The average American household has over $6,000 in credit card debt, which can be a challenging amount to manage. If you’re just making minimum payments, expect to stay in credit card debt for many years — about 25 years on $6,000, by our calculations.
Here’s how I paid off my $6,000 in credit card debt, along with expert advice for tackling balances you may struggle with.
How I Racked Up $6,000 in Credit Card Debt
My husband and I owned a brewpub during the COVID-19 pandemic and struggled to keep operations afloat with shutdowns and limited traffic. We used a business credit card for some expenses to keep operations running.
During lean times at the brewery, I usually only paid the minimum monthly payment on the credit card. I made larger monthly payments when traffic picked up again but never enough to pay the balance in full each month.
My credit card’s variable annual percentage rate stayed around 20%, adding steep interest charges to my monthly bill. My minimum payment was typically around $160, and about $100 was interest charges. Occasionally, we had to add new charges to the balance, further impeding payoff progress.
Treading Water With Minimum Payments
Each month you don’t pay your credit card balance in full, you add interest to your balance and find yourself paying interest on interest. That makes your debt cost more and extends the amount of time it will take you to pay off your credit card debt.
Despite the payments I dutifully made every month, the interest charges and new expenses kept the balance around $6,000. We eventually decided to close the brewery, which became a turning point for managing the business credit card debt.
Business Credit Card Debt Became Personal
When the brewery was open, we paid the business credit card debt with business income. But once it closed, the brewery had no income. As with most small-business credit cards, I signed a personal guarantee when I opened it, making me liable for the debt.
That personal responsibility changed the game. I pay balances in full every month on my personal cards and didn’t want to pay additional interest on this debt. Therefore, I made it my mission to clear it as soon as possible while paying the least interest.
[Read: Best Balance Transfer Cards]
How I Paid Off $6,000 in Credit Card Debt
I chose to use a balance transfer credit card to tackle the debt. “A balance transfer card can be helpful in accelerating paying off debt,” says Sameer Gupta, CEO of credit card optimization tool Uthrive and former director of product innovation for American Express. “You’re saving on interest, so what you were paying in interest you can put back into the payment to make a larger payment each month. Those payments in your 0% period will all go toward your principal.”
I opened a Citi® Diamond Preferred® Card because it offered a 0% intro APR for 21 months on Balance Transfers (then a 17.24% to 27.99% (variable) APR) and had no annual fee. I paid a 5% balance transfer fee, which totaled $300 for the $6,000 balance. It saved me more than $1,000 in interest, shortened my repayment time and gave me a better sense of control over managing the debt.
With 21 months to pay off the balance interest-free, I calculated how much I’d have to pay each month to clear the balance before interest charges were applied. It worked out to $300, which covered the balance plus the balance transfer fee, for a total of $6,300. I took additional freelance assignments to cover the payments and paid off the balance in less than two years interest free.
Was Using a Balance Transfer Offer Worth It?
I briefly considered a personal loan, but interest rates were high. Most debt consolidation loans had APRs of 10% or more — much higher than the 5% balance transfer fee I paid.
I’m confident a balance transfer card was the right choice for my credit card debt. It saved me from paying interest every month and broke an intimidating $6,000 balance into manageable $300 chunks.
Still, using a balance transfer had its drawbacks. I had to pay $300 to transfer the balance, which was initially added to my balance and was the equivalent of one month’s payment. However, the math worked out much better for paying the balance transfer fee instead of interest. Consider the payoff scenarios for a $300 payment with 20% interest vs. a 5% balance transfer fee:
Using a balance transfer card, I shaved four months off my repayment and saved over $1,000 in interest charges.
Did It Affect My Credit?
My credit score dipped for a few months because my credit utilization increased. I had an $11,000 credit limit on the Citi® Diamond Preferred® Card where I transferred my balance, and adding a $6,300 balance put that card’s credit utilization at 57%. But that was a temporary problem, and my credit score rebounded once I got my credit utilization down. Plus, my on-time payments helped add to the positive payment history on my credit report.
[Read: Best Debt Consolidation Loans.]
Expert Advice on Paying Off Credit Card Debt
I used a balance transfer card to pay off thousands in credit card debt and consider my approach successful, but it’s not the only way to become debt free. If you’re struggling with credit card debt, here are some other tips to get ahead of your balances:
— Pay it off as soon as possible. Interest payments can be significant in the long run, says personal finance expert Barry Choi, founder of the Money We Have website. “It’s best to avoid making just the minimum payment since it’ll barely make a dent on what you owe. Instead, try to pay off as much as you can each month.”
— Cut spending. Choi suggests identifying expenses you can reduce from your monthly budget and then using the money saved to pay toward your credit card debt.
— Bring in more money. Try to pick up more hours at work or sell items you don’t need to get additional income to apply to your debt, says Choi.
— Make large payments when possible. Gupta says if you can’t get approved for a balance transfer card, make as large of a payment as possible while staying current on other important payments, such as your rent or mortgage. “In a few months, you can improve your credit and will be more likely to be approved for a balance transfer credit card,” he says.
Once you’ve paid off your credit card debt, avoid carrying a balance again. Make a monthly plan for how much you can afford to charge on your credit card and pay it off in full when the bill comes due. “The key thing to remember is not to go into debt again after things are paid off,” says Choi.
More from U.S. News
Is It Worth Paying a Hotel Credit Card Annual Fee?
What Happens if You Go Over Your Credit Card Limit?
How Long Does It Take to Pay Off $6,000 in Credit Card Debt? originally appeared on usnews.com
Update 02/21/25: This story was previously published at an earlier date and has been updated with new information.
