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One of the biggest drags on American household finances is credit card debt. Some estimates show that the average family can have about $15,000 in credit card debt. Furthermore, about a third of those with credit card debt pay somewhere around the minimum required each month. This could mean about $1,000 or more in interest costs each year. This is money that families pay that they cannot afford, but there are steps that can let the average American cut their credit card debt.

Pay More Than the Minimum

One of the biggest problems that can come with credit cards is the compounded interest that accrues with a failure to pay off the entire balance each month. Depending upon the interest rate, even a small balance around $1,000 could lead to between $100 and $200 in interest costs each year if a cardholder only makes the minimum payment. Additionally, with a common minimum payment of around 2% of the outstanding balance, it would take more than four years to pay off the card. Adding more expenses to the card would increase the amount of interest paid and the repayment period. Therefore, it’s important to pay more than the minimum to cut down on interest charges as well as the repayment period.

Use the Debt Snowball or the Debt Avalanche Technique

There are a couple of popular repayment methods. The first is the debt snowball. This requires a borrower to make the minimum payments on all debts but the smallest. By throwing any additional income at the smallest debt, the payment that went to that debt can go toward the next-smallest debt. As each debt is paid off, the snowball gets bigger, and the repayment process picks up speed. This helps people who need to get financial wins to stay motivated.

The next option makes more mathematical sense. The debt avalanche requires arranging debts in order of the interest rate. A borrower would still pay the minimum on all debts but one. In the avalanche, every dollar available after meeting the minimum payment on all debts should go toward the debt with the highest interest rate. After that debt is paid in full, the additional money would go toward the debt with the highest remaining interest rate. The process should continue until all debts are paid off.


It’s possible to refinance credit card debt. Those who have good credit scores can open up a card with an introductory interest-free period. While this offer is in effect, there is usually no interest on balance transfers, and this can be a great way to pay down the principal of some debts. If the credit line is large enough, it could be possible to consolidate several credit card bills into one. These offers do not change behavior, but they can help those who are looking to save on interest costs.

Getting ahead of credit card debt requires discipline. Paying more than the minimum amount due is key to getting out of credit card debt quickly. Additionally, using a strategy like the debt avalanche or a consolidation of credit card debt with an interest-free balance transfer offer can be a great way to save on interest costs over time.

Chris Jacob is a Registered Representative with Saxony Securities, Inc.. Securities offered through Saxony Securities Inc. (SSI). Member FINRA, SIPC. Non-security products and services or tax services are not offered through SSI. Cadeau is not affiliated with SSI.