Here's How Much Credit Card Interest the Average Family Could End Up Owing

Credit cards allow you to earn rewards and take advantage of other cardholder benefits -- but they can also be very expensive if you don't pay off the balance in full and you find yourself getting hit with interest charges.

Just how much money could you end up sinking into your card payments? Let's take a look, based on how much the typical American owes.

Here's what your credit card interest could cost you

According to data from the Federal Reserve, the mean credit card balance among American families was $6,100 in 2022. The Federal Reserve also reports the average credit card APR was 21.19% as of August 2023.

The table below shows how much you could end up paying in interest depending on different repayment methods if you owed the average amount and were charged the average rate.

As you can see, if you just make minimum payments, paying off the average credit card balance would cost a truly astounding amount of money. You'd pay interest costs more than five times greater than the amount you currently owe and would send your creditor enough interest to buy a car. And you'd be stuck sending your card company money for longer than it would take to pay off the typical mortgage.

Of course, even if you make payments significantly higher than the minimum, sending in $400 a month, you'd still end up owing over $1,000 in added interest costs. The basic fact of the matter is, when you get into interest rates of 20% or higher, you are just going to end up spending a lot of money on financing charges even if you only owe the debt for a short time.

What can you do to reduce your interest costs?

The good news is, you aren't doomed if you have credit card debt. In fact, you have lots of options. One of the simplest might be to simply ask your creditors if they'll lower your rate. This doesn't always work, but sometimes they will be willing to reduce your interest rate, perhaps by offering a special promotional offer. It's worth a phone call to try.

Another option is to get really aggressive about getting that debt paid off. The more extra money you can throw at it, the faster you'll pay down your balance and the lower your interest costs will be. Working a side job, using your tax refund, or selling stuff you don't need could all help you find money to pay extra on a credit card balance.

Finally, you could look into dropping your rate by doing a balance transfer or getting a personal loan to pay off your cards. A balance transfer card is one offering a 0% promotional rate if you transfer a balance to it. Although there's typically a 3% to 5% upfront balance transfer fee, paying that fee to get 12, 15, or even 21 months of 0% interest could be well worth it. And personal loans often have lower rates than cards do, so you could use one to pay off your current credit card debt to convert it to a lower rate as well.

The important thing is to choose one of these options and get to work on it, before you get stuck paying tens of thousands of dollars of interest if you carry the average credit card balance.