The Smart Way High Earners Can Eliminate Credit Card Debt Faster

Credit card balances hit a record high of $1.21 trillion in December 2024, implying that Americans are financing more purchases to afford everyday living regardless of income level.

What’s more, recent survey data from Bankrate found that Americans are willing to spend on vacations and entertainment, even if that puts them in debt. Many high-income earners also feel trapped by circumstances beyond their control, such as high inflation or industry shifts in their career, which can cause financial strain.

Blame inflated spending habits, higher taxes, larger mortgages, or all the above—higher earners aren’t guaranteed financial freedom.

The high-interest debt trap

Credit card debt is often the most difficult to manage due to the high interest rates attached to these products. Credit card interest rates are hovering near 21%, and unlike fixed-rate loans, credit card balances compound. If you just pay the minimum requirement each month, you’ll put only a small portion toward the principal debt while the interest continues to accumulate. This significantly extends your repayment timeline and increases the total interest you’ll pay.

Let’s say you have $50,000 in credit card balances with a 21% APR and a minimum payment of $1,375. If you were to make just the minimum payment, it’d take you a little over 42 years to pay off the balance. You’d also pay over $86,800 in interest in that time.

People of all income levels can fall victim to the high interest trap, but higher earners usually have greater access to revolving credit which may lead to carrying higher balances (and potentially overspending on interest).

Credit card debt can quickly spiral out of control, thanks to high interest rates and compounding balances. However, not all debt solutions are right for high-earners with strong credit. To pay off cards quickly, explore tactics that minimize interest, consolidate payments, and optimize your cash flow.

Why balance transfers & HELOCs aren’t always the best fix

Balance transfers and home equity lines of credit (HELOCs) are common ways to address debt, but they come with some downsides:

• Balance transfers: Transferring balances to a new card with a 0% APR promotional offer can be tempting because it will lower your credit card payments initially. However, these teaser rates are temporary, and high transfer fees often apply. The typical balance transfer fee ranges from 3% to 5% of the total balance transferred.
• Home equity lines of credit (HELOCs): HELOCs may offer lower rates than credit cards but come with drawbacks, as they require you to use your home as collateral. This puts your home at risk if you cannot afford the payments. Plus, you need an appraisal just to qualify, which slows down the funding process and adds upfront costs. Lastly, many HELOCs have variable interest rates that change periodically, making it hard to predict your costs.

The pitfalls of paying off debt too slowly

While you may prefer to repay your high-interest credit card balances slowly, the interest charges will add up fast and it will cost you in the long run. Every dollar you pay in interest is a dollar you could have used to invest or build wealth. Over time, the compounding effect on interest eats away at your ability to save for retirement, afford large purchases in the future, or hit other financial goals.

Just because high earners can afford to carry debt doesn’t mean they should. If you only make the minimum payments, it could take you decades to pay off your balance—this in addition to the significant interest charges you’d incur by carrying credit card debt this long.

There are several advantages to using a personal loan to consolidate credit card debt, such as fixed rates and lower monthly payments that keep more money in your pocket.

Fixed rates and predictable payments

A personal loan with a fixed rate offers more stability and predictability than a variable-rate solution. Unlike most credit cards, a fixed personal loan locks in your interest rate so your payments never change throughout the life of the loan.

Plus, consolidating credit card debt using a fixed-rate personal loan combines multiple balances into a single, more manageable monthly payment. Tracking one payment per month makes it easier to stick to a budget and plan your monthly expenses.

Lower monthly payments, better cash flow

Choosing a longer loan term typically lowers your monthly payment because the future payments are spread out over an extended loan term (BHG offers personal loans up to 10 years).^1,2

Longer terms allow you to be more flexible with your money. You can leverage the extra funds each month to allocate a greater portion of income for retirement savings or build an emergency fund to cover unexpected expenses, reducing the need to rely on credit cards in the future.

Accelerated payoff potential

Borrowers with good credit may be able to secure a lower interest rate than they're currently paying on their existing credit cards. The lower rate could unlock extra room in your budget to add to your loan payments—the more you pay above the monthly minimum, the faster you attack your principal balance. This also helps you save significantly on interest.

FYI: BHG Financial offers large personal loans up to $250,000¹ with no collateral required and fixed, affordable payments with terms up to 10 years.^1,2

High earners are often in a strong position to secure favorable terms on a personal loan for debt consolidation, especially if they have good credit. Consideration is also given to their debt-to-income ratio.

Leverage prime credit for the best loan terms

A strong credit history signals to lenders that you are a low-risk borrower with a track record of responsible financial management. Applicants with prime credit typically get the most favorable interest rates and loan terms, which can translate into significant savings over the life of your loan.

Stay debt-free after consolidation

After consolidating your debt, create a budget and track your spending closely to avoid overusing your cards. Healthy financial habits will help you avoid falling back into the cycle of debt.

Lower monthly payments free up cash flow, so take this opportunity to redirect the money toward wealth-building opportunities, such as investing in your child’s education or padding your retirement savings. That way, you can manage your debt and progress on long-term financial goals.

When evaluating applications for personal loans, lenders will look at your finances to determine your creditworthiness. The higher your income, the more likely you will get approved for a larger personal loan. But lenders also consider other factors, such as how much of your income is already tied to debt payments.

Understanding the application process

Requirements vary by lender, but understanding each lender’s personal loan requirements can help you find the lenders who are most likely to approve your application.

Here’s what lenders like to see:

• Good credit score and history: Borrowers with good or excellent credit scores typically receive the most favorable personal loan rates and terms. Consider your credit history as well—the stronger and longer your track record of responsible credit use, the better your chances of getting approved for lower interest rates.
• Sufficient income and employment: Many lenders have minimum income requirements and need to see a verifiable employment history before approving an application. It’s generally advised to wait to apply for a personal loan until you can show healthy, consistent income, especially if you want a larger loan.
• Lower debt-to-income ratio: To gauge your reliability as a borrower, lenders will look at how much of your monthly income is allocated to your current debt. Typically, the lower your DTI, the higher your chances of loan approval. Higher-income borrowers may have higher DTI thresholds because a substantial income can assure lenders that the borrowers have enough money to repay the loan, even if the DTI is elevated.

You can complete an application in a few minutes, especially if you apply online. However, the instructions for getting a personal loan depend on the lender. It may take a few days to a couple of weeks to receive an approval. For example, BHG Financial provides personal funds in as fast as five days.³

What to expect with a BHG Financial loan

Higher-income earners can leverage personal loans to manage credit card debt and other expenses. BHG Financial offers personal loans for debt consolidation up to $250,000¹  with no collateral required and fixed, affordable payments with terms up to 10 years.^1,2

Not only do these loans typically carry lower interest rates than credit cards, but they also have longer repayment terms,¹ which helps keep your monthly payments low.

Plus, BHG allows you to prequalify using a soft credit inquiry. This means that you can check your rate without impacting your credit score.⁴