The average American has thousands of dollars of credit card debt.
As a whole, Americans hold a record $1.14 trillion in credit card debt as of the second quarter of this year, according to the Federal Reserve Bank of New York's August report.
Individually, they carry an average balance of around $6,330, per TransUnion data. That's up from $5,947 at the same point in time last year.
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But Americans aren't necessarily going into debt over flashy purchases, Ted Rossman, Bankrate's senior industry analyst, tells CNBC Make It. "People tend to get into credit card debt for practical reasons, such as emergency expenses and day-to-day expenses, but this can be a tough cycle to break," he says.
Many Americans carry a balance on their credit cards for years, Bankrate found. About a third of consumers surveyed by Bankrate held balances between one and three years.
"Credit card debt is easy to get into and hard to get out of," Rossman says.
Money Report
Carrying credit card debt can cost you
Carrying a balance from month to month can make your credit card debt more expensive in the long run due to accruing interest. If you're able, it's smart to consistently chip away at your debt until it's paid off.
With that in mind, CNBC calculated how much you would need to pay monthly in order to pay down $6,330 in credit card debt in one, two and three years, as well as how much you would pay in additional interest charges.
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CNBC's calculations are rounded to the nearest dollar, assume that you are not adding to your credit card debt while paying it down and that the $6,330 balance is on one credit card with an interest rate of 25%, the average interest rate as of Sept. 20, according to LendingTree.
1 year
- Monthly payment: $602
- Total amount paid: $7,200
- Additional interest paid: $890
2 years
- Monthly payment: $338
- Total amount paid: $8,108
- Additional interest paid: $1,778
3 years
- Monthly payment: $252
- Total amount paid: $9,060
- Additional interest paid: $2,730
As the calculations show, the sooner you can pay off credit card debt, the better. You'd pay thousands in additional interest charges if you took three years to clear a balance of $6,330 instead of one year or less.
You can try CNBC Make It's debt payoff calculator for yourself and see how quickly you may be able to pay down your debt based on the amount you owe, your interest rate and different timelines.
How to pay off your credit card debt
If you're unsure how to start paying off your credit card debt, there are two common methods experts generally recommend.
- With the avalanche method, you prioritize paying off the card with the highest interest rate first. After making minimum payments on all of your cards, put any extra cash toward the balance with the highest interest rate. When that's eliminated, clear the card with the second-highest interest rate and so on until your debt is paid off. The benefit of this method is that it can save you money on interest charges over the long run.
- With the snowball method, you prioritize eliminating your smallest balance first. Make minimum payments on all of your cards, but funnel any leftover money toward the card with the smallest overall balance. After that card is cleared, put any extra money toward your second-smallest balance and work your way up toward your highest balance. The smaller wins in the beginning can motivate you to keep going.
No matter which method you choose, the most important step is to get started and stick with it, Matt Schulz, chief credit analyst at LendingTree and author of "Ask Questions, Save Money, Make More," tells CNBC Make It.
"There's no perfect method for paying down debt that works for everyone," he says. "It is all about finding something that works for you, and most importantly, that you will see through to the end."
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