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An estimated 14 million Americans have at least $10,000 in credit card debt.

Five-figure credit card debt, and the interest that accrues along with it, can feel overwhelming. It’s the kind of debt that keeps people up at night, and prevents them from pursuing their other financial goals.

But, that debt doesn’t have to stick around forever. With a strategy, chipping away at a $10,000 in credit card debt is achievable. Here are some options for how to pay off $10,000 in credit card debt.

Tips for Paying Off $10,000 in Credit Card Debt

Paying down $10,000 in credit card debt takes discipline and time. These tips and tools could help speed up the journey toward debt freedom.

Consider a Side Hustle

If your budget doesn’t have much wiggle room to make extra payments toward credit card debt, you might consider finding ways to generate more income. Starting a side hustle could be a powerful way to pay down a $10,000 credit card debt faster. Whether it’s grabbing a job in the gig economy or taking a catering job on the weekends, you can put those paychecks toward your credit card debt.

Ask for a Raise

If time is limited for a side hustle, think of how you could make more money in your current role. Is it time to ask for a raise, for instance?

Similarly, switching jobs may land you a higher salary. Nearly half of all Americans who switched roles last year saw an increase in salary. Just make sure that extra income goes toward debt payoff, and not lifestyle creep.

Switch to Cash

When you’re paying down $10,000 in credit card debt, it’s important to avoid accruing a higher balance. Adding more debt can not only feel discouraging, it can extend your payoff timeline.

As you tackle paying down debt, consider avoiding any further spending on credit cards. That can take the form of paying for things in cash, or using a debit card where you can only spend what you actually have. Making a switch to cash means you’re less likely to add to your burden of debt.

Debt Management Plans

While tips and tricks may help you pay down $10,000 in credit card debt, you may have to consider a larger overall strategy to move you towards payoff. Having a debt management plan in place can take some of the pressure away and could put you on a track toward paying off debt faster.

Two popular methods to accelerate debt repayment include the snowball and avalanche method.

The snowball method prioritizes paying off small debts first and working your way up. Here’s how:

1.    Make the minimum monthly payments on all debts.

2.    Take inventory of all your debts and order them from lowest outstanding balance to highest.

3.    Put any extra cash toward the smallest balance debt.

4.    Repeat this until the lowest debt is paid off.

5.    Next, move onto the next lowest debt, adding the surplus cash from step 2 to this card’s monthly payments.

6.    Continue to repeat this process, scaling up to the high-balance debts once you pay off the lower ones.

While this method can seem counterintuitive because of the interest that high balances can generate, starting off with small wins has psychological benefits for some. Having those wins early on may motivate you to move forward.

If you tend to be more disciplined and don’t mind playing the long game, you might prefer the debt avalanche method to pay off $10,000 in debt. Here’s how to deploy the avalanche method:

1.    Make minimum payments on all debts.

2.    Compile all your debt, and order it by interest rate from highest to lowest.

3.    Put any extra cash toward the debt with the highest interest rate.

4.    Repeat until the highest-interest debt it paid off.

5.    Move onto the debt with the next-highest interest rate. Put any extra cash toward this balance until it’s paid off.

6.    Continue this process, prioritizing the highest interest debt first, until all balances are settled.

Typically, the debt avalanche saves more money in interest payments in the long run. However, it can take time to see a win with this method, as opposed to debt snowball.

Credit Card Debt Forgiveness

Credit card debt forgiveness is not as simple as waving a magic wand at your balances and watching them disappear. Forgiveness does not mean the debt’s completely erased, and it comes with its own drawbacks.

Credit card debt forgiveness only becomes an option when a cardholder stops paying their debt and the credit card company sells the outstanding balance to a debt collector. From there, you can negotiate with the debt collector as to how much debt to repay.

Debt collectors buy debts for pennies on the dollar, and thus are willing to recuperate just a portion of the initial amount owed. For example, if you owe $10,000 in credit card debt and it goes to collections, you may be able to negotiate to settle the debt for just $5,000. That payment may be a lump sum or small payments over time.

While credit card debt forgiveness means paying less than the total owed, it has a fair share of drawbacks. Neglecting credit card debt can wreak havoc on a person’s credit score, and you’ll still need to pay some portion of the debt.

Additional Options for Paying Off Debt

Credit card debt forgiveness isn’t the only route toward paying off $10,000 in credit card debt. Depending on your situation, one of the following solutions may work.

Balance Transfers

Some credit card companies allow cardholders to make credit card balance transfers. That means you transfer the outstanding balance from one credit card to another, often with an introductory low interest rate or no interest.

Balance transfers do come with fees, but depending on how much you owe and how much you could save on interest, it could be worth it in the long run. However, keep in mind the interest rate the balance transfer offers may be for a limited time. You’ll want to pay off the remaining balance before the rate rises, or you could owe more than you did before the transfer.

Personal Loans

There are a number of common uses for personal loans, including paying off credit card debt. Often, a personal loan will have a lower interest rate than credit cards, which could help you pay down your debt faster and save on interest. If you’re struggling to figure out how to pay off $10,000 in credit card debt, consolidating multiple balances into a single loan also may streamline the process.

Your credit score can impact if you get approved for a personal loan, as well as what interest rate you receive. If you have a less than stellar credit score, you may not get approved. Using a personal loan calculator can help you determine if this strategy will net you savings and, if so, how much.

Recommended: Types of Personal Loans

The Takeaway

Paying down $10,000 in debt might not be easy, but with the right strategies, it is possible. This could mean adopting an aggressive payoff method or looking for additional options to pay down the debt, like personal loans.

If a personal loan sounds like the right fit for you, consider SoFi personal loans. SoFi has a simple online application and offers easy-to-use tools. You can view your rate in just 60 seconds, and get your loan funds as soon as the day your loan is approved.

Photo credit: iStock/ArtistGNDphotography

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.

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Leveraged exchange-traded funds (ETFs) are tradable funds that allow investors to make magnified bets on an underlying index. Leveraged ETFs have been popular among investors looking to amplify their exposure to a market with a single trade. But they have their risks, like all investments.

Because of how they augment price swings, leveraged ETFs can cause massive losses. And for reasons related to their inner mechanics, they’re not good at delivering sizable returns when held for an extended time. That means investors may not see the returns they expect.

How Do Leveraged ETFs Work?

Exchange-traded funds, or ETFs, are securities, but themselves are a form of index investing. They’re typically baskets of stocks, bonds or other assets that aim to mirror the moves of an index, though ETFs can have many different aims or goals. Leveraged ETFs use derivatives so that investors can double (2x), triple (3x) or short (-1) the daily gains or losses of the index. Financial derivatives are contracts whose prices are reliant on an underlying asset.

In finance, leverage is the practice of using borrowed money to increase the potential return on an investment. Leveraged ETFs use derivatives to increase the potential return on an investment.

Let’s look at a hypothetical example. Say an investor buys a regular, non-leveraged ETF. Here’s how such an ETF would work. If it tracks the S&P 500 Index and the benchmark gauge rises 1% on a given day, the non-leveraged ETF would also climb about 1%.

If, however, the investor buys a triple leveraged ETF or 3x ETF, their return for that given trading day could be a 3% gain. The reverse scenario could also happen, though. If the S&P 500 fell 1% on a given day, the owner of the triple leveraged ETF can suffer a 3% loss.


💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

What Is ‘Decay’ in Leveraged ETFs?

There are pros and cons to ETFs themselves. But leveraged ETFs can be particularly problematic for investors due to their design. They are constructed to deliver multiples of an underlying asset’s daily returns, not weekly, monthly or annual returns. Leveraged ETFs don’t deliver the exact magnitude of 2x or 3x if held for longer than a day.

So, if the S&P 500 were to rise 5% in a week, a triple leveraged S&P 500 would not climb 15% in that week. The same would be true for a double leveraged ETF. There’s no guarantee it would return 2x or 10% to its owner.

That’s because of how leveraged ETFs are constructed. In order to maintain their 2x or 3x exposure, leveraged ETFs use derivatives that need to be rebalanced at the end of each day. This process can erode the returns of the ETFs — a process known as “decay” in the market.

Types of Leveraged ETFs

1.    Double Leveraged (2x) ETFs give investors double exposure to the daily return of an index of stocks, bonds, or commodities. So if an asset or market moves 1.5% in a single day, the fund aims to deliver a return of 3% that day.

2.    Triple Leveraged (3x) ETFs try to provide investors with 3x amplification. So if the underlying asset or index rises or falls 2% on a trading day, the ETF seeks to rise or fall 6%.

3.    Inverse (-1) ETFs are also considered to be leveraged ETFs. They move in the opposite direction of the underlying asset they’re designed to follow. So if an index moves -1%, the ETF would aim to climb 1%, and vice versa. Inverse ETFs are essentially a form of shorting a stock. Investors are able to short the underlying market by buying shares of an inverse ETF.

Pros of Leveraged ETFs

Easy Leveraged Trades

Leveraged ETFs have made it easier for investors to make leveraged wagers on the market, which can be a day-trading strategy but not a practice that’s readily available to all investors, particularly retail investors at home who may be trading in smaller increments.

Useful For Quick Leveraged Market Wagers

Leveraged ETFs can be useful for a one-day wager that an investor wants to make on an underlying market, such as technology stocks, high-yield bonds, or emerging markets.

Allow For Easy Shorting

Inverse ETFs can give investors the ability to short, or bet against, an asset. Short sales aren’t easily available to non-professional investors, particularly retail investors at home. Shorting can be a way for investors to hedge or offset the risk in their holdings.

Cons of Leveraged ETFs

Potential For Outsized Losses

With leveraged ETFs, investors could potentially see outsized losses due to how the products compound returns. For instance, if an index were to tumble 3% in a single day, a holder of leveraged ETFs would experience a plunge of 9% in the shares of their fund.

Rebalancing Needs

Because of how they’re constructed, leveraged ETFs need to be rebalanced daily. This process can cause what’s known as “decay” in the fund, when the performance veers from the underlying asset’s returns. This means investors may not see the 2x or 3x returns if the leveraged ETF is held for longer than a single trading session.

Increased Investment Risk

Inverse ETFs allow investors to short assets, but because of how there’s no limit to how high an asset can go, that means investors could see their holdings in the inverse ETF go to zero.

Derivative Risks

Leveraged ETFs use derivatives to achieve their amplified returns. Therefore, investors should be aware of the counterparty risk — or the risk from the other parties involved in the derivatives.

Higher Costs

Leveraged ETFs tend to be more expensive than traditional ETFs. Investors who want to understand how fund fees work should look at the ETF’s expense ratio. For instance, some popular leveraged ETFs can have an expense ratio of 0.95%. That compares with more traditional ETFs, which can have an expense ratio of around 0.20%.

Closure Risks

There’s a high risk of closure. Investors who don’t sell out of their leveraged ETF shares before the delisting date could be left with positions that are difficult or costly to liquidate.


💡 Quick Tip: How to manage potential risk factors in a self directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Regulation of Leveraged ETFs

Regulators’ rules on leveraged ETFs have varied in recent years. And they continue to change. In early 2023, the Securities and Exchange Commission (SEC) issued a bulletin about leveraged ETFs, warning investors about the particular risks associated with them.

In October 2020, the SEC made a rule change that would make it easier to launch leveraged ETFs, while capping the amount of leverage at 200%. The move was a break away from prior announcements that sought to slow down the creation of new leveraged ETFs. The SEC had previously allowed existing leveraged ETFs to be continued to be traded, while putting restrictions on the approval of new such funds. The SEC issued an alert about leveraged funds to retail investors in 2009.

In May 2017, the SEC approved the first quadruple (4x) leveraged ETF, only to halt its decision soon after.

Some investment firms and ETF providers have pushed for the term “ETF” to not be applied to leveraged and inverse funds. They argue that the term “ETF” is used for a range of products that can lead to significantly different outcomes for investors.

The Takeaway

Leveraged ETFs use derivatives in their construction to try to deliver amplified returns for an investor. Relative to index funds, ETFs can allow entire markets to be more easily traded, similar to how shares of a stock are traded. Leveraged ETFs are not safe for all investors, particularly inexperienced ones.

These ETFs can cause massive losses because of how they magnify returns. In addition, market observers and regulators have said that leveraged ETFs may be better suited for professional or experienced investors to be used within a single trading session. The use of derivatives in such funds causes their performance to veer from the underlying market if the ETFs are bought and held. As always, it’s important to do your research about any ETF or investment before investing.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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