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
A $10,000 credit card balance could cost you $16,056.59 in interest and take 346 months to pay off if you make minimum payments. By paying more than the minimum, you can pay off credit card debt much faster and cheaper. Tools to refinance debt, such as balance transfer cards and debt consolidation loans, can also help.
What is the payment on a $10,000 credit card? ›
So, chances are you can speed up the payoff process significantly by making fixed payments. In the example above, if your credit card company calculates payments as 1% of your balance plus interest, your minimum payment on $10,000 in credit card debt would be about $300.
How much of a $10,000 credit limit should I use? ›
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 long will it take to pay off $10,000 in credit card debt? ›
For example, say you have a credit card account that charges 18% interest, and you have $10,000 in credit card debt. If the minimum payments are equal to interest plus 1% of the balance, it would take 342 months to pay off the debt by making minimum payments alone. That's 28.5 years.
What is the minimum payment on a $5000 credit card balance? ›
Apply the percentage to your current credit card balance and then add your fees and past-due amounts. First, you'll owe 2% on the balance of $5,000, then you'll add $120 past due and $80 in late fees. That would make your minimum payment $300.
How much is a minimum payment on a $3000 credit card? ›
The minimum payment on a $3,000 credit card balance is at least $30, plus any fees, interest, and past-due amounts, if applicable. If you were late making a payment for the previous billing period, the credit card company may also add a late fee on top of your standard minimum payment.
What is the minimum payment on $20000 credit card? ›
Let's say you have a balance of $20,000, and your credit card's APR is 20%, which is near the current average. If your card issuer uses the interest plus 1% calculation method, your minimum payment will be $533.33. That's quite a bit of money to pay for your credit card bill every month.
Is it bad to have a lot of credit cards with zero balance? ›
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.
What is considered a high credit card limit? ›
If you have built up a solid credit history, a steady income and a good credit score, your credit limit may increase to $5,000 or $10,000 or more — plenty of credit to ensure you can purchase big ticket items. Of course, this isn't necessarily designated to just one credit card.
What credit limit can I get with a 750 credit score? ›
What credit score is needed to get a high-limit credit card?
| VantageScore 3.0 credit score range | Average credit card limit |
|---|
| 300–640 | $3,481.02 |
| 640–700 | $4,735.10 |
| 700–750 | $5,968.01 |
| 750+ | $8,954.33 |
Mar 15, 2024
Unfortunately, there is no such thing as a government-sponsored program for credit card debt relief.
How to clear credit card debt without paying? ›
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.
How to pay off 10k in debt fast? ›
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.
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
How to get rid of $15,000 credit card debt? ›
Here are four ways you can pay off $15,000 in credit card 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.
Suppose a credit card has a $5,000 balance with an APR of 16% and a $100 minimum payment requirement. With minimum payments only, you'll pay off the debt in about 6 years and 11 months. If you pay an extra $50 each month with the minimum payment, the time can be shortened by about three years.
What would the payment be on $10000? ›
Here's how much you'd pay each month for a $10,000 personal loan
| 8.00% |
|---|
| Two-Year Repayment | $452.27/month, $854.55 in interest over time |
| Five-Year Repayment | $202.76/month, $2,165.84 in interest over time |
| Seven-Year Repayment | $155.86/month, $3,092.42 in interest over time |
Jan 17, 2024
If you're just starting out, a good credit limit for your first card might be around $1,000. If you have built up a solid credit history, a steady income and a good credit score, your credit limit may increase to $5,000 or $10,000 or more — plenty of credit to ensure you can purchase big ticket items.
Is $10k in credit card debt bad? ›
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.
Can you get $10,000 on a credit card? ›
Credit Cards With 10000 Limit
This is when you stay within your given credit limit, and make the required monthly payments on time, every month. Over time, you can then ask to increase your initial credit limit. If this request is successful, you may then obtain your desired 10k credit card limit.
