The average credit card charges around 21% APR, according to Motley Fool Money research. On a $5,000 revolving balance, that debt costs a little over $1,160 each year in interest.
Where the math gets really scary is only making minimum payments, or continuing to pile on new debt. Credit card interest compounds daily, so the longer you carry a balance the more you end up paying interest on your interest.
I spend my days helping people get out of debt so they can build wealth. Here’s what that $5,000 balance is really costing, and some helpful paths out.
What $5,000 in credit card debt costs at today’s rates
The real cost depends on how long you let the debt linger. Here’s what the same $5,000 balance costs at about 21% APR, depending on what you pay each month:
|
Starting Balance |
Monthly Payment |
Time to Pay Off |
Total Interest Paid |
|---|---|---|---|
|
$5,000 |
$150 |
4 yrs, 3 mos |
$2,570 |
|
$5,000 |
$200 |
2 yrs, 10 mos |
$1,633 |
|
$5,000 |
$250 |
2 yrs, 1 mo |
$1,208 |
|
$5,000 |
$300 |
1 yr, 8 mos |
$963 |
Data source: Author’s calculations.
The pattern is hard to miss. If you can make slightly higher payments, you’ll pay way less interest overall.
The absolute worst case scenario is making minimum payments. Or, adding new debt to the balance instead of paying it down. If you carry $5,000 over month to month for a whole year, it’ll continue to cost ~$1,160 every year.
So if you can spare even a little more each month, do it. Even a $50 difference in payments each month means a huge reduction in your payoff timeline and hundreds saved in interest overall.
How to pay it down faster
The quickest way to kill credit card debt is to attack the interest, not just the balance.
Here are a few proven moves I’ve seen work wonders:
- Target the highest rate first. If you have multiple credit cards with balances, put any extra money into your highest-APR balance first. This will save you the most interest.
- Or start with the smallest balance. Targeting just a single card at a time works too, and lets you focus on quicker wins and momentum.
- Ask for a lower interest rate. Making a quick call to your card issuer can sometimes get a few points off your APR — for free. It never hurts to ask what your options are.
- Transfer balances to a 0% intro APR card. If your credit score is good, you might qualify for a balance transfer card with a 0% intro APR. This lets you move your debt over and “pause” interest during the intro window. Every payment then goes straight to the balance.
Most transfers charge a fee, usually 3% to 5%, so factor that in. On a $5,000 transfer, a 3% fee would cost $150.
The Citi Double Cash® Card, from our partner, is an option worth a look. It offers 0% intro APR for 18 months on Balance Transfers so you can pay down what you owe interest-free for a stretch. After the intro period ends, a 18.24% – 28.49% (Variable) APR will apply.
Better yet, it earns 2% cash back on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases, so you can keep it as a rewards card once your debt has been cleared.
Credit Score:
Falling within this credit range does not guarantee approval by the issuer. An application must be submitted to the issuer for a potential approval decision. There are different types of credit scores and creditors use a variety of credit scores to make lending decisions.
Recommended Credit Score required for this offer is: Good/Excellent (670-850)
Credit Score
Falling within this credit range does not guarantee approval by the issuer. An application must be submitted to the issuer for a potential approval decision. There are different types of credit scores and creditors use a variety of credit scores to make lending decisions.
Intro APR
Purchases: N/A
Balance Transfers: 0%, 18 months on Balance Transfers
Regular APR
18.24% – 28.49% (Variable)
Rewards
Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, pay at least the minimum due on time. Plus, earn 5% total cash back on hotel, car rentals and attractions booked with Citi Travel.
2% cash back
Annual Fee
N/A
$0
Welcome Offer
Earn $200 cash back after you spend $1,500 on purchases in the first 6 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® Points, which can be redeemed for $200 cash back.
$200
-
This card combines a top-notch balance transfer offer with best-in-class unlimited 2% cash back on purchases. There’s no introductory APR for purchases, so you’ll need to pay those off in full every month if you want to avoid interest charges.
Read Full Review
-
- High cash back
- 0% intro APR balance transfer offer
- No annual fee
- Free credit score monitoring
- Foreign transaction fee
- No 0% intro APR on purchases
-
- Earn $200 cash back after you spend $1,500 on purchases in the first 6 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® Points, which can be redeemed for $200 cash back.
- Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, pay at least the minimum due on time. Plus, earn 5% total cash back on hotel, car rentals and attractions booked with Citi Travel.
- Balance Transfer Only Offer: 0% intro APR on Balance Transfers for 18 months. After that, the variable APR will be 18.24% – 28.49%, based on your creditworthiness.
- Balance Transfers do not earn cash back. Intro APR does not apply to purchases.
- If you transfer a balance, interest will be charged on your purchases unless you pay your entire balance (including balance transfers) by the due date each month.
- There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
Where to get help if you feel stuck
If you’re stressed or completely overwhelmed with credit card debt, you’re not alone — and you’re not stuck, either.
There are a handful of non-profit debt counseling organizations that do amazing work in helping people get unstuck. Two legit ones I trust are Money Management International (MMI) and the National Foundation for Credit Counseling (NFCC). These offer free introductory calls to discuss your situation and options.
And if your credit’s in decent shape, the simplest first move is pausing the interest with a balance transfer. Every dollar you pay then goes straight to the balance instead of the bank.
Start by comparing the top balance transfer cards right now, and see which offers best suit you.
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