It can take decades to pay off $5,000 in credit card debt, but it doesn’t have to. According to the U.S. Government Accountability Office, around 82% of adult Americans have a credit card account, but many of those individuals carry balances from month to month, taking years, if not decades, to pay off their debt. Credit card minimum payments are calculated as a small percentage of the balance, so as the balance decreases, the minimum payment also decreases. With an average credit card interest rate in the U.S. of over 24%, it can take a significant amount of time to pay off $5,000 in credit card debt with minimum payments.
For example, if the minimum payment is calculated as 1% of the balance plus interest, it would take approximately 24 years to pay off $5,000 in credit card debt with minimum payments, with a total cost of $14,332.25 including interest. If the minimum payment is 2.5% of the balance, it would take over four decades to pay off the debt, with a total cost of $23,218.87. Finally, if the minimum payment is 5% of the balance, it would take just under 10 years to pay off the debt, with a total cost of $8,220.26 including interest.
To pay off credit card debt faster, it is recommended to take advantage of debt relief services or employ strategies such as the debt avalanche or the debt snowball. Debt relief programs can offer consolidation and settlement options that can help pay off credit cards faster while saving money on interest. The debt avalanche involves finding a comfortable payment amount and committing to that payment, making minimum payments to all lenders except the one with the highest interest rate, and focusing on paying off the highest interest rate debt first. The debt snowball method involves focusing on the highest balance debt first and using small wins to motivate continued debt repayment. By employing these strategies, individuals can reduce the amount of time they spend in debt and the total interest paid.
