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Credit card debt is an increasingly severe problem in the U.S. As Americans become more dependent on their small plastic cards, the amount of debt seems to just get bigger. And bigger.

According to Experian , the average American has a credit card balance is almost $6,200. Along with individual and household debt, the total amount of credit card debt in the U.S. has reached its highest level ever.

Whether debt has got you down, or you’re wanting to consolidate your existing credit cards and opt for ones that have the best perks and benefits for your circumstances, the question of canceling a credit card can be an extremely sticky one.

Many of us find ourselves wondering the best course of action to reduce credit card debt without affecting credit score, and the concern is valid.

While closing an account may play a role in getting a better handle on any existing debt, it’s important to understand ways to cancel a credit card in a way that doesn’t end up setting you back even more.

Ahead are some common steps that are typically needed to be taken in order to fully cancel a card, including sending a written confirmation and keeping a watchful eye on your credit report after you’ve put through a cancelation request.

Do You Really Need to Cancel?

It can be tempting to cancel cards or close accounts when things get overwhelming. But sometimes this may not be the best option.

In many cases, canceling a credit card can actually damage one’s credit score. In fact, canceled accounts may remain on a credit history for several years after the date they are closed. (With a card in negative standing, it will remain on your credit history for up to seven years, and a cancelled card in positive standing typically remains for 10 years.)

It’s important to take the time and analyze your motivations behind canceling an account before you actually do. After all, it may be smarter to simply cut up or hide a credit card rather than officially canceling.

As always, the decision is up to you, but it’s helpful to take these considerations into account before finalizing a decision that may have a long-lasting impact on your credit health and your long-term financial future.

Closing One Account at a Time

If you’ve decided that canceling your card is the best way to go for you, there are some things you may want to keep in mind before getting started.

First of all, when it comes to canceling credit cards, it’s important to remember that not all of them are created equal.

Depending on the exact reasons that led you to wanting or needing to cancel a card, you may want to consider a few things before pulling the trigger.

For example, if you’re thinking of canceling a card, you may want to consider canceling new ones instead of old ones to avoid impacting your credit score.

In the world of credit, older, more established credit in good standing is looked upon more favorably than new, and so you may want to keep this in mind when choosing which card you would like to cut.

On top of this, some credit cards may offer more appealing rewards programs for your lifestyle than others, so you may want to take stock of the perks that come with each card before deciding which one you want to stop using.

Paying Off or Transferring Your Balance

Depending on the total amount of credit you have available, closing a card account with a high credit limit could run the risk of damaging one’s credit score.

If you are carrying high balances on other cards or have active loans, this damage could be especially noticeable, since your debt-to-credit ratio (also called your credit utilization ratio) may affect your credit score. (Typically, you’d want to stay at 30% or below.)

If you’re planning on canceling a credit card, you will likely want to ensure that you’ve paid off any remaining balances on that account. If you fail to do so, you may end up having to pay interest charges on any remaining balance.

If you normally carry a balance from one month to another, you may need to take extra care to pay the full statement balance before canceling a card in order to make sure there is no money left in your balance and avoid future interest charges.

You may also want to take some time to brush up on your knowledge of credit card utilization, as it can be important to understand when it comes to canceling your credit cards smartly.

In order to lessen the negative impact of closing one of your credit card accounts, you may want to pay off all of the balances you carry on all of your cards first.

If you cancel a card while carrying zero balances on all your cards, your credit utilization rate should stay at zero, so even if you cancel a card and remove its balance, your rate shouldn’t be impacted.

Contacting a Credit Card Company

Once you’ve paid off your credit card balance, you will want to contact your credit card company to put through your request to close your account.

Sometimes, you will be able to cancel a credit card without making a phone call. It may be helpful to look up how to cancel a particular credit card online to see if your credit card company offers this option.

In most cases, you will want to contact your credit card company by phone. Usually, your customer service number will be printed on your credit card.

From there, you’d inform your credit card company that you are canceling your card. Keep in mind that some companies require you to speak to a customer service representative in order to complete this process, while others are more flexible.

It’s helpful to know that credit card representatives may be trained to try to convince you to keep your account open. Remember that you have the right to close your account at any time.

Before you hang up the phone, you may want to ask your representative for their name so that you can include it along with your written notice of cancelation.

Sending Written Confirmation

Once you’ve called and canceled your card, you may choose to mail a written confirmation letter to your credit card company. This can be a good option in order to protect yourself generally, but also in the event that the customer service representative made a mistake while putting through your card cancelation request.

In the letter, you would write things like your name, phone number, address, and account number as well as the details from the call you had with your credit card representative. If you got their name, you may want to also include it here.

You might choose to also state that you’d like your credit report to show that the account was closed at your request.

If you choose to mail a letter, consider sending it via certified mail so that you can ensure the company receives it, and make sure to keep a copy for your records.

Keeping an Eye on Your Credit Score

When canceling credit cards, patience is key. From the moment you begin the process to the moment your credit card is officially canceled, it may take one month or even longer, depending on the company.

After your account has officially been canceled, you may wish to keep tabs on your credit report to ensure that your credit card has in fact been listed as closed.

If, for some reason, the card is still marked as open, you may need to get back in touch with your credit card representatives and, possibly, repeat some or all steps in this process.

Know that it can sometimes take several weeks for changes to show up on your credit card report. For this reason, it’s good practice to get into the habit of checking your credit score regularly, whether or not you’ve recently closed a card.

Of course, if you did just cancel a card, you may want to wait a month or so to see whether or not closing your account impacted your credit score.

Keep in mind that, every twelve months, you can get one free copy of your credit report online through AnnualCreditReport.com . Some credit card companies may also offer apps that allow you to check your score for free.

Destroying Your Card

Once you’ve confirmed that your card is canceled, then you’re almost done with the process.

If you’ve ensured that the account is in fact closed, then you can officially destroy your card in the manner of your choosing.

Though cutting up a credit card may provide a feeling of freedom and catharsis, it’s important to be careful to choose a method that makes sure the information on your card is not recoverable.

If you have access to a shredder, shredding your card may be the most efficient and secure way of destroying it.

If you’re using scissors, make sure that you properly cut up all the identifying pieces of information on the card, including your signature, the expiration date, CVV number, and the credit card number itself.

From there, ensure you properly dispose of the shards. For an added layer of security, consider throwing them away in more than one garbage can.

Maintaining a Healthy Relationship with Credit

Despite the array of credit card-related woes many Americans experience, it is possible to leverage credit cards in a healthy and productive way.

Depending on your needs and financial circumstances, finding ways to use credit to your advantage is a great way to ensure that you don’t wind up with more debt than you can handle.

A credit card cancelation can often offer an opportunity to take stock of the way you’re using credit, and establish better practices moving forward.

Once you’ve familiarized yourself with your credit utilization, and taken a look at the rewards you are currently signed up for, you may choose to go about things differently in the future.

One of the best ways to help you keep tabs on your credit is to build a practice of checking your balance and your credit score regularly.

This may look like downloading an app that lets you see all of your savings, checking, and credit card accounts in one place, or just getting into the practice of logging into all of your account on a regular basis.

Whichever way you choose to go about it, there are several strategies you can try out that may help you to keep your credit in check.

From leveraging balance transfers to using the snowball method to help pay off any debt balances you currently have, there are ways to help you get your credit card debt and finances under control—regardless of whether or not you decide to get rid of some of that seemingly precious plastic.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOPL19079

You might have heard the phrase “there’s no such thing as free money.” You may also have heard that “money doesn’t grow on trees,” but we’re pretty sure money is still made of paper. While cash back from your credit card isn’t exactly free money, using credit wisely can be beneficial.

How Does a Cash Back Perk Work?

Cash back is the rebate of the credit card world. The money that you get back, depending on the card and the deal you’ve gotten, may come in the form of a check, statement credit, or deposit with your financial institution.

With points, you might end up with $10 off your next Starbucks purchase; but you might actually prefer The Coffee Bean and Tea Leaf, so a Starbucks card may hold no value for you. With a cash-back reward, you typically get to decide how you want to spend the money: your mortgage, your lunch, your boyfriend’s birthday present, or even your credit card debt.

While some credit card companies offer a flat cash-back rate, other cards offer some combination of a flat cash back rate, and a specialized cash back rate for certain categories (often ones you can choose).

Card holders may be eligible to receive varying amounts—typically a percentage of spending in a certain category, e.g., dining, hospitality, airlines, or groceries.

But choosing a cash-back card with the best rewards isn’t so simple. There are many different kinds of cash-back rewards which may be available.

What’s Available

•   Cash back on a monthly, quarterly, or annual basis.

•   The cash back could be for any kind of purchase or for particular purchases in certain categories like dining, gas, groceries, etc. Sometimes it might be a combination of these two with higher rates of return on certain categories.

•   Timed spending bonuses: If you spend a certain amount within a certain prescribed time you may be eligible for even more cash back than the base amount.

•   Certain cards might also offer non-cash benefits like flight upgrades or extended warranties on purchases made with that card.

Why Do Cash Back Rewards Even Exist?

How is this even possible? Getting paid to spend money sounds like the kind of job you invented when you were twelve—it couldn’t possibly be real.

It turns out that the money you’re getting back comes from some very real places. Of course, credit card companies will try to get you sign up with them instead of their competitors. It’s dog-eat-dog out there. Credit card companies have since come up with a variety of tools to attract customers, and cash back is a common reward.

But where does the money come from? If you’ve ever been asked to fulfill a credit card minimum purchase amount you know where it comes from. The $10 minimum at the cafe is not there entirely to keep you adding extra shots to your morning latte (although you’re totally going to anyway).

The Pros

With so many kinds of credit cards out there, why would you consider a cash-back card?

•   Credit cards with cash-back rewards might actually help you earn more money than a low-interest-rate checking account with a debit card. Some checking account interest rates can often be less than 1% APY. Getting 5%—or more—cash back on your purchases is a lofty difference. Credit card spending, though, is still spending—not saving—an important difference to keep in mind when making purchases. Buying within a budget is still an important consideration.

•   Some cash-back cards offer sign-up bonuses or bonuses for spending over a certain amount or in a certain categories. When used responsibly, these types of bonuses could be used for special purchases a buyer might not have been able to afford otherwise. Two tickets to Paris please!

•   Consumers with credit scores of 740 and higher are typically the ones who qualify for cards with the highest cash-back rewards, which could be up to 6% when purchasing items from designated categories. Yet another reason to pat yourself on the back for your high credit score.

The Cons

Okay, so maybe some of the maxims are correct. Nothing in life is free and money doesn’t grow on trees. Like anything good in life, there can be a downside (we’re looking at you, cupcakes).

•   Many cash-back programs actually come with a maximum on rewards. While it seems that the more you spend the more you get, eventually you might just be spending more.

•   Some cash-back credit cards have annual fees. While this may seem small compared to the money you’ll be getting back, it might be worth it to do the math and make sure the pros outweigh the cons before you are convinced that this card is worth your spending power. Some cards with hefty fees reward the cardholders with perks beyond the cash-back bonus.

•   Like any other credit card, if the balance due is not paid on time, there are typically interest charges and fees added to the principal balance. That amount may negate any cash-back rewards you earned during that statement cycle.

•   Perhaps the biggest con: Choosing and managing a credit card can be complicated. Lots of homework, (i.e., research online, with your bank, has to go into this one before you may feel ready to commit to this endeavor. With occasional fees and sometimes hard-to-acquire gains, your research is key to making sure you find one that works for your spending habits. Cash-back credit cards can pay off, but it might take some digging to find the right one.

Unfortunately, at the end of the day, there’s no free lunch. Credit card companies are in the business of making money and they rely on your debt to fund their businesses.

Using credit wisely—and reaping all the rewards—typically means paying the balance due in full each billing cycle. Getting to that point can take some time, though.

New and existing Checking and Savings members who have not previously enrolled in direct deposit with SoFi are eligible to earn a cash bonus when they set up direct deposits of at least $1,000 over a consecutive 25-day period. Cash bonus will be based on the total amount of direct deposit. The Program will be available through 12/31/23. Full terms at sofi.com/banking. SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC.

SoFi members with direct deposit can earn up to 4.00% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 3/17/2023. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet

¹See Rewards Details at SoFi.com/card/rewards.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOPL19062

If you’ve been thinking about canceling one of your credit cards, you may have heard that you should keep it open.

If so, you might be wondering, “Why? Is it bad to cancel a credit card?”

The answer, as with most finance-related matters, is that it depends on your specific situation, including the reasons you’re thinking about closing that card.

Perhaps, for example, your credit card company has changed its terms in a way that’s not acceptable to you, or you just want to simplify your finances by having fewer credit cards in your name.

“Can I cancel a credit card?” is, of course, different from “Should I cancel a credit card?” Keep reading to find out the difference between the two, some pros and cons, and other considerations.

Note that this is just an overview of common tips, questions, and hypotheticals. Only you can decide for yourself what makes the most sense for your unique financial situation.

Times When You Might Consider Canceling

If a credit card is costing you money, maybe because of annual fees, then you might be thinking about closing that card, especially if you don’t really use it. Before you do, it’s possible to the credit card company to see if the fees can be waived. There is no guarantee that the answer will be yes, but it doesn’t hurt to ask.

Maybe you find yourself putting impulse purchases on this card and you can’t pay the balance off in full at the end of the month. Then you may decide to cancel the card to get your debt under control.

Or you may learn about a card that offers great rewards you could benefit from, whether that’s cash back, loyalty points, frequent flyer miles, or something else.

So you might decide that a reward credit card would be better suited for your needs and you’re thinking about closing your current card and using this one instead.

That may be the right choice for you. Note, though, that reward cards typically have a high annual percentage rate (APR), so if you don’t pay your balance off in full each month, this may not be the best fit.

Here’s another scenario. Let’s say that your credit card has a high interest rate. Does it make sense to shop around for a better one and transfer the balances? What about applying for a zero interest credit card?

More About Zero Interest Credit Cards

You’ve probably seen offers for no interest credit cards and may think that you should apply for one and transfer your balance from a high interest credit card to this one. And, in certain circumstances, that may make sense for you.

If, for example, the new credit card would give you a six-month introductory window to pay off your balance or at least significantly pay it down at zero interest, you might end up saving a nice amount of money on interest.

On the other hand, the interest rate will go up after the introductory period—and it’s possible that it would be higher than your current credit card. So be mindful about this process and investigate the specifics before transferring your balances.

There are other potential problems. Sometimes, if you don’t pay the entire balance off during the introductory period, the company collects interest on the entire principal, even if your remaining balance is close to zero. So, in this case, nothing was really free about this credit card, and it may end up costing you more money in interest.

In addition, sometimes there are fees attached to the transfer. When that’s the case, typical fees might be about 3% of the balances you’re transferring, with some as high as 5%—and, if the zero interest credit card you’re considering has fees of 5%, that’s $500 on a $10,000 balance!

Circling back to the main issue, if you decide to transfer your balances to a no interest credit card, should you cancel your old one?

If you keep both the old card and the new one, and end up using both of them, you may end up in more debt than if you hadn’t done the transfer in the first place. There is no one right strategy to take, so it’s important to create a plan that works for you.

So, can you cancel a credit card? Of course you can. But, the more important question may be whether you should—and to help you make your decision, here are some common reasons you might not want to cancel that card.

Before You Cancel

Having debt and managing it responsibility—including credit card debt—can be seen as a plus by creditors. And if you cancel a credit card, under certain circumstances, it can have a negative impact on your credit.

Is your credit utilization rate under 30%? That can show lenders you can use credit responsibly. A credit utilization rate is the percentage of available credit you’re currently using—so if you cancel a credit card, the amount of credit you have available to you will go down by the amount of the unused credit on that card.

For example, a credit card with a credit limit of $10,000 and a $2,000 balance on it, then there’s $8,000 of available credit on that card. Cancel that card and that $8,000 available credit vanishes, which causes overall credit utilization rate to go up.

Another factor in your overall credit score is the average age of accounts. If you cancel an older card in your name, this can lower the average age of your accounts, though even closed accounts remain on your credit report for seven to 10 years.

•   If you do decide to cancel a card, good rules of thumb include:

•   Before canceling a card, continue to make payments on time until the balance is paid in full.

•   Check credit scores afterward to make sure no errors occurred.

•   Avoid closing several of them at once, because this could look suspicious to creditors.

Contact the company to find out exactly what needs to be done to close the account. Simply cutting up your card isn’t actually closing it. If there is an annual fee associated with the card, you could still be charged that amount.

Using the Credit Cards You Keep Open

If you decide to keep all or some of your credit cards open, these ideas could provide guidance on their use.

Once your credit-worthiness is established, you might start receiving credit card offers. Maybe a whole lot of them. And when you go into a store, you might be asked if you’d like to apply for one of their credit cards—and they might offer you discounts and other perks to say yes.

Each time you apply for a credit card, however, it can trigger a credit inquiry that’s called a “hard pull” or “hard credit inquiry.” If this happens too often in a short amount of time, it could affect your credit score.

Does a credit card offer cash advances? If so, you might want to check the APR you’d pay if you’re considering a cash advance. It’s likely to be several points higher than paying for a specific purchase with the card. If you use your credit card at an ATM, you may also need to pay a fee, so it’s often better to use a debit card or write a check when you need cash.

Another option is to contact your credit card company and ask for a better interest rate/APR. A 2018 poll for CreditCards.com showed that 56% of the people who asked got a thumbs up to their request. And 70% of those who asked to have their annual fee waived or lowered got a positive response.

Managing Credit Card Debt

Perhaps you’re trying to determine how much credit card debt is too much for you. If so, then having the ability to make the minimum payment each month typically isn’t the best benchmark, because paying only the minimum can cause your debt to grow because of compounding interest.

It can make sense to use the concept of credit card utilization to determine if you’re being smart with your credit card management.

As another check, you could calculate your debt-to-income ratio, especially if most of your debt is credit card debt. If it’s higher than you’d like, this may mean it’s time to take action on your credit card debt.

Your debt-to-income ratio shows how much of your pretax income goes toward paying monthly debt—and when it’s high, some lenders might be reluctant to lend to you or may charge a higher interest rate. They might decline to lend you any money at all.

If you decide that it’s time to pay off your credit card debt, there are many methods and strategies out there, including the snowball method. Steps include the following:

•   Choose the account with the smallest outstanding balance to pay off first.
•   On other accounts, pay the minimum amount due to avoid late fees.
•   With your targeted account, pay as much as possible with the goal being to pay it off as soon as you can.

Once that account is paid off, select the next account with the lowest balance and repeat the process, but add the amount you were paying on the initial balance (thus, the snowball).

This can be an effective method of paying off credit card debt because it builds momentum and creates incremental financial victories, but it doesn’t address interest rates. So it’s important to factor in higher-interest debts before embarking on a strategy like this one.

Whether you choose to use the snowball method or another strategy to manage and pay down debt, at the heart of it all is effective budget tracking.

Tracking what you spend could help you decipher where you’re overspending—and, with today’s virtually frictionless spending, that’s easy to do. Sometimes, people who start to track their spending for the first time discover they’re actually spending hundreds of dollars more in certain categories than they realized.

Until you have financial benchmarks to monitor, it can be hard to make meaningful changes in your spending and saving habits. With accurate tracking, though, you may find yourself feeling inspired to eliminate some expenses (perhaps unused online subscriptions) and reduce others (maybe your cell phone bill).

Although this might initially feel tedious, it could give you the freedom to spend your money on what really matters to you.

Taking Out a Personal Loan

Another option to help crush your credit card debt could be an unsecured personal loan. Taking out a credit card consolidation loan could help consolidate your debt and get it back under control.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOPL19075

There’s nothing quite like the feeling of having your credit card balance paid in full. It’s like a breath of fresh air, a surge of pride, and a huge sigh of relief all rolled into one. But Americans have an on-going love affair with plastic.

Collectively we hold more than $1 trillion in credit card debt. When it comes to getting rid of credit card debt, baby steps can lead to big victories—even the possibility of getting those credit cards paid off in 2020.

To be clear, we’re not talking about being completely debt-free in 2020. Depending on how much you owe on all your debt in total, that could be a longer journey. But targeting your credit card debt can be a smart first-step since credit card debt can sometimes come with a high interest rate.

We’ve put together eight common strategies for how to get rid of credit card debt. But first, you’ll need to get your head in the game. Unless you suddenly receive an inheritance or win the powerball, unloading debt can be challenging.

If you truly want to try and eliminate credit card debt in the new year, it’s going to require a lot of budgeting, discipline, and will-power. You’ll likely have to make sacrifices and compromises. But if you can keep your eye on the prize, next year you could be looking at a nice, round zero.

1. Limit Your Use of Credit

No strategy for how to crush credit card debt is going to work if you continue to rely heavily on your credit cards. Pick one card to keep—ideally, one with good terms, like a low interest rate or a great rewards program —and put the rest away.

You can store them in a safe place or even cut them up so you’re not tempted to use them. If the card doesn’t carry a large annual fee, consider not canceling your credit card account, since losing that cards credit history or percentage of credit utilization could possibly have an affect on your credit score.

2. Take a Hard Look at Your Spending

Go through last month’s bank and credit card statements and add up all the money you spent eating out, or shopping for non-essentials. You may be surprised at what you find.

Review your spending closely and see if there is any room for you to cut back on unnecessary expenses. Then, create a budget that’s completely within your means.

The goal is to cut back on your discretionary spending so you can focus additional funds on paying off your credit card debt. Take a look at our tips for creating a better budget. Building a workable budget is one of the first steps in tackling your debt.

3. Create a Debt-Repayment Strategy and Stick to It

There are a few different schools of thought when it comes to eliminating your credit card debt, especially if you have debt spread over multiple credit cards. Regardless of the strategy you choose, make the minimum monthly payments on all of your debts.

One strategy is called the debt avalanche method. Using this method you’ll organize your credit card debt from highest interest rate to lowest interest rate.

Focus your efforts on repaying the debt with the highest interest rate first. Then as you pay off each credit card, you can contribute the money you were contributing to the next debt.

On average, Americans will pay more than $1,000 in interest this year, so tackling the highest interest rate first could be appealing. You can use our credit card interest calculator to see an estimate of how much interest you’ll accrue on your current track.

The other approach suggests you focus on the credit card with the smallest balance first. This is called the debt snowball method. The goal of this strategy is to encourage you to continue your debt repayments. Since you start with the smallest balance, you’ll start seeing the impact of your payments faster.

6. Transfer to a Balance Transfer Credit Card

This could help you toward your goal of eliminating your credit card debt but in order to do so it will require diligence to avoid common pitfalls.

A balance transfer credit card allows you to open a new low-interest or interest-free credit card and transfer your existing balance from a high-interest credit card, so you can pay off the debt. In theory, paying off the debt should be easier without a high APR.

The introductory APR on low or 0% transfers generally lasts anywhere from six to 18-months, so be sure you understand the terms and conditions. These can be a useful tool if you can repay your debt during the introductory period.

7. Consolidate Your Debt with a Personal Loan

A personal loan won’t eliminate your debt, but it could help you get out of the high-interest credit card game. Instead of a revolving door of debt, you can opt to pay one monthly fixed payment, possibly at a lower interest rate.

8. Pay More than You Owe, More Often than You Owe It

As you work toward paying your credit card debt, consider making more than the monthly minimum payments. This can help you pay off your debt faster and in doing so, could help you reduce the amount of money you spend in interest over the life of the debt. This can be helpful in both the avalanche and snowball methods of debt repayment.

Ready to see how consolidating your credit card debt with a personal loan could help you take control of your finances? SoFi can help. Use our personal loan calculator to compare your current debts with a personal loan.

When you take out a loan with SoFi there are no prepayment penalties or origination fees. You’ll also gain access to a community of like-minded savers.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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Scary, but true. The amount of student debt in the United States is approximately $1.5 trillion , about one-and-a-half times what Americans currently owe on their credit cards. People use credit cards for home repairs, to go on vacation, to buy groceries, to eat out at restaurants—and for just about any other expense you can think of. Yet, all of these purchases combined are dwarfed by our country’s total student loan debt.

Student loan debt is now the second biggest form of debt in our country, only behind mortgage loans—and the debt balance and its accompanying crisis continues to grow. In this post, we’ll delve into what impact this situation is having on the millennial generation (and other borrowers). We’ll also reverse engineer the reasons why this debt crisis is taking place and share strategies to help whittle down student loan debt, maybe even paying it off more quickly.

National Student Loan Debt and Its Impact on Borrowers

A recent study shows that millennials who have student debt have a net worth, on average, that’s 75% less than those without student debt (an average of $29,087, compared to $114,376 for those who are loan-free).

Students with loan debt also tend to have, when compared to their peers with no student loan debt:

•  about half as much money in the bank ($5,500 versus $10,180 )

•  approximately $19,000 less in their retirement accounts ($21,160 versus $39,905 )

•  larger mortgages—and on homes with less value

In short, financial wellness of millennials with student loan debt is clearly substandard, overall, when compared to others in their demographic without this debt. And, although people with college degrees tend to get higher-paying jobs, overall, the weight of the student debt that often accompanies it can drag down a person’s ability to gain financial wellness.

Here’s another statistic to consider: in an era when total student loan debt has surpassed total credit card debt, millennials with student loans also have more credit card debt.

•  55% of those with student loans also have credit card debt ; only 32% without education-related debt do.

•  Their average balance is $2,888 compared to $1,476 for graduates without student loan debt.

A Forbes article looks at the “disastrous domino effect” created by student debt, with one couple sharing how their debt is forcing them to “put their lives on hold year after year.” It’s had a negative impact on their marriage as they focus on paying down debt, and as they’re waiting to have children and buy a home. This debt has been a “huge burden and point of contention.”

Related: Will There Ever Be a Student Loan Bailout?

The borrower being quoted was a participant in a 50-state survey, Buried in Debt , of student loan debt and its impact on borrowers.

This report examines how the unrelenting stress of student debt can strain borrowers financially as well as emotionally. One of the participants shares how she regularly thinks about selling everything she owns to live in her car so she can put more money towards her debt.

Conclusions from the report include:

•  Nearly 90% of borrowers surveyed struggle to make payments.

•  The majority have less than $1,000 in their bank account.

•  6% of them have even had Social Security payments or wages garnished.

•  Nearly one third of them say their student loan bill is higher than their rent or mortgage payment.

•  65% say it’s higher than their entire monthly food budget.

More About the National Student Loan Debt Crisis

The amount of U.S. student loan debt continues to grow, increasing by 170% in just 10 years’ time . You read that right: over the last 10 years or so, the amount of student debt (in real dollars!) nearly tripled, which may lead people to believe we’re in the midst of a student loan bubble, similar to the subprime real estate bubble from a decade ago.

In June 2018, NASDAQ.com published Safehaven’s prediction that the student loan bubble is about to pop, and the article also shares how, earlier in 2018, the chairman of the Federal Reserve stated that this student loan increase could “slow down economic growth.”

Why this Debt is Growing

In part, the total student loan debt is growing because the costs of getting an education are still rising beyond the rate of inflation. In fact, over the last 10 years, the published costs of in-state tuition and fees at public universities increased at an average of 3.1% beyond the rate of inflation.

And, as long as the cost of attending college outpaces the cost of living, problems will continue for borrowers. Plus, the housing market crash of 2008 has also fed into today’s student loan debt crisis. That’s because some parents who’d planned to borrow against their homes’ equity to help their children attend college often couldn’t do so, post-2008. So, these students needed to take on debt of their own. More specifically, some economists suggest that, for every $1 drop in home equity loans, there has been an increase of 40 to 60 cents in student loans.

Even more alarming, analysis by The Brookings Institution estimates that, by 2023 (just a few short years away!), nearly 40% of student borrowers may default on their loans.

Paying Down Student Debt More Quickly

If possible, you could consider making an extra payment annually toward your loans’ principal balance. Can you do this twice a year? Every quarter? Paying extra toward your loans can help you get them paid off more quickly.

If that strategy is too much for your cash flow situation, you could always try figuring out how much you could increase your monthly payment beyond the minimum. Even if that doesn’t seem like an option right now, you can continue monitoring your financial situation and taking advantage of when you can pay more to your debt balance.

It can also help to create or review your monthly budget to see where you can cut back on expenses. For example:

•  How many paid apps, monthly subscriptions, and so forth do you have automatically deducted from a bank account or put on a credit card? Do you use them enough to justify their prices? There are even apps that help you can cancel unnecessary subscriptions and more.

•  When is the last time you shopped around to make sure you’re getting a good deal on your car insurance, enter’s insurance, or cell phone plan? How much could you save if you switched to a less expensive plan, and would the coverage still be as good?

•  What discretionary spending can you reasonably live without?

What would happen if you put those “found” dollars onto your student loan balance?

Refinancing Student Loan Debt with SoFi

If you’ve ever consolidated, say, balances from multiple credit cards into a personal loan, then you already know how much more convenient it can be to have one monthly payment. And, if you can get a lower rate on your new loan, you could also pay less interest over the life of the loan—depending on your repayment term.

The same is true when you refinance your student loans. It isn’t unusual for students to have taken out multiple loans for their education, and consolidating them into one loan with one monthly payment and a potentially lower interest rate might help them manage their repayment.

At SoFi, we allow you to refinance federal and private loans. We do, however, recommend that you explore the repayment benefits you can receive with federal loans, such as forgiveness programs or income-driven repayment plans, before refinancing. You’ll lose out on those benefits when you refinance with a private lender, so it’s important to be sure you won’t want to take advantage of any federal loan benefits either now or in the future.

When you refinance, you can opt for a fixed or variable loan and potentially select a more favorable loan term. If you are currently struggling to make your monthly student loan payments, it might make more sense to choose a longer term—though this can mean paying more interest over the life of the loan. Alternately, if you refinance to a shorter term, you could pay your loans off earlier, potentially paying less in interest.

In just two minutes, you can find your rate online and see if you qualify for SoFi student loan refinancing.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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