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Are you fighting off thousands in credit card debt? If so, you’re far from alone.
The average American carries $6,610 in credit card debt, according to Motley Fool Money research, with total credit card debt in the U.S sitting at a whopping $1.263 trillion. That’s not going away anytime soon — but there are some things you can do to help put a dent in it.
Here’s what’s really going on with credit card debt in America right now — and what you can do with a big existing balance.
How much credit card debt does the average American have?
The average American has $6,610 in credit card debt per person, and $9,371 per household. On an interest rate of, say, 20% APR, that’s thousands of dollars in interest costs every year. Not great.
Let’s break it down further, though — debt varies a lot by age. Gen X carries the heaviest average balance at $9,600, while Gen Z sits at the low end with $3,493. Part of the reason: Younger borrowers tend to have lower credit limits, which naturally caps how much debt they can rack up.
Income matters too, but not in the way you might expect. Middle-income earners are actually the most likely to carry a balance — 57% of people in the 40th to 59th income percentile have credit card debt, more than either the richest or poorest Americans.
Why is credit card debt so costly?
Credit card debt is expensive because interest rates are at near-historic highs. The average interest rate on credit card balances is around 20% APR — an astronomical number compared to loans, mortgages, and other types of credit.
At 20% APR, an average $6,000 balance is costing you roughly $1,200 a year in interest alone. That’s money you have to pay that isn’t making a dent in your actual balance (your “principal”). So you can literally pay thousands a year to your issuer and barely gain any ground.
How do you get out of credit card debt faster?
The fastest way to get out of credit card debt is to stop the clock on interest while you pay it down. A balance transfer credit card does just that.
With a balance transfer card, you can move your balance over to your new card and pay it off interest-free for a limited time. The best cards offer around 12-21 months of 0% interest, which can be huge for getting a hold on your debt.
Whichever 0% intro APR card you choose, run the math first. Cards usually carry a balance transfer fee of 3% to 5% of the amount you move, so you want to make sure the interest you’ll save outweighs that upfront cost. But in most cases, it’s an easy win.
Still comparing options? Browse our list of the best balance transfer credit cards to see which card makes the most sense.
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