Key Points:
- It can take decades to pay off $10,000 in credit card debt
- Minimum payments go primarily towards interest
When you make a minimum payment on a credit card, you may be shocked by how little of an impact that payment had on your balance. And, that’s largely due to the way credit card payments are calculated. In many cases, your minimum payment is calculated as the interest charges plus 1% of the balance each month. In turn, the money for your minimum payment primarily goes to interest with little going toward your actual balance. So, it’s hardly surprising that it takes so long to pay credit card debt off. But how long does it take to eliminate credit card debt if you owe $10,000 to credit card companies? And are there ways to speed up the process? Here’s what you need to know.
Three factors typically play a role in how long it takes to pay a debt off when making only minimum payments: your balance, your interest rate and how your minimum payments are calculated. According to LendingTree, the average credit card interest rate in the United States is 24.59%. Considering a $10,000 debt and a 24% interest rate, here’s how long it might take you to pay off your credit card debt by making only minimum payments (based on common minimum payment calculations):
- 1% of the balance plus interest: It would take 29.5 years or 354 months to pay off $10,000 in credit card debt making only minimum payments. You would pay a total of $19,332.21 in interest over that period.
- 2.5% of the balance (including interest): It would take over 53.5 years — or 643 months — to pay off $10,000 making only minimum payments. You’ll pay a total of $38,218.97 in interest over this period.
- 5% of the balance (including interest): It would take 11.75 years — or 141 months — to pay off $10,000 making only minimum payments. You’ll pay a total of $6,553.58 in interest over that period.
If you’re like most people, you don’t want to be in credit card debt for decades on end. So, how do you speed up the process? Here are a few options to consider:
- Stick to a fixed payment: One reason it takes so long to pay off credit card debt is that as the balance falls, the minimum payment does too. So, chances are you can speed up the payoff process significantly by making fixed payments. In the example above, if your credit card company calculates payments as 1% of your balance plus interest, your minimum payment on $10,000 in credit card debt would be about $300. But if you consistently make $300 fixed payments, rather than making minimum payments, you’ll be out of debt in under five years — or 56 months to be exact. That savings in time is coupled with significant savings in interest. In fact, making fixed payments in this example would mean you pay $6,644.17 in interest, rather than $19,332.21 — resulting in savings of $12,688.04.
- Use a debt consolidation loan: Debt consolidation loans allow you to roll your credit card debt into a loan with better terms. You can use these loans to consolidate multiple high interest rate accounts into one account or to bring down the interest rate on a single debt with high interest.
- Get expert help: If you’re having a difficult time making your credit card payments, it may be time to reach out to experts for help. The truth is that over 80% of Americans have credit cards in their wallets and many struggle with credit card debt, so you aren’t alone.
It can take quite a while to pay credit debt off. If you want to eliminate it quickly, though, it’s important to “determine what will motivate you to keep paying your debt off,” sayss Beckham. “Debt can be tackled in a variety of ways — and unfortunately there is no magic wand that makes it disappear — but at the end of the day, what works for you is the method that is consistent and keeps you motivated.”
