Americans Owe Nearly $1 Trillion in Credit Card Debt. Here's How to Get Yours Under Control

Americans are carrying roughly $988 billion in credit card debt, according to the Federal Reserve, the highest amount ever.

Card debt has increased close to $250 billion since April 2021, the agency reported, when it reached $740 billion.

Typically, credit card debt dips in the first quarter of the year as Americans pay off holiday bills. That didn't happened in 2023, though, for the first time since the recession of 2001.

The Best Low-Interest Credit Cards See at CNET

Analysts say that's because people used their cards to pay for essentials, rather than Christmas presents or vacations.

"It seems likely that part of the fourth-quarter run-up in balances went towards groceries and other everyday bills, rather than holiday expenditures," Mary Eschelbach Hansen, author of Bankrupt in America, told Marketwatch. "Folks are having a harder time paying that back."
 
The average interest rate on existing cards was 20.92% in the first quarter of 2023, according to Wallet Hub. That's the highest since the Federal Reserve began tracking such information in 1994.  

For new credit card offers, annual percentage rates averaged 22.15% in the first quarter of 2023, up from 18.32% during the same period last year. 

Nearly half (46%) of cardholders are carrying a balance from month to month, Bankrate reported, up from 39% a year ago

Read on: How to Get Out of Credit Card Debt

How much does the average person have on their credit cards?

According to Experian, one of the three major credit bureaus, the average balance was $5,910 at the end of 2022, a 13.2% increase from a year earlier.

USA Today puts it at $7,951, based on its analysis of data from the Federal Reserve Bank of New York and the US Census Bureau.

Both figures represent an uptick from the height of the pandemic, as the Fed has continued adjusting interest rates, and consumers are increasing discretionary spending

How can I pay off my credit cards?

Getting out of credit card debt is a lot harder than getting into it. But even if you don't have a lot of extra money on hand, there are some things you can do to chip away at your balance.

Don't just pay the minimum

About 43% of Americans only pay the minimum on their credit cards. But that's a huge pitfall: Your payments will mostly go toward the interest on your card and the balance will remain almost unchanged.

Paying the monthly minimum of a $5,000 balance at 17% APR, for example, could take ten years and cost an extra $5,000.  

Consider a balance transfer

Credit card companies will often try to attract new customers with a lower introductory annual percentage rate, or APR, especially for balance transfers.
Read on: The Best Balance-Transfer Credit Cards

For example, if you owe $1,000 on a card with a 20% APR, you may be able to transfer that balance to a new card that has a 0% APR for the first year. If you can pay off the balance within those 12 months, you'll save $200 in interest.

It's important to pay off that balance in full, though, or you could wind up paying an even higher interest rate when the introductory offer expires. 

Debt consolidation

A debt consolidation service can be helpful if you owe money on several different cards. It can broker a deal that allows you to make a single monthly payment that's divided up among your creditors. In return for regular payments, the credit card companies will lower the interest and eliminate certain fees. 

There may be a fee involved for the service, so, if you only have one or two cards, you might want to approach your creditors directly.

Depending on your circumstances, your credit card company may approve you for a hardship assistance program. Typically that will lower your interest rate or allow you to temporarily defer payments, though it may mean closing the account or taking a hit to your credit score.

Read on: How to Get Out of Credit Card Debt