High-interest credit card debt can devastate even the most thought-out financial plan. U.S. consumers carry $6,501 in credit card debt on average, according to Experian data, but if your balance is much higher—say, $20,000 or beyond—you may feel hopeless.
Paying off a high credit card balance can be a daunting task, but it is possible. You can start working toward paying off $20,000 in credit card debt by developing a battle plan that includes using accelerated repayment strategies and consolidation options, cutting back in other areas of your budget and, if necessary, seeking help.
5 Ways to Pay Off $20,000 in Credit Card Debt
There are several different ways you can tackle your credit card debt, so it's important to research your options to determine which ones will work best for you. Here are some steps you can take to accomplish your goals.
1. Set Concrete Goals
With $20,000 or more in debt, it can be difficult to set a timeline for when you'll be debt-free. Still, it's important to set concrete goals for yourself.
Start by listing all your balances, monthly payments and interest rates to get an idea of what you're dealing with. Then, you can set one or more goals, such as:
- How much extra you want to put toward your debt payments each month
- A timeline to pay off your first balance
- An overall timeline to pay down all your balances
Even if you're feeling motivated right now to pay off your debt, it can be easy to lose that motivation over time, especially with a large balance. Having specific goals in mind and reminding yourself of your reasons for paying off debt can help you stick to your plan.
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2. Use a Debt Payoff Strategy
Whether or not you use other methods to pay down your debt more quickly, you may consider an accelerated debt repayment approach to speed things up even more. Here are a few to consider:
- Debt avalanche: With the debt avalanche approach, you make just the minimum payment on all of your credit cards except for the one with the highest interest rate. With that one, you'll apply extra payments until it's paid in full. Then, you'll take what you were paying toward that account and add it to your minimum payment on the card with the next-highest interest rate. You'll keep doing this until you've paid off all of your balances.
- Debt snowball: The debt snowball method is similar to the debt avalanche method, but instead of focusing on the accounts with the highest interest rates, you'll focus on the accounts with the lowest balances. This may give you some quicker wins and can keep your motivation up as you tackle the rest of your debt.
- Debt snowflake: The debt snowflake strategy is one you can use on its own or in addition to the debt avalanche or snowball methods. With this approach, you'll take small daily savings you gain and put those toward your monthly payments. Examples include money saved using grocery store coupons, splitting a streaming subscription or selling some of your personal belongings.
3. Consolidate Your Debt
If your credit is in good shape, you may be able to save money and pay off your debt more quickly through debt consolidation. The two most common options include debt consolidation loans and balance transfer credit cards.
- Personal loan: A debt consolidation loan is a personal loan used to pay off credit card debt. On average, personal loans have lower interest rates than credit cards, and they also provide a set repayment term, making it easier to know when you'll be debt-free. You can also use a personal loan calculator to figure out how much you'd need to pay each month and how much interest you'll pay by the time your debt is paid off.
- Balance transfer credit card: Balance transfer cards offer 0% introductory APR promotions, which can last anywhere from 12 to 21 months. During that time, you can pay off some or all of your debt interest-free. That said, you'll typically need to pay an upfront fee of 3% to 5% of the transfer amount. You may also run into problems if your new card's credit limit isn't high enough to cover all of your debt.
You may also consider using a home equity loan or home equity line of credit, but keep in mind that these loans use your home as collateral, and they may also come with expensive closing costs or annual fees.
Learn more >> Balance Transfer vs. Debt Consolidation Loan: Which Is Best?
4. Cut Back Spending
Not knowing where your money is going every month can make it difficult to pay off the debt you've accumulated. If you haven't made a budget before, take some time to write out your income and expenses over the past few months, then categorize each expense so you get an idea of how you're spending your money.
This can help you determine where you can reasonably cut back to put more cash toward your debt.
- Recurring bills: You may be able to negotiate certain utility bills, especially if there are multiple providers in your area. Other options include shopping around for lower insurance rates and splitting streaming subscriptions.
- Discretionary spending: Cutting discretionary spending may include spending less money on eating out, entertainment, online shopping and other lifestyle-related expenses. Just keep in mind that if you cut too much too quickly, the lifestyle change could make it difficult to stay motivated.
Learn more >> Ways to Reduce Expenses
5. Consider Credit Counseling
If your credit is in poor shape and your financial situation doesn't allow for larger payments, you may consider getting help through credit counseling. Credit counselors can provide expert advice and personalized guidance for your specific circumstances at no cost.
If the situation calls for it, they can also set you up on a debt management plan (DMP). These plans, which typically last three to five years, involve you making one monthly payment to the credit counseling agency, which it distributes to your creditors. They may also be able to negotiate lower interest rates and monthly payments on your behalf.
DMPs typically require a modest upfront and monthly fee, and may require you to close your credit cards. But if you're having a hard time paying back your debt on your own, a DMP is a good alternative to debt settlement and bankruptcy.
Learn more >> Is a Debt Management Plan Right for You?
Frequently Asked Questions
It's generally recommended to keep your debt-to-income ratio (DTI)—the percentage of your gross monthly income you use for debt payments—below 43%.
While it's possible to use low-interest debt to improve your lifestyle and work toward your financial goals, it's important to eliminate any high-interest debt, such as credit cards and personal loans, as quickly as possible.
Getting out of debt can save you money by eliminating interest costs, which can add up quickly if you're carrying several credit card balances. It can also free up some cash flow, giving you more financial flexibility to work toward other important financial goals or to improve your lifestyle.
Paying down credit card debt can also potentially improve your credit score and lower your DTI, which can improve your odds of getting more favorable credit terms in the future.
If you're struggling to manage your debt situation on your own, consider consulting with a credit counselor who can provide you with free budgeting and debt management advice and also potentially recommend a DMP, which can help you pay down your debt more efficiently.
Learn more >> How to Get Credit Counseling or Financial Assistance
Make a Habit of Responsible Credit Use
In many cases, credit card debt comes from factors outside of your control, such as medical bills or divorce. But regardless of how your debt was accumulated, it's important to take steps to develop good credit habits going forward:
- Paying your bills on time and in full every month
- Avoiding spending more than you can afford
- Keeping your balances low relative to your credit limits
- Avoiding frequent new credit card applications
- Keeping old accounts open, even if you don't use them regularly
It's also important to check your credit score and credit report regularly so you can spot potential problems before they wreak havoc on your credit score. This can include things like missed payments but also potential fraud and inaccurately reported information.