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It’s no surprise that Americans often rely heavily on credit cards to make ends meet. And with a recent period of rampant inflation, it’s equally unsurprising that credit card balances are on the rise.
In the fourth quarter of 2024, U.S. credit card balances rose by $45 billion, reaching the $1.21 trillion mark — the highest level recorded by the Fed in 20 years.
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It’s also worth noting that consumer debt is on the rise. Mortgage balances hit $12.61 trillion during the fourth quarter of the year, while auto loan balances reached $1.66 trillion.
In the fourth quarter of 2024, 7.18% of balances became seriously delinquent (more than 90 days), versus 6.36% in the previous year.
U.S. consumers carry a lot of credit card debt, and given the interest rates associated with credit cards, this can be extremely detrimental to their financial health. So, it’s important to try to break that cycle.
An unsettling trend
Surging inflation and costs have pushed many consumers deeper into credit card debt. In Q4 2024, the average credit card borrower owed $6,580, up from $6,360 a year before.
The number of Americans carrying balances also increased to 171.4 million. Many are struggling to pay bills, with 28% seeing their debt grow, and 37% unable to make ends meet without taking on more debt.
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Breaking the cycle of credit card debt
Credit card debt is a double-edged sword: the longer you carry a balance (or multiple balances), the more interest you accrue.
Carrying high credit card debt relative to your total credit limit can damage your credit score, making borrowing money even more expensive and trapping you in a terrible cycle.
To break free, consider cutting back on spending, increasing income through a side hustle, and choosing a debt payoff method. The avalanche method tackles high-interest debts first, saving you more money, while the snowball method focuses on paying off smaller debts first, offering quicker psychological wins. Both methods have their advantages depending on your goals.
One way to tackle your high-interest debt faster is to consolidate them into one affordable payment with a lower interest rate. The lower rate allows you to pay the debt faster, which means you would also be saving on the total amount of interest paid.
Finding a lender offering personal loans with low interest rates is easier than ever with the help of online marketplaces like Credible. In just a few clicks, see a side-by-side comparison of the top lenders with the annual percentage rates (APRs), loan term and loan amount available based on your credit score.
Another way to pay down credit card debt quickly is by using a balance transfer credit card, which allows you to transfer your existing debt to a card with 0% APR for a certain period. This helps you save on interest and pay off your balance faster.
Searching for the right credit card can be overwhelming. But with Cardratings.com, it’s quick, easy and personalized.
Cardratings lets you easily compare a wide variety of rates and balance transfer offers, so you can find the right card that suits your needs.
For example, if you have a $10,000 balance at 22% APR, you’d pay around $2,200 in interest over a year with minimum payments. But if you transfer the balance to a card offering 0% APR for 12 months (with a 2% transfer fee), you’d pay a $200 fee upfront. Even with the fee, you’d save about $2,000 in interest, making it a smart way to pay off debt faster.
Finally, if you own a home — you have equity — so you could look to consolidate your credit card debt into a home equity loan.
With home values higher than ever, you can make your home work harder for you by making the most of your equity. The average homeowner sits on roughly $311,000 in equity as of the third quarter of 2024, according to CoreLogic.
Rates on HELOCs and home equity loans are typically lower than APRs on credit cards and personal loans, making it an appealing option for homeowners with substantial equity.
Unlock great low rates in minutes by shopping around. You can compare real loan rates offered by different lenders side-by-side through LendingTree. Just answer a few simple questions, and LendingTree will match you with up to 5 lenders with low rates today. Terms and Conditions apply.
But be careful, as you’re putting your home on the line. Falling behind on home equity loan payments could lead to foreclosure.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
