I spent my 20s traveling and spending all my money — now I’m forking out $800/month to cover my 4 maxed out credit cards. How can I get out of this hole?

The credit card trap: A closer look

Credit card debt is a huge problem for young adults. Experian reported in 2024 that millennials' average credit card balance is around $6,642, a significant jump from 2023 data. The convenience of credit cards, combined with high interest rates, makes it easy to accumulate debt but challenging to pay it down. Why is it so hard?

High-interest rates. According to the Consumer Financial Protection Bureau, the average APR on credit cards assessed interest was 22.8% in 2023. These high rates can significantly increase the amount owed if you cannot pay the balance off in full each month.

Minimum payments. Credit card companies typically require only a small minimum payment each month, which barely covers the interest. This means the principal amount remains largely untouched, prolonging the debt repayment period.

Lifestyle inflation. As incomes increase, so do spending habits. This phenomenon, known as lifestyle inflation, can lead to higher credit card balances if not managed carefully.

Kiss your credit card debt goodbye

Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.

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Solutions for managing and paying down debt

Tackling high credit card debt requires strategy and discipline. Here are some proven strategies you can begin implementing today.

First, consider the “debt avalanche” method, an approach to debt repayment that prioritizes accounts with the highest interest rates first while making minimum payments on the rest. This approach can help you save money on interest payments over time. Here’s how it works: List all of your debts from the highest to the lowest interest rate. Allocate as much extra money as possible to the card with the highest interest rate. Once the highest-interest card is paid off, move to the next one on the list.

Need some extra incentive? The debt snowball method takes a slightly different approach, by focusing on paying off the smallest debts first, offering psychological motivation through quick wins. Start by listing all credit card debts from smallest to largest balance. Allocate extra money to the smallest debt while making minimum payments on the others. Once the smallest debt is paid off, move to the next smallest debt.

Credit card balance transfers and debt consolidation can simplify payments and reduce interest costs. A balance transfer involves moving high-interest credit card debt to a card with a lower interest rate, often with a promotional 0% APR for a limited time. Debt consolidation involves combining multiple debts into a single loan with a lower interest rate.

For credit balance transfers, look for credit cards offering a 0% APR on balance transfers for an introductory period (usually 12-18 months). Be mindful of balance transfer fees, typically 3% to 5% of the transferred amount.

For consolidation, apply for a personal loan with a lower interest rate than your credit cards. Use the loan to pay off all credit card debts, then focus on repaying the consolidation loan.

Budgeting and financial discipline are critical to any debt paydown. Creating a realistic budget can help you track expenses, identify areas to cut back and allocate savings towards debt repayment.