How Gen Xers can conquer their credit card debt
Key takeaways
- The average credit card debt owed by Gen Xers is over $7,000 — higher than what other generations owe
- Credit card and overall debt can be managed and paid off by adopting effective tactics aimed at eliminating what you owe
- Proven strategies for reducing or eliminating credit card debt include reducing your spending, paying more than the minimum due, pursuing debt avalanche or debt snowball, using a balance transfer credit card and implementing a debt management plan or debt relief option
The average American debt load is higher than you may think. In fact, looking closer at average credit card debt by age, Generation X — those born between 1965 and 1980 — has some pretty large credit card balances and overall debts.
But this doesn’t mean this cohort is inherently bad at managing money. Instead, many Gen Xers feel extra financial pressures based on their family situations, as many are now caring for both children and aging parents. Still, it’s important for those in this age group to get a better handle on money matters and work to resolve their debt — especially with retirement on the horizon.
Whether or not you’re a Gen Xer, this guide will help you learn how to get out of credit card debt, the best way to pay off credit card debt, how to find credit card debt help and when to pursue worthy strategies like the debt avalanche, the debt snowball, debt management plans and balance transfer credit cards.
Gen X and credit card debt
Curious what the average credit card debt is for Generation X? Interested in other financial facts related to this age group? Here are a few sobering statistics:
- The average credit card debt for a Gen Xer is $7,070 (Bankrate)
- 18 percent of Gen X say their biggest financial regret is taking on credit card debt, higher than any other generation (Bankrate)
- 38 percent of Gen X say they have at least one credit card that carries a balance month to month, the most of any generation (Bankrate)
- 32 percent of Gen X with a credit card say day-to-day expenses such as groceries, child care or utilities are the biggest reason they currently carry a balance from month to month on their credit card (Bankrate)
- 28 percent of Gen X who do not believe they are financially secure say high or revolving debt is keeping them from feeling this way (Bankrate)
- 60 percent of Gen X say money negatively impacts their mental health, the most of any generation (Bankrate)
Gen X struggles with financial security
Credit card debt isn’t the only worry on the minds of folks in their 40s and 50s nowadays. Consider the following data points that indicate how Gen X faces financial security challenges.
“Generation X faces unique financial challenges,” says Steven Kibbel, a certified financial planner and chartered financial consultant. “They came of age during the 2008 financial crisis and the subsequent recession, which impacted their earnings and savings potential. They are often referred to as the ‘sandwich generation’ because they’re likely to be supporting aging parents and their own children simultaneously.”
Also, the cost of living – including education and housing – has jumped substantially over the years, making it harder for this generation to save and pay off debt.
The experts agree that it’s neither accurate nor fair to label Gen X as irresponsible with money based on their credit card debt.
“Debt doesn’t directly translate into poor money management, as there can be a variety of factors at play that lead to a bigger debt load,” notes personal finance expert Andrea Woroch. “Caring for their children and aging parents puts a big financial strain on their personal finances.”
Nevertheless, the sooner Gen X can dig out of debt, the better. “High-interest credit card debt can quickly snowball, making it harder to pay off over time. And having high levels of debt can significantly impact your ability to retire comfortably,” Kibbel continues.
How to pay off credit card debt
Feel a bit overwhelmed by credit card bills and financial pressures? Want to learn how to get out of credit card debt? Don’t panic. With the right approaches, you can decrease what you owe and enjoy better financial peace of mind.
For starters, check out Bankrate’s debt calculator. By providing some key information about your income and debts, the calculator will generate a customized payment plan that includes a well-structured schedule for paying off your debts efficiently and swiftly.
In addition, consider following action steps for paying off your credit card debt.
Choose a debt payment strategy
If you aren’t sure how to tackle the debt you’ve accumulated, there are several debt payment strategies you’ll want to consider, including the debt snowball, debt avalanche, debt consolidation loan and debt management plan.
- Debt snowball
- The snowball debt payment method directs you to pay your debts off by starting with the smallest one and working upward. Each time you pay a debt off, you reallocate the money you spent on that bill to pay off the next-smallest debt.
- Debt avalanche
- The debt avalanche is a debt repayment strategy in which you pay off the debt with the highest interest rates first. Once you pay off that debt, you add that debt’s payment to the minimum payment of your next highest-interest debt. This method may take longer to start paying off debts, but it will often save money on interest in the long run.
- Debt consolidation
- Debt consolidation loans, offered by traditional banks, online lenders and credit unions, allow you to combine multiple debts — ideally, at a lower interest rate. Not only can this approach help you save on interest costs, but it may also enable you to avoid late fees if you’re incurring charges while trying to manage multiple debts on your own.
- Debt management plan
- Debt management plans (DMPs) are provided by nonprofit credit counseling agencies. In a DMP, credit counselors assess your budget, negotiate with your creditors and arrange to consolidate your debts into a single plan that they manage to help you get back on track.
Use a balance transfer credit card
Another option is to transfer your outstanding high-interest credit card balance(s) to a 0 percent APR credit card, so long as you can pay off the balance transfer card before the APR period ends.
Money tip: Many balance transfer credit cards offer a 0 percent APR introductory rate for up to 21 months. You will pay a one-time transfer fee, but if you can stay disciplined, you may be able to pay off your debt without accruing interest in the card’s first year.
Pay more than the minimum payment each month
Paying only your minimum payments each month can significantly lengthen the amount of time it’ll take to pay off your debt. This tactic — in which you pay more than simply the minimum amount due on your credit cards monthly — can decrease the amount of interest paid over time and accelerate debt repayment.
“It’s one of the simplest and most effective strategies, but it does require having enough income to afford higher payments,” adds Kibbel.
Consider debt relief options
Various debt relief options exist that can support you in paying off your credit card debt, such as negotiating lower payment amounts with creditors, working with a for-profit debt relief company, arranging for a debt settlement or declaring bankruptcy.
If your credit card debt is truly unmanageable, turning to these solutions may provide a path out of debt that wouldn’t otherwise be achievable. Before pursuing one, be sure you’re working with a reputable provider, and be aware that the specific option you pursue can have a long-term impact on your overall credit profile.
“These options can have serious consequences, including significant impacts on your credit score, so they should be considered as last resorts,” Kibbel cautions.
Reduce your spending to keep the debt off
Understandably, the best way to stay out of credit card debt is to simply not add to it in the first place. Creating a reasonable budget and sticking to it can help ensure you don’t add to your debt load, while also enabling you to free up more cash for debt repayment.
“It’s a crucial part of any debt repayment strategy, but it requires discipline and may involve lifestyle changes,” says Kibbel.
The bottom line
If you’re tired of carrying heavy credit card debt and want to improve your financial situation, take action now to better manage your dollars and pay off what you owe. Remember that you are not alone, and help is available.
“Consider seeking advice and guidance from a financial advisor or credit counselor if necessary,” adds Kibbel.
