How much credit card debt is bad?
You don't want to check your debt-to-income ratio every time you make a few charges. So, there's an easier ratio you can use to measure when you have too much credit card debt. It's your credit card debt ratio. In general, you never want your minimum credit card payments to exceed 10 percent of your net income.
Once this number gets above about 30%, it's bad for your credit. So, if you have $5,000 in credit card debt and $10,000 in credit limits, that 50% utilization would hurt your credit. Late payments: If your credit card payment is late by 30 days or more, the card issuer can report it to the credit bureaus.
The general rule of thumb is that you shouldn't spend more than 10 percent of your take-home income on credit card debt.
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.
$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.
“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's not at all uncommon for households to be swimming in more that twice as much credit card debt. But just because a $15,000 balance isn't rare doesn't mean it's a good thing. Credit card debt is seriously expensive. Most credit cards charge between 15% and 29% interest, so paying down that debt should be a priority.
Ideally, financial experts like to see a DTI of no more than 15 to 20 percent of your net income. For example, a family with a $250 car payment and $100 of monthly credit card payments, and $2,500 net income per month would have a DTI of 14 percent ($350/$2,500 = 0.14 or 14%).
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.
On an individual level, the overall average balance is around $6,501, per Experian's data. Other generations' credit card debt falls closer to that average or below. Here's the average amount of credit card debt Americans hold by age as of the third quarter of 2023, according to Experian.
How many people have $50,000 in credit card debt?
Running up $50,000 in credit card debt is not impossible. About two million Americans do it every year. Paying off that bill?
Credit card debt can be overwhelming — but it can also be forgiven in some cases. If you have a significant amount of debt compared to your income, you may qualify for credit card debt forgiveness, so consider reaching out to a debt settlement company for help.
Generally speaking, a good debt-to-income ratio is anything less than or equal to 36%. Meanwhile, any ratio above 43% is considered too high. The biggest piece of your DTI ratio pie is bound to be your monthly mortgage payment.
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.
- Using a balance transfer credit card. ...
- Consolidating debt with a personal loan. ...
- Borrowing money from family or friends. ...
- Paying off high-interest debt first. ...
- Paying off the smallest balance first. ...
- Bottom line.
- Create a Budget and Stick to It.
- Secure an Additional Source of Income.
- Consider Nonprofit Credit Counseling and Financial Assistance.
- Look for Debt Relief.
- Understand How to Use Credit Responsibly.
- The Importance of Debt Reduction.
- Take advantage of a debt relief service.
- Consolidate your debt with a home equity loan.
- Take advantage of 0% balance transfer credit cards.
Generation | Ages | Credit Karma members' average credit card debt |
---|---|---|
Gen Z | Members 18–26 | $2,781 |
Millennial | 27–42 | $5,898 |
Gen X | 43–58 | $8,266 |
Baby boomer |
$25,000 at 20%: Your minimum payment would be $666.67 per month and it would take 437 months to pay off $25,000 at 20% interest. You would pay $41,056.85 in interest over the life of the debt.
It will take 32 months to pay off $15,000 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.
How long will it take to pay off 15k debt?
A minimum payment of 3% a month on $15,000 worth of debt means 227 months (almost 19 years) of payments, starting at $450 a month. By the time you've paid off the $15,000, you'll also have paid almost as much in interest ($12,978 if you're paying the average interest rate of 14.96%) as you did in principal.
If you want to pay off debt more quickly, you'll need to make extra credit card payments and pay above the minimum. 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.
If it's between 43% to 50%, take action to reduce your debt load; consulting a nonprofit credit counseling agency may be helpful. If it's 50% or more, your debt load is high risk; consider getting advice from a bankruptcy attorney.
If you cannot afford to pay your minimum debt payments, your debt amount is unreasonable. The 28/36 rule states that no more than 28% of a household's gross income should be spent on housing and no more than 36% on housing plus other debt.
Personal debt can be considered to be unmanageable when the level of required repayments cannot be met through normal income streams. This would usually occur over a sustained period of time, causing overall debt levels to increase to a level beyond which somebody is able to pay.
References
- https://www.ramseysolutions.com/debt/average-american-debt
- https://www.businessinsider.com/personal-finance/average-credit-score
- https://www.cnbc.com/select/what-is-the-28-36-rule-for-buying-a-home/
- https://www.bankrate.com/real-estate/what-is-the-28-36-rule/
- https://www.synchronybank.com/blog/average-american-debt-by-age/
- https://www.investopedia.com/average-credit-scores-by-gender-5214525
- https://www.forbes.com/advisor/mortgages/pay-off-mortgage-early-vs-investing/
- https://hopecu.org/understandingcreditcards/
- https://www.businessinsider.com/personal-finance/average-american-debt
- https://www.unfcu.org/financial-wellness/50-30-20-rule/
- https://www.nerdwallet.com/article/credit-cards/15000-credit-card-debt
- https://www.nerdwallet.com/article/finance/find-extra-money-pay-debts
- https://www.gloucestershire.police.uk/SysSiteAssets/foi-media/gloucestershire/policies/unmanageable-debt-policy
- https://www.thebalancemoney.com/debt-free-characteristics-4059833
- https://www.consolidatedcredit.org/credit-card-debt/how-much-debt-is-too-much/
- https://www.cnbc.com/select/average-american-debt-by-age/
- https://www.investopedia.com/ask/answers/021215/what-good-debt-ratio-and-what-bad-debt-ratio.asp
- https://www.usatoday.com/money/blueprint/credit-cards/what-is-the-average-credit-card-debt/
- https://wallethub.com/answers/pl/monthly-payment-on-15000-personal-loan-1000450-2140762724/
- https://www.experian.com/blogs/ask-experian/how-to-pay-off-credit-card-debt-with-no-money/
- https://www.nasdaq.com/articles/40-of-americans-pay-off-their-house-are-they-doing-better-financially
- https://www.cbsnews.com/news/how-to-pay-off-20000-in-credit-card-debt-in-3-years-or-less/
- https://www.cnbc.com/2024/03/27/how-much-credit-card-debt-americans-have-by-age-.html
- https://www.forbes.com/advisor/credit-cards/average-credit-card-debt/
- https://www.fool.com/the-ascent/research/average-household-debt/
- https://www.cbsnews.com/news/great-ways-to-pay-off-20000-in-credit-card-debt/
- https://www.investopedia.com/ask/answers/12/reasonable-amount-of-debt.asp
- https://www.cnbc.com/select/how-to-pay-off-credit-card-debt/
- https://wallethub.com/answers/cc/how-long-to-pay-off-20000-credit-card-debt-1000423-2140858500/
- https://www.cnbc.com/select/paying-off-too-much-debt/
- https://www.lendingtree.com/personal/personal-loan-calculator/
- https://www.cnbc.com/select/average-american-debt-in-40s/
- https://www.debt.org/faqs/americans-in-debt/demographics/
- https://www.fool.com/the-ascent/credit-cards/how-much-debt-too-much/
- https://wallethub.com/answers/cc/how-to-pay-off-15000-in-credit-card-debt-1000294-2140754717/
- https://www.nerdwallet.com/article/finance/what-is-the-average-credit-score-by-age-and-what-is-a-good-score-for-my-age
- https://finance.yahoo.com/news/men-vs-women-more-credit-120024159.html
- https://www.credible.com/personal-loan/credit-card-consolidation-loans/30000-credit-card-debt
- https://www.bankrate.com/finance/credit-cards/credit-card-debt-survey/
- https://www.fool.com/the-ascent/credit-cards/how-long-pay-off/
- https://localfirstbank.com/article/how-much-money-should-i-have-saved-by-the-time-i-am-30/
- https://abcnews.go.com/US/americans-credit-card-debt-hits-record-113-trillion/story?id=106990807
- https://www.cbsnews.com/news/how-long-will-it-take-to-pay-off-your-debt/
- https://money.com/average-american-personal-debt-amount/
- https://www.caminofinancial.com/en/blog/business-managment/psychology-of-being-debt-free/
- https://www.bankrate.com/banking/savings/emergency-savings-report/
- https://www.experian.com/blogs/ask-experian/how-much-credit-card-debt-is-too-much/
- https://www.nerdwallet.com/article/finance/how-much-debt-is-too-much
- https://www.horizonfcu.org/5-ways-to-pay-off-a-loan-early/
- https://www.sacbee.com/finance/article272836150.html
- https://www.experian.com/blogs/ask-experian/what-is-the-average-credit-score-in-the-u-s/
- https://www.investopedia.com/terms/b/baddebt.asp
- https://www.cbsnews.com/news/3-ways-to-qualify-for-credit-card-debt-forgiveness/
- https://wallethub.com/answers/cc/how-long-to-pay-off-7000-credit-card-1000423-2140858495/
- https://www.cnbc.com/select/average-debt-for-20-year-olds/
- https://www.incharge.org/debt-relief/how-much-debt-is-too-much/
- https://www.cnbc.com/2024/04/09/most-of-americans-are-living-paycheck-to-paycheck-heres-why.html
- https://gtdebtsolutions.com/2023/06/14/how-much-debt-is-normal-for-your-age/
- https://www.equifax.com/personal/education/credit/report/articles/-/learn/understanding-credit-good-debt-vs-bad-debt/
- https://www.cbsnews.com/news/ways-to-pay-off-10000-in-credit-card-debt/
- https://www.equifax.com/personal/education/credit-cards/articles/-/learn/why-do-people-have-credit-card-debt/
- https://www.genisyscu.org/genisys-blog/why-is-a-mortgage-good-debt-to-have
- https://finance.yahoo.com/news/jaw-dropping-stats-state-credit-130022967.html
- https://www.bostonherald.com/2023/03/14/the-average-millennial-has-nearly-30k-in-debt-here-is-what-they-should-do/
- https://www.incharge.org/debt-relief/debt-management/how-to-pay-off-50000-credit-card-debt-strategies-advice/
- https://www.cbsnews.com/news/how-long-will-it-take-to-pay-off-5000-in-credit-card-debt/
- https://www.axios.com/2023/12/12/mortgage-free-homes
- https://www.cbsnews.com/news/how-much-credit-card-debt-is-too-much/
- https://www.bankrate.com/personal-finance/debt/why-debt-forgiveness-is-not-as-forgiving-as-it-looks/
- https://www.incharge.org/debt-relief/debt-management/pay-off-15000-in-credit-card-debt/
- https://wallethub.com/answers/cc/how-long-to-pay-off-15000-credit-card-debt-1000423-2140858499/
- https://www.firstrepublic.com/insights-education/average-american-debt
- https://www.fool.com/the-ascent/credit-cards/articles/i-owe-1000-on-my-credit-cards-am-i-in-trouble/
- https://www.citizensbank.com/learning/how-much-debt-is-too-much.aspx
- https://www.nasdaq.com/articles/this-is-the-average-age-most-americans-become-mortgage-free
- https://wallethub.com/answers/cc/what-percentage-of-america-is-debt-free-2140664784/
- https://www.bankrate.com/finance/credit-cards/business-credit-cards-tax-deductible/
- https://www.creditkarma.com/insights/i/average-debt-by-age
- https://www.ramseysolutions.com/debt/7-characteristics-of-debt-free-people
- https://www.marketwatch.com/picks/i-have-20k-in-credit-card-debt-and-pay-400-a-month-just-in-interest-im-worried-about-this-large-sum-of-interest-im-paying-what-should-i-do-01675358619
- https://fortune.com/recommends/credit-cards/average-credit-card-debt/
- https://www.capitalone.com/learn-grow/money-management/average-credit-card-debt-in-america/
- https://www.cbsnews.com/news/how-to-pay-off-15000-in-credit-card-debt/
- https://www.koho.ca/learn/zero-balance-on-credit-card/
- https://www.fool.com/the-ascent/credit-cards/articles/have-10k-in-credit-card-debt-heres-how-to-pay-it-off/
- https://extension.umn.edu/credit-and-debt/how-much-debt-too-much-debt
- https://fortune.com/2024/03/01/millennials-gen-z-snowballing-debt-interest-rates-credit-scores/