Credit Card Debt Guide

Credit card debt is the balance owed on one or more credit cards. With a credit card debt, the cardholder is required to pay only a portion of the balance each month, while the rest rolls into the next month. That means it is a revolving debt. Every day that goes by with a balance left over on the card will cost the cardholder a certain amount in interest. That’s one reason why credit card debt...

A credit card balance is the total amount owed to a credit card company for purchases, balance transfers, cash advances, fees, and interest at any given time. A credit card balance goes up when new charges post to the account. The balance goes down when the cardholder pays the bill. A credit card’s balance can always be found on the credit card statement or by logging in to the card issuer’s website.

Keeping track of your...

How much credit card debt is OK depends on how much you’re able to comfortably pay off based on your income and other outstanding debts. Your total monthly debt payments, including credit card payments, should be below 36 percent of your monthly income in order to keep things manageable and get approved for most loans. You can see what your debt-to-income ratio currently is by using WalletHub’s debt-to-income calculator.

Tips for Managing Credit Card Debt

The best strategy to pay off credit cards is to repay the credit card with the highest APR first because you will minimize interest charges that way. Rank all your credit cards by interest rate and, after paying the minimum amount due for each, put the rest of your debt budget toward the card with the highest APR.

Best Strategy to Pay Off Credit Cards

1. Pay at least the minimum amount due on...

You should pay off the credit card with the highest interest rate first because you’ll save the most money that way. Apply the biggest monthly payment you can manage to the balance with the highest interest rate and pay at least the minimum amount due on your other credit card accounts to avoid credit score damage. Then, move on to the balance with the next highest interest rate and repeat the process with each card until you’ve...

The best way to pay off a credit card balance is to pay it off in full each month by the due date to avoid any interest or fees. If you already have a credit card balance that you’re carrying from month to month, the best approach is to pay as much above the minimum payment as possible until the balance is paid off.

While making the minimum payment on time each month helps you...

The best credit card to pay off debt is the Wells Fargo Reflect® Card because it offers an introductory APR of 0% for 21 months from account opening on qualifying balance transfers. That allows cardholders to move existing debts to the card and save money while paying them off over time. The balance transfer fee is also relatively small, at 5% (min $5).

In addition, the Wells Fargo Reflect card has an introductory APR of 0% for 21 months from account opening on purchases. The card’s regular APR is 17.74%, 24.24%, or 28.49% Variable. Also, this card has a $0 annual...

The least costly way to pay off your credit card debt is to pay off the card with the highest APR first, which is called the avalanche method. By allocating any extra funds to the card with the highest interest rate, while still paying the minimum for other debts, you will cut down on the amount of interest you pay.  

Least Costly Way to Pay Off Your Credit Card Debt

1. Make a list of your credit card debts, including current...

Three ways to pay off credit card debt fast are to do a balance transfer, pay off the highest-APR card first, and pay off the debt with a personal loan. The actual time it will take to repay credit card debt depends on the methods you choose and what you can afford to pay toward it each month. WalletHub’s credit card payoff calculator can help you plan your repayment schedule.

3 Ways to Pay Off Credit Card...

Whether it's better to pay off one credit card or reduce the balances on two depends on several factors. Here are a few considerations to help you make an informed decision:

• Interest Rates: Compare the interest rates on both credit cards. If one card has a significantly higher interest rate, it may be more beneficial to focus on paying off that card first. By eliminating the high-interest debt, you can save money on interest...

If you have no money and are trying to pay off credit card debt, then you should try and find an additional source of income. This can be either a side hustle, working as a freelancer, or selling things that you no longer need. You should also cut any unnecessary expenses and avoid adding anything else to your existing debt.

However, if you already exhausted every way of bringing in more money or reducing...

You can get out of debt with no money and bad credit with the help of a debt management program or a debt consolidation loan for bad credit, especially if you have some income despite not having any money saved. You could also consider a loan from a friend or family member, and careful budgeting will go a long way, too.

How to Get Out of Debt with No Money and Bad Credit

...

Around 23% of Americans are debt free, according to the most recent data available from the Federal Reserve. That figure factors in every type of debt, from credit card balances and student loans to mortgages, car loans and more.

The exact definition of debt free can vary, though, depending on whom you ask. For example, some people don’t count mortgages because they are viewed as “good debt” by creditors, since they are secured by...

The average credit card debt by age ranges from $4,070 for people between the ages of 18 and 35 to $3,990 for people aged 75+. The combined average credit card debt (for all ages) is roughly $10,668 per household, according to WalletHub data and FDIC. It’s even higher if you only consider households that carry a balance from month to month.

Average Credit Card Debt by Age Range:

• 18-35: $4,070
• 35-44: $6,370
• 45-54:...

Around 60% of people are in credit card debt, according to 2021 data. In 2023, 8 in 10 adults in the U.S. (82%) reported having at least one credit card and 73% of those adults carried a balance. Also, nearly 48% of credit card accounts carry debt, according to the latest reports. For more context, out of the 600 million credit card accounts, over 280 million carried a monthly balance, indicating that millions of people in the U.S....

The average credit card debt held by Gen Z is $2,854, according to Q3 2022 data from the credit bureau Experian. This is the lowest average for any adult generation, which makes sense considering that people in Gen Z (ages 11-26) have had the least amount of time to rack up credit card debt. It’s important to note that the average only reflects members of Gen Z who are 18+ years old and can get...

The average credit card debt held by baby boomers is $6,245, according to Q3 2022 data from the credit bureau Experian. Baby boomers (ages 59-77) have the second highest debt level among all adult generations, behind only Gen X (ages 43-58). 

Part of the reason why baby boomers’ credit card debt is so high is that many of them have reached retirement age and are now on a fixed income. Many baby boomers also...

The average credit card debt for college students is $3,280, according to College Finance. This debt has become increasingly popular among college students. Plus, according to the College Finance study, it causes the most worry among college students, even more so than student loans. 

What you should know about college student credit card debt:

• 37.6% of college students are behind on their payments while 44.7% of them are only paying their minimum amount.
...

Yes, you can get debt forgiveness from credit cards, though please keep in mind that credit card issuers rarely forgive debts entirely. Unless you can prove that the debt is fraudulent, it’s not very likely that you will walk away with a clean slate. However, there are a few alternatives to explore if you’re looking to get rid of debt.

Alternatives to Credit Card Debt Forgiveness

• Credit Card Debt Settlement: Negotiating a...

Yes, you can get rid of debt without paying in rare cases, but it is very risky and will severely damage your credit score. You can get rid of debt without paying by waiting for your state’s statute of limitations to end and hoping you don’t get sued by creditors in the meantime. Just keep in mind that once the statute of limitations ends, your creditors can still try to collect money in other ways.

Alternatively,...

No, there aren’t any government programs to help you pay off credit card debt. The CARD Act does place restrictions on credit card companies that make it easier to pay off credit cards, and the bankruptcy process can get rid of credit card debt, but the government doesn’t normally assist with managing credit card debt. For that, you’ll need to find a private credit counselor, and you can start by viewing the U.S. Department of Justice’s approved list.

Unpaid credit card debt will drop off an individual’s credit report after 7 years, meaning late payments associated with the unpaid debt will no longer affect the person’s credit score. Unpaid credit card debt is not forgiven after 7 years, however. You could still be sued for unpaid credit card debt after 7 years, and you may or may not be able to use the age of the debt as a winning defense, depending on...

A credit card debt relief program is an arrangement designed to help you manage and reduce your credit card debt. Several methods can achieve debt relief, including debt settlement, debt management, debt consolidation, and bankruptcy.

Debt settlement involves negotiating a lower repayment amount, while debt management is the process of restructuring debt under a more favorable payment plan with lowered interest or waived fees. Debt consolidation allows you to use a a low APR loan or balance transfer credit card...

Yes, Capital One does have a credit card forbearance program. The program assists customers who can’t pay their Capital One credit card bills because of unforeseen circumstances. Some types of assistance available could include lowered interest rates, debt settlement, repayment plans, and more. The exact terms of the program depend on each person’s individual situation.

How to Qualify for the Capital One Forbearance Program

• You must show that you have a financial hardship...

The biggest differences between debt relief and debt consolidation are the number of options available for resolving debt and the credit-score impact. Debt relief is a term used to describe a variety of solutions available for debt resolution, including debt consolidation. Debt consolidation is a specific method of debt relief that involves merging multiple debts into one large balance with a single monthly payment.

Debt consolidation is a very popular method of debt relief, but...

The Chase credit card hardship program temporarily reduces monthly credit card payments in the event of unforeseen financial setbacks. Chase might waive late fees, reduce your interest rate, and/or put you on a payment plan. However, you must prove a legitimate financial hardship, such as serious illness or injury, death in the family, unemployment, divorce, or natural disaster, for example.

How to Enroll in the Chase Credit Card Hardship Program

• If your financial situation...

The four main ways to consolidate credit card debt are: 1) using a personal loan; 2) borrowing against your home equity; 3) transferring your balances to one credit card; and 4) joining a debt consolidation program. Those are actually the options for consolidating all types of debt, not just credit card debt. The option that is best will depend on what interest rates you can qualify for, how much debt you need to consolidate, what your credit rating is...

The easiest way to consolidate debt is to get a debt consolidation loan with no credit check. When you apply for one of these loans, there will be no hard inquiry into your credit history, making it easy for you to qualify if you have bad credit or no credit. You may or may not get a large enough loan with a low enough APR for consolidation to be worth it, though.

Easiest Debt Consolidation Loans to Get (No Credit Check)

To get a debt consolidation loan, you must be at least 18 years old and have a steady income as well as a credit score of at least 580. Not all debt consolidation loans will require a 580+ credit score, but it’s unlikely you’ll get rates that are worthwhile for consolidation with a lower score. People who meet the general requirements for a debt consolidation loan will find the process of getting approved to be...

The best debt consolidation credit card is the Citi Simplicity® Card because it offers an intro APR of 0% for 21 months on balance transfers, along with a $0 annual fee. You can avoid finance charges for more than half a year longer than average with this card, which should produce lots of savings, despite the transfer fee. You have to pay 3% intro fee ($5 min) for each transfer in first 4 months, and 5% ($5 min) for each transfer after that. There’s also a regular APR of 17.74% - 28.49% (V).  

When comparing credit cards for debt consolidation, your goal should be to find...

The best low interest credit card for debt consolidation is the Citi Simplicity® Card because it has an intro APR of 0% for 21 months and a $0 annual fee. The long intro period gives you valuable time to pay off your transfer with no interest.

Just bear in mind that the regular APR is 17.74% - 28.49% (V). There is also a balance transfer fee: 3% intro fee ($5 min) for each transfer in first 4 months, and 5% ($5 min) for each transfer after that. The Citi Simplicity Card has a starting credit limit of $500, but it could be higher depending...

You generally can’t consolidate debt without hurting your credit at least a small amount in the short term. Debt consolidation usually requires a new loan or line of credit, and the hard inquiry into your credit history that happens when you apply typically leads to a slight dip in your credit score. This decrease is only about 5-10 points in most cases and lasts up to 12 months, but the damage is repairable.

Credit score...

The best way to do a balance transfer is to apply for a new credit card with a low balance transfer APR and low fees. If your balance transfer credit card application is approved, the new card’s issuer will pay your original creditor for the amount transferred. You will then owe that amount, plus a balance transfer fee of 0% - 3%, to the balance transfer card’s issuer. If you repay the full amount of your balance...

The catch with a balance transfer credit card is that you'll likely have to pay a balance transfer fee of 3% or more, and you might not save money once the 0% APR period ends because interest charges will apply to any remaining balance. You also need to have good credit to get a 0% balance transfer card in most cases.

Things You Could Consider a Catch With Balance Transfers

Fees

Not all balance transfer...

The pros of balance transfers include saving money on interest, consolidating debt, and possible improvement in credit score in the long run. On the other hand, some of the cons of balance transfers are balance transfer fees, high regular APRs, and above-average score requirements. Generally, when you transfer a balance, you’re shifting high-interest debt to a credit card with a lower interest rate.

Pros and Cons of Balance Transfers

The best credit card calculators are the credit card payoff calculator, credit card interest savings calculator, and balance transfer calculator from WalletHub because they are free, easy to use, and capable of finding hidden savings. The key is to select the right type of credit card calculator for the objective at hand.

Best Credit Card Calculator to Use, by Situation

If you want to determine what it will take to become debt free: Use WalletHub’s credit card payoff calculator.

This type of credit card...

It would take more than 19 years to pay off a $10,000 credit card balance if you only paid the minimum, assuming an interest rate of 22% and a minimum payment of 3% of the balance. The exact amount of time depends on how much your issuer’s required minimum payment is and what your credit card’s interest rate is.

For example, with an interest rate of 22% (average for existing credit card accounts) and...

You can calculate your monthly credit card payment from multiplying the monthly interest rate by the outstanding balance. Your card's monthly rate can be obtained by dividing its APR by 12 for the number of months in a year. The simplest way to do that is using a credit card calculator.

How to Calculate Your Monthly Credit Card Payment

1. Open a free credit card calculator.
2. Fill in your card’s balance and APR.
3. Choose the...

The most strategic way to use credit card calculators is to make them integral to your credit card decision-making process. In other words, before making any significant decisions relating to your credit card use or spending, first crunch the numbers with the appropriate credit card calculator. This will make it easier to pick the right credit card, set goals, evaluate the efficacy of taking on new debt, and manage your finances better.

For example,...

Yes, you can convert your credit card debt to a loan by using the money from the loan to pay off your credit cards. Many banks, credit unions, and online lenders offer debt consolidation loans, which are designed to pay off multiple balances, thus combining the debts and allowing for one payment per month.

A common type of loan for consolidating credit card debt is an unsecured personal loan. Unsecured personal loans don’t require you to put anything...

The types of loans that can be used for debt consolidation are unsecured personal loans, secured personal loans and home equity loans. You can also use other methods to consolidate debt, such as a balance transfer credit card or a home equity line of credit.

Types of Loans Used to Consolidate Debt

Unsecured personal loans

An unsecured personal loan is the best way to consolidate debt because you do not have to put anything...

Yes, you can use a personal loan for credit card consolidation. Borrowers can use the funds from a personal loan for almost anything, including paying off credit card debt. Some lenders offer personal loans that they brand as “debt consolidation loans,” with their own set of interest rates. For example, LightStream’s overall personal loan APRs range from 3.99% to 17.48%, but their rates for debt consolidation loans range from 5.99% to 17.29%. Most lenders don’t...

The pros of using a personal loan to pay off credit card debt include the potential to get lower interest rates and the ability to consolidate multiple debts into one monthly payment. The interest savings and convenience can help you get debt-free sooner, which should also lead to credit-score improvement.

The cons of using a personal loan to pay off credit card debt include the temptation to overspend after your card’s credit line is...

The best credit card consolidation loans for fair credit come from LightStream, a division of SunTrust Bank. LightStream’s credit card consolidation loans have a relatively low APR, ranging from a minimum of 5.99% to a maximum of 17.29%, depending on an applicant’s creditworthiness. Considering the average existing credit card account charges around 14%, LightStream provides the potential to save a lot on interest. LightStream credit card consolidation loans require a credit score of 660+, according...

Among the credit cards that allow balance transfers from personal loans there are those issued by Bank of America, Barclays, Capital One, Citi or Wells Fargo. Keep in mind, however, that the balance of the loan transferred must be within your card’s credit limit. You should also take into account that most balance transfer cards won't allow you transfer existing debt if it's from the same bank. That means you won't be able to transfer a Citi personal loan...

Yes, you can consolidate car loans and credit cards together using a personal loan, a balance transfer credit card, a home equity loan, or a home equity line of credit. Once you apply and are approved, simply use your new loan or line of credit to pay off your outstanding debts. This will consolidate your debt with your new lender.

Your new loan, line of credit, or credit card should have a lower interest rate than your current debts so you can save money in the long run....

It is possible to consolidate student loans and credit card debt together, most of the time. Borrowers can take out a personal loan and use the cash to pay off whatever debts they may have. Most lenders do not specify what the money must be used for. There are rare exceptions, though. For example, Payoff is a lender that only offers personal loans to pay off credit card debt. But in other cases, there should...

You should get a personal loan to pay off debt if it will save you more money than the best balance transfer credit cards. Personal loans are better than balance transfers in a few situations. The first is if your credit is not good enough to get a balance transfer card. Balance transfer cards with 0% APRs generally require a credit score of 700 or higher. You may be able to get some unsecured personal loans with a credit...

Your credit score could increase by 10 to 50 points after paying off your credit cards. Exactly how much your score will increase depends on factors such as the amounts of the balances you paid off and how you handle other credit accounts. Everyone’s credit profile is different.

You can estimate how much your credit score is likely to change after getting out of credit card debt using WalletHub's free credit score simulator.

How Paying Off...

No, paying off your credit card balance doesn’t hurt your credit score, on the contrary, it usually helps improve it. Paying off your credit cards reduces your overall debt, which puts you in a more stable financial position. Plus, reducing your credit card debt will improve your credit utilization ratio and therefore increase your score.

Why Paying Off Your Credit Card Doesn’t Hurt Your Credit

• Your total debt goes down: Paying off your credit cards reduces your overall debt, which puts you in...

The best way to pay off credit card debt without hurting your credit is to consolidate your debt with a loan or balance transfer credit card. There may be an initial dip in your score from a hard inquiry, but the positive effects quickly make up for it when you pay off the consolidated debt as planned.

If you want to see how debt consolidation may impact your credit score, check out WalletHub’s credit score simulator. 

You should pay at least the minimum amount required on your credit card by the due date each month if you want to raise your credit score. For the best results, pay the monthly bills in full to avoid interest charges and keep your credit utilization below 30% (under 10% is ideal).

The amount your credit score will increase after your payment depends on how high your credit utilization ratio was before the payment and what your...

It’s better to pay off your credit card than to keep a balance because paying the card off will save you money on interest. Credit card companies charge interest when you don’t pay your bill in full every month, but you’ll enjoy a grace period with no interest if you always pay your full statement balance by the due date.

Some people think you need to carry a balance in order to see positive information...

It usually takes up to 30 days for your credit to improve after paying off a credit card. The exact timing depends on when your billing cycle ends and when the credit card issuer reports the payment to the major credit bureaus. Lenders typically report once a month. Paying off a credit card does not always lead to credit score improvement, though.

You can use WalletHub’s free credit score simulator to find out how paying off your credit card will...

You should respond to a court summons for credit card debt by first trying to settle the issue with your creditor and then by fighting the lawsuit in court if you’re unable to come to an agreement. The worst thing you can do is ignore the summons. It’s not going to go away, and pretending it doesn’t exist will just result in the court ruling against you, ordering you to repay the full amount your creditor says...

You should file for bankruptcy for credit card debt if you have exhausted all other options, such as debt consolidation loans and credit counseling. Bankruptcy can be a useful opportunity to wipe your credit card slate clean, since credit card debt is typically discharged during both Chapter 7 and Chapter 13 bankruptcy. It’s common, too – in 2020, for example, more than 75% of bankruptcy filers had credit card debt.

Filing for bankruptcy will significantly damage your credit...

Debt settlement and bankruptcy are the two major options of last resort for people with unmanageable debt, especially from credit cards. It is better to pursue debt settlement when you want to minimize damage to your credit score and when avoiding the stigma of bankruptcy is important. It is better to file bankruptcy if a faster debt resolution with a greater chance of success and less frequent creditor communication and are top priorities.

While debt...

Credit card companies sue for non-payment in about 15% of collection cases. Usually debt holders only have to worry about lawsuits if their accounts become 180-days past due and charge off, or default. That’s when a credit card company writes off a debt, counting it as a loss for accounting purposes. But even after a charge-off, credit card companies can still pursue a debt holder for repayment or sell their debt to a collection agency. If...