Credit cards have many perks, but you need to be careful about how you use them. Because they only require small minimum payments every month, it's easy to spend more than you can afford. If you end up with credit card debt, it can be difficult to repay. It's also expensive, as the average credit card interest rate is now over 20%.
As you'd expect, it gets even more difficult (and more expensive), the higher your balance is. To show just how costly credit card debt can be, here's a look at how much a $10,000 balance could cost you. And if you're currently in this situation, we'll also look at the best ways to get out of credit card debt.
How much a $10,000 credit card balance could cost you
The amount a credit card balance costs you depends on the interest rate and how much you pay toward it. For this example, we'll use an interest rate of 20%, just under the current average.
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You're only obligated to make your credit card's minimum payment. Each card issuer has its method for calculating minimum payment amounts, but many set the minimum as interest charges plus 1% of the balance, so we'll use that. If you only make minimum payments, a $10,000 credit card balance will cost you $16,056.59 in interest and take 346 months to pay off.
Minimum payments on a $10,000 balance would start at $267 and decrease as you paid down what you owe. But if you kept paying the same $267 until your debt was paid off, you'd do it in 60 months and pay $5,810.26 in interest.
If you paid more than the minimum, you'd save even more. Here's how the amount of interest and the payoff timeline change based on how much you pay:
| Monthly credit card payment | Total interest | Payoff timeline |
|---|
| $300 | $4,718.19 | 50 months |
| $400 | $3,044.21 | 33 months |
| $500 | $2,266.07 | 25 months |
| $750 | $1,404.14 | 16 months |
| $1,000 | $1,030.45 | 12 months |
Data source: Author's calculations.
How to get out of credit card debt
The most important part of getting out of credit card debt is paying more than the minimum. As you just saw, there's a massive difference in how much interest costs you when you pay the minimum compared to when you pay more. And the more you can pay, the better.
Even if you're dealing with a large amount of debt, every little bit helps. Just look at how paying off a $10,000 balance changes if you go from paying $300 per month to $400. You pay off your balance 17 months earlier this way and save nearly $1,700.
So, if you can work overtime or cut your spending to have more money to apply to your credit card debt, it's absolutely worth it. The amount you pay has the biggest impact on how quickly you pay off debt -- and how much it costs you.
There are also ways to refinance your credit card debt. The best options require a good credit score, meaning a score of 670 or higher. Here are two of the most popular options:
- Balance transfer credit cards: These have a 0% intro APR on balance transfers, and some have introductory periods that last 15 months or longer. During the intro period, you can pay down your credit card debt interest-free.
- Debt consolidation loans: These are personal loans designed for paying off debt. They generally have lower interest rates than credit cards. You'll also be able to pay back your loan on a set timeline with fixed monthly payments.
Financial tools like these can help you pay back credit card debt. That being said, the key is still to pay as much as you can. It's ultimately your payment habits that make the difference in getting rid of credit card debt.
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FAQs
One of the best ways to improve your credit score is to lower your credit utilization ratio. A good rule of thumb is to keep your credit utilization under 30 percent. This means that if you have $10,000 in available credit, you don't ever want your balances to go over $3,000.
How much should you spend on a $10,000 credit card? ›
You should use less than 30% of a $10,000 credit card limit each month in order to avoid damage to your credit score. Having a balance of $3,000 or less when your monthly statement closes will show that you are responsible about keeping your credit utilization low.
What percentage of cardholders have a balance of over $10000? ›
Key findings. The percentage of credit cardholders with five-figure debt continues to grow. 22.6% of American credit cardholders across the 100 largest metros have balances of at least $10,000 — up 45.8% from 2019 and 32.9% from 2021.
Is $10k in credit card debt bad? ›
Having any credit card debt can be stressful, but $10,000 in credit card debt is a different level of stress. The average credit card interest rate is over 20%, so interest charges alone will take up a large chunk of your payments. On $10,000 in balances, you could end up paying over $2,000 per year in interest.
What credit card has a 10k limit? ›
The best credit card with a $10,000 limit is the Chase Sapphire Reserve® card because it offers a minimum credit limit of $10,000 along with elite travel rewards and benefits. Chase Sapphire Reserve is a particularly good option for big spenders with excellent credit.
What is 30% of $10,000 credit limit? ›
Most credit experts advise keeping your credit utilization below 30 percent, especially if you want to maintain a good credit score. This means if you have $10,000 in available credit, your outstanding balances should not exceed $3,000.
What is the average credit card balance in the US? ›
On an individual level, the overall average balance is around $6,501, per Experian's data. Other generations' credit card debt falls closer to that average or below. Here's the average amount of credit card debt Americans hold by age as of the third quarter of 2023, according to Experian.
How much credit card balance is too high? ›
Then add up the balances on all your credit cards and compare the two numbers. If your total balance is more than 30% of the total credit limit, you may be in too much debt. Some experts consider it best to keep credit utilization between 1% and 10%, while anything between 11% and 30% is typically considered good.
How many people have $50,000 in credit card debt? ›
Running up $50,000 in credit card debt is not impossible. About two million Americans do it every year. Paying off that bill?
How fast can I pay off 10k in credit card debt? ›
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.
7 ways to pay off $10,000 in credit card debt
- Opt for debt relief. One powerful approach to managing and reducing your credit card debt is with the help of debt relief companies. ...
- Use the snowball or avalanche method. ...
- Find ways to increase your income. ...
- Cut unnecessary expenses. ...
- Seek credit counseling. ...
- Use financial windfalls.
Outside of bankruptcy or debt settlement, there are really no other ways to completely wipe away credit card debt without paying. Making minimum payments and slowly chipping away at the balance is the norm for most people in debt, and that may be the best option in many situations.
Is it bad to go over 30% of the credit limit? ›
To maintain a healthy credit score, it's important to keep your credit utilization rate (CUR) low. The general rule of thumb has been that you don't want your CUR to exceed 30%, but increasingly financial experts are recommending that you don't want to go above 10% if you really want an excellent credit score.
Is 40% credit utilization bad? ›
A low ratio suggests that your balance is manageable, while a high one suggests that you may be having a hard time paying your debts. Experian, one of the three big credit reporting agencies, recommends keeping it at 30 percent or lower.
What is 30% of $1000 credit limit? ›
Keeping your credit utilization at no more than 30% can help protect your credit. If your credit card has a $1,000 limit, that means you'll want to have a maximum balance of $300.
How much should I spend on my credit card if my limit is $1000? ›
The Consumer Financial Protection Bureau recommends keeping your credit utilization under 30%. For instance, if you have a $1,000 credit limit, aim to keep your credit below $300.
