Credit Card Debt is consumer debt that results when a client of a credit card company purchases an item or service through the card system. Credit card debt is the third largest source of household indebtedness. Only the mortgage and student loan debt markets are larger.
A few statistics on credit card debt for US Households:
- Average credit card debt: $15,607
- Average mortgage debt: $153,500
- Average student loan debt: $32,656
In total, American consumers owe:
- $11.63 trillion in debt
- $880.5 billion in credit card debt
- $8.07 trillion in mortgages
- $1,120.3 billion in student loans
So why do so many people have credit card debt?
Americans depend on their credit cards far more than they do their savings. Credit cards are very easy to obtain and even easier to load-up with debt. Couple that with a convenient way of spending money and we can see why the debt piles up.
There are approximately 609.8 million credit cards are currently in use in the United States, with credit card users having an average of 3.5 cards each. There are about 176.8 million credit card users in the US. Every year, about 5 billion credit card solicitations are mailed in the USA.
Paying Off Credit Card Debt
No matter how much debt you have or how long you have had it, you are more than likely thinking about how to pay it off. There are several different payment methods or schemes you can follow when trying to pay down credit card debt:
The Snowball Method
The snowball method is a method in which you pay off your smallest bill first and then putting what you were paying on the small bill (when it is paid off) toward your next bill, thus snowballing your payments until all your debt is gone
Paying off your high-interest debt first:
When you have a card with an abnormally high interest rate, it could be in your best interest (depending on the overall balance) to rank your credit cards in order from the one with the highest interest to the lowest, and then apply the snowball strategy to debts in that order instead of according to the balance.
Using Balance Transfers to reduce credit card debt
One scheme credit card companies use to get your business is to offer extremely low APRs on balance transfers (meaning you put the balance from one card/company onto a new card with a new company). If you do this correctly, you could end up paying 0% interest during the introductory balance transfer period and then just stop using the card once it is paid off. This is a great way to eliminate credit card debt for a disciplined person trying to reduce their credit card debt.
Pay On Time
Make an effort to pay on time every single month. This can be a problem for some people if they are forgetful or if they are short on money.
- Setup an automatic bill payment system
- Setup online reminders
- Write due dates on a calendar
Pay more than the minimum payment
When you have credit card debt and want to eliminate it, you should always try pay more than the minimum required payment. If you routinely make the smallest possible payment, you will end up paying significantly more interest, spend more time in debt and waste money.
Depending on how much you owe and what your interest rate is at, you could easily be saving thousands of dollars and be out of debt in a year or two as opposed to over 20 years in some cases!
Accruing too much credit card debt is much easier than eliminating it completely, however, implementing one of the above strategies may be your key to eliminating credit card debt once and for all.