Smart Strategies to Escape Credit Card Debt

Editor’s note: This article is part of our Debt Free series, a Next Avenue initiative made possible by a grant from the RRF Foundation for Aging.

Admit it, you are over 50 with credit card debt.

According to credit card data from Experian, you're not alone. GenXers and baby boomers have several thousand dollars of credit card debt weighing them down.

The average credit card balance for GenXers has grown by close to 50% since 2012 and now exceeds $9,000. Baby boomers are doing a bit better. Baby boomers now owe slightly less than they did 12 years ago with a $6,648 average balance.

The average interest rate on credit-card debt is 22.8% — almost double the average of 12.9% a decade ago and the highest level seen since the Federal Reserve began keeping records on this in 1994. Someone with a $9,000 credit card balance at that average interest rate will pay $170 a month in interest alone.

That is why carrying a credit card balance when you are over 50 can be bad news for your financial health.

"(For) Generation X, who are often in their prime earning years and potentially juggling various financial responsibilities (like mortgages, children's education and retirement savings), credit card debt can impede financial stability, limit their ability to save for retirement and affect their overall financial well-being," says Rod Griffin, senior director of consumer education and advocacy for Experian. "For some GenXers, paying off this debt can lead to lower interest payments, improved credit scores and a better ability to manage other financial goals."

People of retirement age or approaching it also have incentives to pay off credit card debt.

"Baby boomers, who may be nearing or in retirement, benefit greatly from reducing credit card debt as they approach their retirement years," Griffin says. "Lowering debt can reduce financial stress and ensure that a greater portion of their income is available for retirement savings and living expenses, rather than interest payments."

Need more incentive? Those hefty credit card balances are hurting your credit score as well as your wallet. How so?

"Credit card debt impacts your credit utilization rate, which can have a significant effect on your credit score," Griffin says. "Carrying high credit card balances raises your credit utilization rate, which will bring down your credit scores.

"On the flip side, keeping your credit card balances low reduces your credit utilization rate, which is a good thing and will have a positive impact on credit scores."

Ready to wipe out your credit card debt? Here are some tips and strategies for paying down debt.

1. Stop spending. Before you can make headway on that card debt, you've got to keep it from growing.

"First, it's important to stop accruing more debt," Griffin says. "Credit can be a financial tool, but debt is a financial problem. So, start with creating a realistic budget. This way you can understand how much you can reasonably and consistently allocate toward paying down your debt every month, while avoiding accruing additional debt along the way.

2. Start learning. Payoff calculators give you a clear sense of how long it will take you to extinguish your credit card debt. Many financially oriented websites have free calculators, including financial data providers, credit unions, personal finance platforms and credit agencies.

Enter your current credit card balance, the card's annual percentage rate (APR) and your monthly payment. The calculator will reveal: the month and year you'll be debt-free, the number of payments you'll need to make, total interest you'll pay and total payment amount.

3. Consider a balance transfer. Move the unpaid balance on a high-interest card to a credit card with a lower interest rate. This will save you on interest charges as you pay down your debt.

"If your credit is in good standing, you may consider transferring balances to a card with lower interest rates or taking advantage of promotional balance transfers offers on a new card," Griffin says. "However, you should be honest with yourself before making the decision to do something like this. If applying for a new card is going to tempt you to overspend, this may not be the right choice for your financial health in the long run."

4. Make targeted payments. Here are two key strategies for paying down credit card debt more quickly. They are called the debt avalanche and the debt snowball.

"The debt avalanche method focuses on tackling the debt with the highest interest rate first, offering the best chance for long-term savings," says Bruce McClary, senior vice president of media relations at the National Foundation for Credit Counseling in Washington.

"On the other hand," he continues, "the debt snowball approach targets paying off the smallest balance first, delivering early signs of progress as small debts are cleared more quickly. The key to success is knowing yourself, and which debt repayment method would keep you motivated to reach your goal."

5. Pay more than the minimum. You'll clear out debt faster when you pay more than the minimum payment due on your credit card balance. So take a look in your budget and locate some extra cash to be added to your card payments.

"Your household budget is your roadmap when it comes to developing a strategy to pay down credit card debt," McClary says. "The goal is to find room to increase your monthly payments, so you are paying more than the minimum. The more you pay above the monthly minimum, the faster you are out of debt and the more you save on interest over time."

6. Don't be late. Making your monthly payments before they are due is important. Falling behind on credit card payments can hurt your credit and your financial health.

"Missing credit card payments can harm your credit score, making it harder to get credit when you need it for emergencies or to improve your quality of life," explains April Lewis-Parks, director of financial education at Consolidated Credit in Fort Lauderdale, Florida. "It can also cause interest rates on your current debt to go up, adding more pressure to your finances.

7. Prioritize past due accounts. If you are behind on a card payment, make it a top priority to pay the account and get current.

"If you only have room in your budget to tackle one account at a time, prioritize accounts that are past due," McClary says. "Bringing those accounts current will help stop late fees and improve your credit.

"Once all of your accounts are paid as agreed," he adds, "you can apply the extra funds to the accounts that are charging the most interest. It may take time to see results, but the long term savings will add up."

8. Ask for a lower rate. Think a credit card issuer would never reduce its credit card interest rate? You won't know unless you try.

"People should consider contacting their credit card company to request a lower interest rate," Lewis-Parks advises. "Creditors may offer temporary hardship programs for long-time customers in good standing."

9. Get help making a plan. If you are unable to pay your credit card bills on your own, a debt-management plan from a nonprofit credit counselor may be able to help.

"A debt management plan (DMP) is created by a nonprofit consumer credit counseling agency, which negotiates with unsecured creditors to get them to accept payments and offer concessions," says Melinda Opperman, chief external affair officer at Credit.org in Riverside, California. "The creditor may accept smaller minimum payments, waive fees or lower interest rates. The entire goal is to help the borrower repay all the debt owed."

When you sign up, you are agreeing to a few years of committed debt payments.

"A DMP is usually designed to take around five years to pay off all of one's debts — the borrower sends their monthly payment to the nonprofit credit counseling agency, which distributes the payment to each of the creators as agreed. It's a bit like a debt consolidation, except it's your payment that is consolidated and sent to one place every month—you don't take out a new consolidation loan."