Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.
One of the biggest financial lessons everyone needs to learn with their first credit card is that payments are neither optional nor good to delay. The bottom line with any credit card, store-branded or otherwise, is that paying them off as soon as possible, preferably every month, is the only way to move forward.
This subject is often the source of heated debate on Reddit, which is why one particular post caught my eye. In the case of this Redditor posting in r/personalfinance, they work for a store-branded credit card provider and indicated that it takes a whopping six years, on average, for an American to pay off one of their credit cards.
There is no question that this is an intriguing subject I wanted to investigate. Six years sounds like an awfully long time, but also a number I could see being very accurate.
Average Payment Length
According to this Redditor, who works for a provider of store-brand credit cards for names like Banana Republic and Victoria’s Secret, the average length he sees to pay off a single purchase is six years. This is a wild truth, if it’s 100% accurate at this Redditor’s company, as a single purchase should take far less time to pay off.
However, what’s more concerning is that this payment takes so long because these individuals are continuously accruing 29.99%, on average, in interest. What we don’t know from this Redditor is the average single purchase balance. As you can imagine, there is an obvious difference between a $100 and $1,00 balance as far as the payment is concerned.
US News & World Report
Of course, this is where things get interesting as US News and World Report indicates the average American household has over $6,000 in credit card debt. By its calculations, if you just made the minimum payment, their findings indicate it would take almost 25 years to pay off the whole balance, which is a crazy, if true, number.
CBS News
Compare this to a CBS News report that indicates the average interest rate for a credit card right now is 22.76%. According to their reporting, it would take approximately 421 months, or 35 years to pay off a $20,000 balance. If you increased your payment to 5% of the outstanding balance every month, you could cut this down to 13 years and at a $600 fixed payment, a little over 4 years. No matter which of the scenarios you are considering, they are all incredibly concerning.
The Conclusion
Ultimately, this Redditor tells us that this six-year timeline isn’t just a number that could be accurate, given what CBS News and US News & World Report discovered, it might actually be far worse than he considers. Unfortunately, credit card debt continues to be a serious problem in America, and the hope is that more Americans will learn the benefits of paying off their balance monthly.
How to Pay Off Credit Card Debt
If you are struggling with credit card debt, there are several ways to tackle it, with the snowball method being the most recommended. This strategy involves paying off the smallest balance first and then rolling over whatever that payment would be into the next lowest payment. Ultimately, you’ll work toward the largest debt, but you should have a good payment history to tackle it quickly.
Alternatively, you could try the avalanche method, which would have you start by focusing on the payment with the highest interest rate first. In other words, focusing less on balances but more on interest rates, you’ll pay off this credit card debt first and then move on to the next highest interest rate payment, and so on.
Regardless of which method you use, the hope is that you’ll be able to track your progress as you go, which would encourage you to continue making these payments until you have no credit card debt left.
Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.
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