How to Pay Off 20,000 in Credit Card Debt

How to Pay Off 20,000 in Credit Card Debt article image.

High-interest credit card debt can devastate even the most thought-out financial plan. On average, Americans carry $5,315 in credit card debt, but if your balance is much higher—say, $20,000 or beyond—you may be feeling hopeless.

Paying off a high credit card balance can be a daunting task, but it's possible. You can start working toward paying off $20,000 in credit card debt by developing a battle plan that includes using consolidation options, cutting back in other areas of your budget, earning more money and more.

Make a Plan to Tackle $20K in Credit Card Debt

There are several ways you can approach your credit card debt, and they all might play a role in your plan of attack. Before you start taking action, though, your first steps should be to assess the situation and understand your options:

  • Write out all of your debt. If you have more than one credit card, write out the balance and interest rate for each one. You may also want to include the credit limit, so you know which cards are closer to being maxed out.
  • Create or reevaluate your budget. Not knowing where your money is going every month can not only lead to overspending but also make it difficult to pay off the debt you've accumulated. If you haven't made a budget before, take some time to write out your income and expenses over the past few months, then categorize each expense so you get an idea of how you're spending your money. This can help you determine where you can reasonably cut back to put more cash toward your debt. If you already have a budget in place, consider reevaluating it to see if you can optimize your money management.
  • Set concrete goals. With $20,000 or more in debt, it can be difficult to set a timeline for when you'll be debt-free. Still, it's still important to set concrete goals for yourself. For example, you can set short-term goals for paying off certain balances or simply for how much you want to put toward your credit cards every month in addition to your minimum payments. Meeting those goals will encourage you to keep at it.
  • Research different methods. There are a lot of different strategies you can take to address your debt, many of which we'll cover in a minute. Not all of them are best suited for everyone, though, so take your time to research your options and find the best approach for your situation. Ultimately, you might incorporate several of the following strategies into your plan. When you're dealing with a large amount of debt, a more all-encompassing approach is often wise.
  • Develop your "why". Even if you're feeling motivated right now to pay off your debt, it can be easy to lose that motivation over time, especially with a large balance. One way to maintain that motivation is to think about why you want to be debt-free. You may simply be seeking to get your head above water financially, or you might have a specific goal in mind, such as saving for a down payment on a house. Whatever your reason, putting it in writing can encourage you to stick to your plan.
  • Consider a moratorium on credit card spending. If you're charging purchases to your credit cards while trying to pay them down, it can feel like you're taking two steps forward and one step back. Consider switching to cash or your debit card, so you can avoid further overspending and get out of debt as quickly as possible. Of course, this is only possible if your budget allows it, so you might start by simply taking steps to reduce how much you add to your debt every month.

Reduce Your Interest Rates

One of the things that makes it tough to escape from credit card debt is continually accruing interest on your existing balances. That's why it's important to look for ways you can cut your interest rates and slow that buildup. Not only will this save you money, but it will also shorten the amount of time it'll take to pay off your debt in full.

Here are a few different ways you can get lower interest rates on your credit cards.

Contact Your Card Issuer

It doesn't always work, but you may be able to get a lower interest rate simply by asking. Credit card companies often offer promotional rates to existing customers, and you may qualify for one, especially if you've always paid your bill on time.

When you call, it's important to be polite and clear about what you want. Ask directly if it's possible to get a lower interest rate on your credit card, either temporarily or permanently, and they may be willing. Again, there's no guarantee this will work. But if it does, a short phone call could save you hundreds of dollars.

Apply for a Debt Consolidation Loan

If you have good credit, you may be able to get a debt consolidation loan, which is a personal loan used to pay off credit card debt. Some personal loans charge higher interest rates than credit cards, but their rates are lower on average.

What's more, debt consolidation loans have set repayment terms, which can help ensure that you become debt-free by a certain date—that can be more difficult if you have just a low minimum payment every month.

Just make sure you can afford the monthly payment. Many personal loan companies offer prequalification, which doesn't impact your credit and offers you a quote for the amount you want to borrow. You can also use a personal loan calculator to figure out how much you'd need to pay each month and how much interest you'll pay by the time your debt is paid off.

Get a Balance Transfer Credit Card

Another option for good-credit borrowers, balance transfer cards offer introductory low or even 0% APR promotions, which you can use to save money on interest. Depending on the card, these promotions can last between six and 20 months.

During that promotional period, you can pay down your debt interest-free. Even if you don't pay the full balance by the end of the promotional period and the card's APR climbs to its standard ongoing rate, you will have saved money on interest over that time.

With most balance transfer cards, you'll have to pay upfront balance transfer fees, which are typically 3% or 5% of the transfer amount. That charge pales in comparison to the interest savings, but it can serve simply to add to your debt balance if you don't make much progress paying down the balance during the zero-interest period.

Also, balance transfer cards are subject to credit limits, and there's no guarantee you'll get enough to consolidate all of your credit card debt onto the new card. Even if you can transfer just a couple balances over, though, you still stand to save money.

Reduce Your Bills and Cut Down on Spending

With a budget in place, you'll be equipped to consider areas where you can cut expenses back and reallocate that money toward your debt.

Start by looking at your recurring bills, which you may be able to cut without consistent effort. You may be able to negotiate certain utility bills, especially if there are multiple providers in your area.

In addition to looking at your recurring expenses, take some time to also cut back on your discretionary spending. This may include spending less money on eating out and entertainment, cutting subscriptions you don't use very often or even sharing certain subscriptions and other costs with family members to cut how much you pay each month.

To get an idea of what's normal spending, you can review the average household expenses from the Bureau of Labor Statistics. It's important to note, however, that each household is different, and only you know how to appropriately spend less and save more given your circumstances.

Average Monthly Household Expenses by Income Range
Income Range$0 - $22,487$22,488 - $43,431$43,432 - $72,233$72,234 - $120,728$120,729+
Apparel and services$68$104$128$187$298
Health care$238$329$391$503$701
Cash contributions$54$96$111$181$388
Personal insurance and pensions$52$167$386$721$1,655
All other expenditures$158$176$227$285$627

Source: Bureau of Labor Statistics, Consumer Expenditures 2019

Utilize Debt Repayment Strategies

In addition to other options, you may choose to employ a specific debt repayment strategy to pay down your credit card debt more efficiently. Here are three to consider:

  • Debt avalanche: With the debt avalanche approach, you make just the minimum payment on all of your credit cards except for the one with the highest interest rate. With that one, you'll apply extra payments until it's paid in full. Then, take what you were paying toward that account and apply it to the one with the next-highest interest rate (on top of its minimum payment). You'll keep doing this until you've paid off all of your balances.
  • Debt snowball: The debt snowball method is similar to the debt avalanche method, but instead of focusing on the accounts with the highest interest rates, you'll target the accounts with the lowest balances.
  • Debt snowflake: The debt snowflake strategy is one you can use on its own or in addition to the debt avalanche or snowball methods. With this approach, you'll take small daily savings you gain and put those toward your monthly payments. Get a coupon for $2 off a grocery item? Put that $2 toward your debt. Got some extra belongings you no longer need? Run a yard sale and use the proceeds to pay down your debt.

If you're trying to decide between the debt avalanche and snowball methods, here's how to make the right choice for you: In general, the debt avalanche method can save you more money, but it may have you focusing on large balances first, which can take more time to pay down.

In contrast, the debt snowball approach may not save you the most money, but it can give you wins early on as you pay off smaller balances.

How to Get Additional Help With Your Debt

If your credit is in poor shape and your financial situation doesn't allow for larger payments, you may consider getting help through credit counseling. Credit counselors can provide expert advice and personalized guidance for your specific circumstances at no cost.

If the situation calls for it, they can also set you up on a debt management plan (DMP). These plans, which typically last three to five years, involve you making one monthly payment to the credit counseling agency, which it distributes to your creditors. They may also be able to negotiate lower interest rates and monthly payments on your behalf.

DMPs typically require a modest upfront and monthly fee, and you may need to close your credit cards. But if you're having a hard time paying back your debt on your own, a DMP is a good alternative to debt settlement and bankruptcy.

If the cost of your other bills is making it harder to pay down your debts, financial assistance is out there. Assistance from charitable and other organizations can take some of the financial stress off making ends meet so you're better able to take care of your debt.

Make a Habit of Responsible Credit Use

In many cases, credit card debt comes from factors outside of your control, such as medical bills or divorce. But regardless of how your debt was accumulated, there are some steps you can take to develop good credit habits going forward.

Responsible credit card use includes many things, such as:

  • Paying your bill on time and in full every month
  • Avoiding spending more than you can afford
  • Keeping your balances low relative to your credit limits
  • Avoiding frequent new credit card applications
  • Keeping old accounts open, even if you don't use them regularly

It's also important to check your credit score and credit report regularly so you can spot potential problems before they wreak havoc on your credit score. This can include things like missed payments but also potential fraud and inaccurately reported information.

Monitor Your Credit Going Forward

Both now and in the future, make it a priority to monitor your credit card balances regularly. You don't have to check every day or even every week, but it's a good idea to stay on top of it. In addition, be sure to keep an eye on the information that gets reported to the credit reporting agencies.

With Experian's free credit monitoring service, you'll get access to your FICO® Score powered by Experian data, as well as your Experian credit report, which is updated every 30 days. You'll also get real-time updates every time a change occurs, such as a new credit inquiry, missed payment or even a change in your credit score.

As you stay on top of your credit, you'll have a better chance of avoiding another situation where you're struggling to pay down a mountain of debt. Improving your credit scores can also help you qualify for better interest rates on loans and credit cards, as well as lower rates on auto, homeowners and even life insurance policies (in most states).