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Financial Education 101

Paying off debt and debt management

4 minute read

If you need debt help, you might like to know that you're not alone: the vast majority of Americans are in debt right along with you.1 That means up to 80%2 of your friends and neighbors are wondering how to get out of debt.

Although it's by no means an easy task, it is doable—and you can start with this overview of how to achieve debt management.

Different types of debt

You should know that not all debt is created equal. Installment debt, such as a mortgage, student loan or car loan, is debt you pay back with monthly payments over a set period.3 Revolving debt, such as a credit card or home equity line of credit, is an open-ended account that you can use up to a certain limit.4 You should try to rid yourself of both kinds of debt, but revolving debt in the form of a credit card might be more detrimental. One of the reasons is because if you have a high balance on your credit card month after month, your credit score could be negatively affected.5

Credit card debt especially dangerous

There's another reason why credit card debt is considered one of the worst types of debt6: high interest rates. The average interest rate on credit cards is 14.87%.7 Compare that to the interest rates of other common types of debt:

  • mortgage: 4.38%, the average interest rate for a 30-year fixed mortgage8
  • car loan: 4.21%, the average interest rate for a 60-month auto loan9
  • student loan: between 5.05% and 7.6% for the 2018–19 school year, depending on the type of loan10

A higher interest rate means you'll owe more over the life of the loan than with lower-rate options, assuming payoff times are similar. In other words, higher interest rates make your loan more expensive.11 And with credit card interest rates two to three times higher than rates for other loans, it can be a good place to start when seeking to become debt free.

How to get out of credit card debt

If you have credit card debt, try to pay it off fast. Always pay on time and try to pay more than the minimum amount. You might try sending payments every week instead of every month to speed up the process. Look around for promotional offers that give you 0% interest for a set period. As long as you pay off the full loan by the end of the promotional period, these can help you get to the finish line faster. For eliminating other types of debt, use a similar approach: pay on time, pay more than the minimum payment required, and negotiate for better interest rates.

Any kind of debt repayment requires that take a hard look at your spending patterns and get in the habit of only buying what you need. You might also need to increase your income, perhaps by finding a different or second job. Finally, avoid getting into debt again by trying to build up an emergency fund of $1,000–$2,000, or getting one month ahead financially. That way, if you have an unexpected medical bill or car repair, you can pay for it without reaching for your credit card.

1 Maurie Backman, February 15, 2018, “It’s Official: Most Americans Are Currently in Debt,” Motley Fool,
2 Ibid.
3 “Could Borrowing Let You Meet Your Goals?,” May 10, 2018, Fidelity,
4 Lending Tree, “Glossary,” s.v. “revolving debt,”
5 Brendan Harkness, August 8, 2018, “How to Pay Off Debt: 6 Strategies That Work,” Credit Card Insider,
6 Kailey Fralick, November 5, 2018, “The 4 Worst Types of Debt and What You Can Do to Get Rid of Them,” Motley Fool,
7 Claire Tsosie and Erin El Issa, December 10, 2018, “2018 American Household Credit Card Debt Study,” NerdWallet,
8 “Average U.S. Mortgage Rates 2018,” ValuePenguin,
9 “Average Auto Loan Interest Rates: 2018 Facts & Figures,” ValuePenguin,
10 Teddy Nykiel, July 31, 2018, “Current Student Loan Interest Rates and how They Work,” NerdWallet,
11 Justin Pritchard, November 2, 2018, “What Is Interest?” The Balance,
*Subject to credit approval. Minimum monthly payments required. See for details.

This content is subject to change without notice and offered for informational use only. You are urged to consult with your individual business, financial, legal, tax and/or other advisors and/or medical providers with respect to any information presented. Synchrony and any of its affiliates, including CareCredit,(collectively, "Synchrony") makes no representations or warranties regarding this content and accept no liability for any loss or harm arising from the use of the information provided. Your receipt of this material constitutes your acceptance of these terms and conditions.
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