What amount of credit card debt is bad?
The general rule of thumb is that you shouldn't spend more than 10 percent of your take-home income on credit card debt.
In general, you never want your minimum credit card payments to exceed 10 percent of your net income. Net income is the amount of income you take home after taxes and other deductions. You use the net income for this ratio because that's the amount of income you have available to spend on bills and other expenses.
$5,000 in credit card debt can be quite costly in the long run. That's especially the case if you only make minimum payments each month. However, you don't have to accept decades of credit card debt.
Is $2,000 too much credit card debt? $2,000 in credit card debt is manageable if you can pay more than the minimum each month. If it's hard to keep up with the payments, then you'll need to make some financial changes, such as tightening up your spending or refinancing your debt.
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. It can feel disheartening, especially when you're not sure what you can do to make real progress.
“That's because the best balance transfer and personal loan terms are reserved for people with strong credit scores. $20,000 is a lot of credit card debt and it sounds like you're having trouble making progress,” says Rossman.
It will take 41 months to pay off $30,000 with payments of $1,000 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
Running up $50,000 in credit card debt is not impossible. About two million Americans do it every year. Paying off that bill?
It will take 47 months to pay off $20,000 with payments of $600 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
However, multiple accounts may be difficult to track, resulting in missed payments that lower your credit score. You must decide what you can manage and what will make you appear most desirable. Having too many cards with a zero balance will not improve your credit score. In fact, it can actually hurt it.
How many Americans have over $20,000 in credit card debt?
| What is your total current credit card debt? | Percentage of respondents |
|---|---|
| More than $20,000 | 10.53% |
| More than $10,000 | 10.93% |
| $5,001 to $10,000 | 12.84% |
| $2,501 to $5,000 | 16.05% |
| Age group | Average credit card debt |
|---|---|
| Gen Z (18-25) | $2,854 |
| Millennials (26-41) | $5,649 |
| Gen X (42-57) | $8,134 |
| Baby boomers (58-76) | $6,245 |
The bottom line: Credit card debt is considered "bad" debt because of its high interest rates and low minimum payments, and the fact that it isn't used to buy appreciating assets. Use your credit cards for the rewards and other benefits, but pay the balance in full each month.
| Generation | Average total debt (2023) | Average total debt (2022) |
|---|---|---|
| Gen Z (18-26) | $29,820 | $25,851 |
| Millenial (27-42) | $125,047 | $115,784 |
| Gen X (43-57) | $157,556 | $154,658 |
| Baby Boomer (58-77) | $94,880 | $96,087 |
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.
- Make a list of all your credit card debts.
- Make a budget.
- Create a strategy to pay down debt.
- Pay more than your minimum payment whenever possible.
- Set goals and timeline for repayment.
- Consolidate your debt.
- Implement a debt management plan.
Key takeaways
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
- Make a Budget and Stick to It. You must know where your money goes each month, full stop. ...
- Cut Unnecessary Spending. Remember that budget I mentioned? ...
- Sell Your Extra Stuff. ...
- Make More Money. ...
- Be Happy With What You Have. ...
- Final Thoughts.
- Take advantage of a debt relief service.
- Consolidate your debt with a home equity loan.
- Take advantage of 0% balance transfer credit cards.
To pay off $30,000 in credit card debt within 36 months, you will need to pay $1,087 per month, assuming an APR of 18%. You would incur $9,116 in interest charges during that time, but you could avoid much of this extra cost and pay off your debt faster by using a 0% APR balance transfer credit card.
How to pay off $15,000 in debt quickly?
- Take advantage of debt relief programs.
- Use a home equity loan to cut the cost of interest.
- Use a 401k loan.
- Take advantage of balance transfer credit cards with promotional interest rates.
Since taking office, the Biden-Harris Administration has approved debt cancellation for nearly 3.9 million Americans, totaling almost $138 billion in debt relief through various actions.
The average FICO credit score in the US is 718, according to the latest FICO data from April 2023. The average VantageScore is 701 as of January 2024. Credit scores, which are like a grade for your borrowing history, fall in the range of 300 to 850. The higher your score, the better.
Men have 20% more personal loan debt than women. Men have 16.3% more auto loan debt than women. Men have 9.7% more mortgage debt than women. Women have 2.7% more student loan debt than men.
Living on credit cards can't last forever, because eventually you'll reach the end of your credit line. Consider it a stop-gap measure, not a permanent plan. “In a lot of cases, you won't know how long your emergency will last,” says Nitzsche. “It could be a few months, it could be a year.
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