Life has always been expensive. But lately, it seems like it’s become more difficult to stretch a dollar.
Recent data from TransUnion confirms this, publishing a report that details the average credit card debt across the U.S. In every demographic, the numbers are startling. Holding credit card debt is the equivalent of lighting a chunk of your income on fire. Nightmarishly high interest rates make it even harder to afford life’s myriad expenses. If you’re an “average” consumer, you need a plan to pay down your credit card debt quickly.
Credit card debt in America by the numbers
According to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit, credit card debt in America has increased by $45 billion from Q1 of 2023. That represents a 4.6% increase in a single quarter, with cardholders shouldering thirteen-figure debt at $1.03 trillion for the first time. In short, that amounts to an average balance of $5,733 per cardholder.
Eye-watering, to say the least–and the fact that many of us carry no balances makes this statistical average even more alarming.
Consider the implications: The Federal Reserve reports that the average credit card interest rates are 20.68% in Q2 of 2023. Making only the minimum monthly payment on a $5,733 balance could result in over $1,000 in interest payments. That’s not to mention some borderline predatory credit cards that impose more than 30% APR.
Interest rates this lofty make it extremely difficult to “undo” overspending.
Credit card debt by age
TransUnion provides data surrounding current credit card debt by cardholder age. Here are the averages it found:
These figures show that, generally speaking, cardholders aged 30–64 possess more than the estimated credit card debt national average. Individuals outside of this spectrum may have fewer bills, perhaps due to situations like living at home (in the case of younger cardholders) or receiving subsidies for things like in-home assistance or assisted living (in the case of older cardholders).
States with the highest and lowest credit card debt
States with the highest and lowest credit card debt are not necessarily proportional to the cost of living in each area. As of early 2023, Alaska was the state with the most average credit card debt at $6,652 per person (about $900 more than the national average). Conversely, Wisconsinites carry the least credit card debt. They average $4,700, which is over $1,000 under the national average.
Business credit card debt
For many reasons, small business credit cards are a popular tool for business owners. One big motivation is to keep personal expenses sequestered from work expenses and earn rewards in business-focused bonus categories while they’re at it.
Senior Wealth Advisor Neal Furlong says small business credit cards are a good idea for anyone operating an entity, no matter how small. “Even for folks that operate as their own sole proprietors, it’s easier to track your numbers for tax purposes–and [see] what’s a deductible expense–so you’re not mixing [business and personal expenses].”
JPMorgan Chase provided data that the median revolving balance among small business credit cards averaged slightly more than $7,000 in 2022. In other words, for cardholders who failed to pay their balances in full each month, $7,000 was the average balance carried.
Tips for paying down credit card debt
If you’re one of the millions of Americans who has racked up credit card debt, don’t despair. There are many proven tools and strategies that can help you pay down that debt quickly and get your finances back on track. Here are some of the best methods.
“Snowball” or “Avalanche” method
Two fashionable tactics for eliminating credit card debt are the “snowball” and “avalanche” methods. Both are very simple and practical for those with debt across multiple credit cards.
The snowball method requires that you focus all your resources on paying off the account with the smallest amount of debt. This will help you lower your monthly minimum payments as quickly as possible.For example, let’s say you’ve got three credit cards: a Visa with a $4,000 balance, a Mastercard with a $2,000 balance, and an Amex with a $500 balance.
With the snowball method, you would make minimum payments for all cards (to prevent your accounts from becoming delinquent) and throw the rest of your expendable funds at the $500 Amex balance. Once that’s paid off, you would rinse and repeat with your $2,000 Mastercard balance while only paying the minimum balance on the Visa.
The avalanche method takes a different approach. You’ll continue to make all of your minimum payments, but you’d instead channel your money toward paying off the account with the highest APR. With this method, you ensure you lose as little money as possible to interest.
Consolidating debt with a personal loan is another strategy for those with debt across several credit cards. Upon approval for a debt consolidation loan, your bank will give you a chunk of money to pay off credit card debt (or at least pay it down). You’ll then owe your bank instead of your credit card issuers.
Debt consolidation loans tend to have much lower interest rates than credit cards–and you’ll likely pay significantly less in monthly minimum payments, as you’re only making one payment per month.
Balance transfer credit cards
Balance transfer credit cards can be used much like debt consolidation loans. Here’s how the strategy works: many credit cards offer 0% intro APR for a specific amount of time (generally between 12 and 21 months) when transferring a balance. You can enjoy zero interest during the defined introductory period by opening one of these cards and transferring balances from your other credit cards. This means every dollar you put towards paying your card off goes toward the principal amount. You can also benefit from one monthly payment instead of multiple.
An important caveat is that you may not be approved for a balance transfer credit card (or a credit line that can accommodate your current debt) if you aren’t touting a good credit score due to a high credit utilization. And, if you fail to pay the debt in full by the end of the introductory period, you’ll be on the hook for the full amount of the interest that would have accrued in that time frame. If you go this route, be prepared to be diligent in your payments.
Perhaps more important than treating the symptom of credit card debt is addressing the cause: spending more than you’re making. A wide selection of budgeting and debt reduction apps exist to help you keep track of every hard-earned dollar.
For example, Rocket Money famously imports all of your account transactions and categorizes your spending with graphs and charts to help see where you spend your money. The service can negotiate lower prices for various memberships and subscriptions, and it can even identify and cancel any duplicate services for which you may be unwittingly paying.
Contact your credit card issuer
Another often-recommended strategy to paying debt is to contact your credit card issuer directly. It’s possible to have success in reducing your APR by simply asking. However, this may not come without consequences.
“I would be cautious in doing that,” says Credit Expert John Ulzheimer, formerly of FICO and Equifax. “Remember, banks are in the business of risk mitigation. The minute you call a card issuer [about a lower APR], you’re telling them you’re struggling to make your payments. It wouldn’t be unheard of to get a letter in the mail the following week indicating that your account has been closed or your credit limit has been reduced to your balance. They don’t want you to get into any more debt.”