How to Pay Off $20,000 in Credit Card Debt

Erasing credit card debt

How to Pay Off $20,000 in Credit Card Debt

How do you turn $20,000 into almost $47,000?

If you’re talking about credit card debt, all you need do is make minimum monthly payments. At current rates, it will end up costing you an extra $26,126 in interest payments.

That is not good.

So how do you pay off $20,000 in credit card debt before interest rates totally devour your bank account?

It may sound hard, but all you need is determination and a plan. Here are the best ways to escape a $20,000 credit card black hole. Look them over and find an overall strategy that works for you.

Find out if Debt Management can help

Getting Started

You could try to get motivated by asking what $20,000 could buy. Among other things, it could get you a 45-night cruise to Antarctica and the Amazon or a Volkswagen Jetta or 1,539 months of Netflix. But being a shopaholic is probably what got into this fix. And you are hardly alone. Even before the coronavirus outbreak staggered the U.S. economy, credit card debt hit $930 billion in the last quarter of 2019. If you’re in that bind, the first thing you might need is an attitude adjustment.

Get Your Mind Right

Take ownership of your situation. You might have been laid off, or your ex-spouse could have cleaned you out in a divorce. But Visa and Mastercard don’t care about your excuses. The best revenge is to pay off your cards ASAP. That’d tell them where they can stick that $14,374 in interest.

Put Your Credit Cards in a Deep Freeze

Credit cards are your sworn enemy. Keep one for emergencies, but do not put another discretionary dime on it. That dime could cost you much more than 10 cents. The average credit card interest rate in April 2020 was almost 16.2%. If you owed $20,000 and made the minimum 1% payment a month, it would take 406 months to pay that off and you’d accrue $26,126 in interest. Paying off $20,000 on cards with 10% interest would end up costing you an extra $16,262. And you don’t even want to know what a 29% interest rate would cost.

Develop a Debt-Payoff Strategy

A great place to start is nonprofit credit counseling. Credit counselors can take a look a your financial situation during a free 20-40 session and recommend a debt relief solution that suits you. That could be a debt management program or any of the other strategies on this list.

Debt Management Program

Under a debt management plan, you enroll in a structured program offered by a nonprofit credit counseling agency. Your payments are consolidated, and creditors often offer lower interest rates. So instead of making a bunch of payments each month for your credit card problem, you make only one. And it’s at a lower interest rate, which saves you a lot of money. Credit counselors from the agency also help you set up a budget and will guide you through the program, which typically takes three to five years to complete.

Does it work? It does – if you work at it.

Jackie Bryan did. She had a $21,343 in debt spread over 17 credit cards. She enrolled in a debt management plan and paid it all off in 48 months.

“We are done with credit cards, I mean DONE!” she said when the last bill was paid. “Most of the time, we’ve had enough money to pay bills, but I’m just not an organized person and I didn’t do a good job with money management.”

D-I-Y Debt Snowball/Avalanche

There are two popular D-I-Y approaches to chipping away at debt. You can pay off the smallest credit card debt first, which might give you more motivation to pay the next-largest, then the next and so on. That’s the snowball method. The avalanche method is to pay off the credit card with highest interest rate first, then work down. From a purely financial standpoint, the debt avalanche makes more sense. But some people like the momentum aspect of the Snowball.

Get a Loan

Ideally, you’d have a rich uncle or a friend who’d loan you $20,000 interest-free. Since that’s not likely, you could apply for a debt consolidation loan through a bank, credit union or online lender. The interest rate would vary depending on your circumstances, but it would almost certainly be lower than what your credit cards are socking you with. If you own a house, you might consider getting a Home Equity Line of Credit. Just remember, your house would become your collateral. If you default, you could lose the roof over your head.

Debt Settlement

This is an option if your situation is really dire and credit card companies are convinced they’ll never get the full amount you owe. You negotiate and agree to make a one-time payment for a percentage of what you owe, optimistically somewhere close to 50%. You could hire a company to negotiate for you, but beware of scam artists who charge exorbitant fees. The upside of debt settlement is you could get half of your original balance forgiven. The downside is a debt settlement stays on your credit report for seven years and will wreck your credit score. So, it might end up costing you more in the long run.

Borrow From Your Retirement Plan

Raiding your IRA or withdrawing money from your 401(k) is not a prime option, since there’s traditionally been a 10% penalty if you withdraw money before age 59½. It’s less risky now that Congress approved a COVID-19 stimulus bill. It allows savers to withdraw up to $100,000 and waives the 10% penalty. The money will be subject to regular income tax, but the bill allows you to spread it out over three years, so it’s not all taxed at once.


Bankruptcy is the last of the last resorts. Under Chapter 7, you give up just about everything you own to pay off lenders. Your debt disappears, but so does your house, your car, your wide-screen TV and anything else the court deems non-essential.

Under Chapter 13, you enter a court-supervised repayment plan that last three to five years. Either approach will wreck your credit score and make future loans difficult to get.

A Chapter 13 stays on your credit report for seven years. A Chapter 7 stays on for 10 years.

If you have $20,000 in credit card debt, you can relate. Whatever strategies you use to pay that off, it can be done.
Once you do it, you can treat yourself to a nice cruise. And you’ll be smart enough not to put it on a stupid credit card.


Tom Jackson

Tom Jackson focuses on writing about debt solutions for consumers struggling to make ends meet. His background includes time as a columnist for newspapers in Washington D.C., Tampa and Sacramento, Calif., where he reported and commented on everything from city and state budgets to the marketing of local businesses and how the business of professional sports impacts a city. Along the way, he has racked up state and national awards for writing, editing and design. Tom’s blogging on the 2016 election won a pair of top honors from the Florida Press Club. A University of Florida alumnus, St. Louis Cardinals fan and eager-if-haphazard golfer, Tom splits time between Tampa and Cashiers, N.C., with his wife of 40 years, college-age son, and Spencer, a yappy Shetland sheepdog.