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
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.
How much should you spend on $10,000 credit limit? ›
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.
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.
How do I pay off a $10,000 credit card? ›
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.
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.
How much to pay off $10,000? ›
Examples of How Long It Will Take to Pay Off $10,000 in Debt
| Debt | Monthly Payment | Payoff Time |
|---|
| $10,000 | $300 | 45 months |
| $10,000 | $400 | 31 months |
| $10,000 | $500 | 24 months |
| $10,000 | $1,000 | 11 months |
Yes, $10,000 is a high credit card limit. Generally, a high credit card limit is considered to be $5,000 or more, and you will likely need good or excellent credit, along with a solid income, to get a limit of $10,000 or higher.
What does 10000 credit limit mean? ›
And the more responsible you are with your money, the higher your credit limit may be. Once your creditor determines your credit limit, you can spend up to that amount. So if you get a new credit card with a limit of $10,000, you could spend up to $10,000 before maxing out your credit card.
Is it hard to get a 10k credit card limit? ›
Credit limits are based largely on your income, debt, and credit history. So, the more money you make and the better your credit is, the higher the credit limit you can expect. It's possible to get a $10,000 limit on many credit cards, but finding cards with definite $10,000 minimums is difficult.
How long will it take to pay off $10,000 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.
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.
Is 0% debt bad? ›
Having no credit card debt isn't bad for your credit scores, but you do need to maintain open and active credit accounts to have the best scores.
Is 10k of debt a lot? ›
What's considered too much debt is relative and varies by person based on the financial situation. There's no specific definition of “a lot of debt” — $10,000 might be a high amount of debt to one person, for example, but a very manageable debt for someone else.
How long does it take to pay off $1,000 on a credit card? ›
It will take 24 months to pay off $1,000 with payments of $50 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.
How to get out of debt when you are broke? ›
How to get out of debt when you have no money
- Step 1: Stop taking on new debt. ...
- Step 2: Determine how much you owe. ...
- Step 3: Create a budget. ...
- Step 4: Pay off the smallest debts first. ...
- Step 5: Start tackling larger debts. ...
- Step 6: Look for ways to earn extra money. ...
- Step 7: Boost your credit scores.
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.
How long will it take to pay back $10,000? ›
Let's say you had that same $10,000 credit card debt at 18% interest mentioned above, and you made a $350 payment every month until it was paid off. In that case, you'd be free of your debt in 38 months. That's 304 months, or just over 25 years, faster than making minimum payments alone.
How long to pay off $5,000 credit card with minimum payment? ›
During that time, you'll pay a total of $9,332.25 in interest for a total payoff cost of $14,332.25. 2.5% of the balance (inclusive of interest): It would take 505 months to get rid of your $5,000 credit card balance making just minimum payments at 2.5% of your balance. That's over four decades of payments.
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.
