always getting into debt to make extravagant purchases, Ted Rothman, senior industry analyst at Bankrate, told CNBC Make It. “People tend to get into credit card debt for practical reasons, like emergency expenses and everyday expenses, but this cycle can be hard to break,” Rothman said.
Many Americans carry credit card balances for years. Found BankrateAbout one-third of consumers surveyed by Bankrate had carried balances for between one and three years.
“Credit card debt is easy to get into but hard to get out of,” Rothman says.
If you have credit card debt,
Carrying a balance each month can increase your credit card debt. In the long run, it will be more expensive as interest accrues, so if possible, it's wise to steadily reduce your debt bit by bit until it's paid off.
With that in mind, CNBC calculated how much you'd need to pay each month to pay off $6,330 in credit card debt over one, two, and three years, and how much you'd end up paying in additional interest.
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CNBC's calculations are rounded to the nearest dollar and assume that no credit card debt increases during the repayment, and that the $6,330 balance is on a single credit card with an interest rate of 25%, the average interest rate as of Sept. 20. According to LendingTree:.
1 year
- Monthly payment: $602
- Total payment: $7,200
- Additional Interest Expense: $890
2 years
- Monthly payment: $338
- Total payment: $8,108
- Additional Interest Expense: $1,778
3 years
- Monthly payment: $252
- Total payment: $9,060
- Additional Interest Expense: $2,730
As the math shows, the faster you pay off your credit card debt, the better: If you pay off that $6,330 balance over three years instead of within one year, you'll end up paying thousands of dollars in extra interest.
You can try CNBC Make It's debt repayment calculator for yourself to see how quickly you could pay off your debt based on the amount you owe, interest rates, and different timelines.
How to pay off credit card debt
If you're not sure how to pay off your credit card debt, there are two common methods that experts typically recommend.
- and Avalanche MethodSo, prioritize paying off the card with the highest interest rate first. After you've paid the minimum payments on all your cards, put any money you have left over towards the balance of the card with the highest interest rate. Once that's gone, pay off the card with the second highest interest rate, and keep doing this until your debt is paid off. The benefit of this method is that you'll save money on interest in the long run.
- and Snowball MethodSo, prioritize eliminating your smallest balance first. Make the minimum payment on all your cards, but put any money left over on the card with the smallest overall balance. Once that card is paid off, put any money left over on the second smallest balance, and gradually work your way up to your highest balance. Your first small wins will motivate you to keep going.
Whichever method you choose, the most important step is to get started and stick with it, Matt Schultz, principal credit analyst at LendingTree and author of “Ask Questions, Save Money, Make More,” told CNBC Make It.
“There's no one-size-fits-all solution to paying off debt,” he says. “You just have to find what works for you and, most importantly, follow through.”
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