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Pop quiz: Let's say you've got $10,000 in credit card debt, and you make the minimum required payment every month. If the card has an 18% APR, how much interest would you likely pay before that debt is gone for good?

A: $2,000

B: $6,000

C: $10,000

D: $14,000

The answer is D: $14,000, believe it or not. If you're only paying the minimum each month ($250 to start), you'll have paid $14,423 in interest. That's not only about 1.5 times what you originally spent, but it would take you more than 28 years to pay your balance off. And 18% is a conservative estimate: If your card had the average APR — about 22% — it would cost thousands more.

In other words, when you carry debt on a high-interest credit card, what you spend isn't actually what you spend.

So what?

It's not uncommon to accrue debt this time of year. When you can't quite cover the cost of a vacation, wedding, or concert tickets, it may be the tradeoff you make for a memorable summer with friends and family.

That doesn't mean you can't do anything to lower your costs, however. A lower interest rate, combined with a debt repayment strategy, can potentially save you thousands of dollars.

Here are two options for taming the interest monster:

Transfer the balance. Balance transfer credit cards typically give borrowers with good credit (a score of 670 or higher) an introductory rate as low as 0%. They usually charge a one-time fee of 3% to 5% of the transferred balance, but it's often still worth the interest saved, depending on your balance.

The one major catch? That rate doesn't last, so you'll go back to paying lots of interest if you don't pay your balance off in time. (The intro period is often somewhere between 6 and 18 months). In other words, this can be a smart option, but you should be confident about how long it will take to get back on track.

Take out a personal loan. While interest rates on a personal loan vary widely, the average for a three-year term is just over 12%, according to Bankrate — roughly half of what credit cards charge. And, unlike most credit cards, the interest rate on a personal loan is usually fixed. That means they're repaid in predictable monthly payments over a set term, making it easier to budget.

Let's go back to the example in the quiz. Say you consolidate that same $10,000 in credit card debt into a personal loan charging 12% interest. If you pay $263 each month (not much more than the initial minimum credit card payment), you'd pay a fraction of the interest — $2,640 — and be done in four years. Even a 16% rate would only cost you $283 a month and one quarter of the interest.

Just keep in mind: The longer the repayment period, the more interest you'll pay. (Use SoFi's personal loan calculator to run your own numbers.)

The last big task is making sure you don't rack up new charges just as quickly as you pay them down. According to a 2023 study by the credit bureau TransUnion, many borrowers who used a personal loan to lower their credit card debt had almost as much credit card debt within 18 months.

To help you reset your spending, try using debit cards or cash for daily purchases and unlink your credit cards from digital wallets. An added bonus: Limiting your credit card use may strengthen your credit score.

Then, before the next adventure calls, consider stashing what you would be making in monthly credit card payments into a high-yield savings account like SoFi's. By the time next year's vacation rolls around, you might be able to pay for those memories in cash.

Related Reading

U.S. Consumer Credit Market Increasingly Splitting Along a K-Shaped Path, TransUnion Research Finds (TransUnion)

Most Americans Considering Personal Loans Are Focused on Debt Reduction, Not Spending, SoFi Data Shows (SoFi)

American Credit Card Debt Nears All-Time High: Experts Weigh in on Ways Out (Newsweek)

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