Over the last couple of years, issues with persistent inflation have sparked an increase in the price of many necessities like gas, food and housing. In turn, many households are struggling to pay for these essentials and are using credit cards to fill in the gaps. In fact, one in five credit card accounts are now maxed out.
While using a credit card can help you cover basic household expenses, this type of borrowing typically comes with high rates. For example, the average credit card rate is currently 22.63% (as of July 9, 2024) — but depending on your credit and borrower profile, your card rates could be much higher.
As a result, paying off credit card debt can be challenging, especially if you have a significant balance, like $30,000 in card debt. With a debt that high, it could take decades to pay off what you owe due to compounding interest. But the good news is that there are several strategies you can use to pay down $30,000 in card debt, experts say.
Need to get rid of high-rate card debt now? Explore your top debt relief options here.
5 expert-driven tips for paying off $30,000 in credit card debt
Here are some expert-driven strategies that may help you pay off $30,000 in credit card debt.
Choose a debt repayment strategy
If you have extra funds to pay more than the minimum amount on your credit cards, consider using debt repayment strategies like the debt avalanche or snowball methods.
The debt avalanche method involves focusing on making additional payments on your card with the highest interest rate first while making minimum payments on your other balances.
With the debt snowball method, you focus on making extra payments on your credit card with the smallest balance while making minimum payments on your other cards.
“Mathematically the debt avalanche method is better [because you can save the most on interest],” says Edward Zhexu Ai, assistant professor of finance at Wagner College.
Realistically, though, people need more motivation to cut their expenses consistently to pay off debts, Ai says. So, if quick wins will motivate you to continue paying down debt, the debt snowball method may be the best solution for you.
Find out more about what your debt relief options are today.
Tap your home’s equity
If you’re a homeowner, tapping your home’s equity via a home equity loan or home equity line of credit (HELOC) and using the funds to pay down some or all of your $30,000 in credit card debt could be a viable option, experts say.
For example, if you have good credit and you are financially stable, Ai says he would recommend using a home equity loan. You can typically get a lower interest rate with these loans [than credit cards] because you’re using your house as collateral.
However, one of the major risks is that home equity loans and HELOCs use your home as collateral. So, if you can’t repay the home equity loan as promised, the lender can foreclose on your home.
Take out a debt consolidation loan
Another debt relief option that can help you pay down $30,000 is taking out a debt consolidation loan, which is a type of loan that is used to pay off your debts, including credit cards. The main benefit of debt consolidation loans is that they typically offer lower average rates than your credit cards, reducing the amount owed in interest. And, by rolling multiple credit card balances into one loan, you can also streamline your payments.
You can typically get a loan for debt consolidation through a bank, online lender or credit union. In addition, many debt relief companies offer debt consolidation loans through partner lenders.
This option can be smart to consider, Ai says, if your credit score is good enough to get a favorable interest rate on the new loan.
Utilize credit card debt settlement
Many debt relief companies offer credit card debt settlement, also known as credit card debt forgiveness, as a service to those they work with. With this option, the debt relief company negotiates with your creditors to try and secure an agreement for a lump-sum settlement for less than you owe.
If successful, these negotiations can result in paying a lot less in total for your credit card debt. But while debt settlement may help you substantially reduce your debt, it does come with some downsides.
For example, a debt settlement can leave a negative mark on your credit report — and it’s often worse than bankruptcy, says Glenn Downing, CFP at investment firm CameronDowning. As a result, his firm doesn’t recommend taking this route to get out of credit card debt.
Another downside is that there are often tax implications tied to credit card debt forgiveness.
“The forgiven amount would be considered taxable income. So having credit card debt forgiven could lead to a higher tax bill,” says Ai.
Use a balance transfer credit card
Another option is to transfer some or all of your credit card debt to a balance transfer credit card. If you can qualify for the right balance transfer card, you could save thousands of dollars in interest. After all, some credit card issuers have 0% promotional APR periods as long as 21 months — allowing you to aggressively pay down your balance without additional interest.
According to Francisco Ayala, CFA and CFP at The Coleridge Group, a financial planning company, this is often the best way to reduce your interest costs. That said, this option does have some potential downsides.
For example, credit card issuers typically charge a balance transfer fee that ranges from 3% to 5% of the transferred amount. So, if you transferred $15,000 of your credit card debt to another card, you might pay a balance transfer fee ranging from $450 to $750, depending on the fee the card charges.
Another drawback is that once the promotional window closes, you’ll have to pay any remaining balance at the card’s standard rate, which is often high. So, if you’re going to take this route, it’s important to have a plan in place to pay off what you owe before the promotional period ends.
The bottom line
Paying off $30,000 in credit card debt is no easy feat, especially in today’s economic environment. But there are options to achieve debt relief. For example, you could consolidate debt on your own with a home equity loan or personal loan. Or, if you’re having trouble making minimum payments on your cards, it might make sense to seek help from a debt relief company.
Whatever strategy you use to pay down credit card debt, it’s crucial to review your finances to determine what got you into debt in the first place. If the reason was bad spending habits or a lack of income, you’ll need to modify your behavior or find ways to boost your income. If the behavior isn’t modified and cash flows aren’t improved, consolidation loans, balance transfers and other debt relief options are temporary bandages that are going to fall off at some point, Edward Silversmith, CFP at financial planning firm Wealth Enhancement Group, says.
