| Here are some strategies to pay off that big credit card debt | | |  | WED, SEP 08, 2021 | | | | If you're buried in credit card debt, sadly you're not alone.
Overall, Americans owe $800 billion across almost 500 million credit card accounts. The average debt for an individual now stands at $6,270.
A credit card is typically the most expensive debt you can take on, with average percentage rates in the teens and 20s. So, if you're just making the minimum payment each month, it will take you a very long time to pay off your balance — possibly decades. During that time, you will also be paying a lot of interest. Carrying a great deal of credit card debt is a threat to your financial security.
That's why it's essential to pay off credit card debt.
It's important to understand there's "good debt" and "bad debt." Debt that helps you acquire appreciating assets, like a house or a business, or an education — through student loans — is generally considered good.
But there is one type of debt that is always considered bad — credit card debt. The "bad debt" is debt that doesn't provide something of ongoing value. It's debt that should be avoided and needs to be the first debt you work on paying off.
It will hold you back from making the most of your income. The money that goes to pay those high credit card bills could be used toward an emergency savings plan, to create a college savings fund or toward buying a home.
There are several debt-reduction strategies worth considering.
With the "debt-snowball" method, you pay off debt in order of smallest to largest, no matter what the interest rate owed on the cards. The "debt avalanche" is an accelerated system of paying down debt that is based on paying the loan with the highest interest rate first. Still, others may try "debt consolidation," which rolls multiple debts into a single payment with a new loan or another credit card to pay off the existing balances owed. The goal with debt consolidation is to secure new financing with a lower interest rate.
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