Credit card debt is damaging the finances of millions of Americans. For many decades, households have been sinking in a sea of red ink.
Because credit card interest rates tend to be high, the deeper someone falls into debt, the more difficult it is to climb out of the hole.
So, just how much credit card debt does the average American hold today?
The Average Amount of Credit Card Debt in the U.S.
As of the second quarter of 2023, the average credit card balance in the U.S. was $5,947, according to TransUnion, one of the three major credit reporting agencies.
“This represents the highest average balance since the second quarter of 2008,” says Paul Siegfried, senior vice president and credit card business leader at TransUnion.
Total credit card balances in the U.S. hit a record-high $963 billion during the second quarter of 2023, according to TransUnion. That represents a 17% increase from the same quarter in 2022.
Siegfried notes that higher balances put consumers at risk because “high balances generate high minimum payments.”
Since the U.S. Federal Reserve Board began its latest rate-hiking campaign in early 2022, credit card interest rates have soared to record highs. That makes it even more difficult for borrowers to pay off debts as their balances climb.
Why Is Credit Card Debt Rising?
Total credit card balances are growing partly because more people are applying for cards, Siegfried says.
“The number of consumers who have acquired a credit card has continued to increase over the past three years and has reached an all-time high,” he says.
As of the second quarter of 2023, there were 70 million more credit card accounts open than in 2019, before the pandemic, according to the Federal Reserve Bank of New York.
About 69% of Americans had a credit card account during the second quarter of 2023, up from 65% at the end of 2019 and 59% at the end of 2013.
In addition, people are reaching into their wallets for plastic more often.
“The average balance per consumer has risen as consumer spending increased as a result of high inflation and rising wages,” Siegfried says.
Dana Menard, a certified financial planner and founder and lead financial planner of Twin Cities Wealth Strategies Inc. in Maple Grove, Minnesota, says he has seen an increase in credit card spending among clients.
“I’ve definitely noticed an uptick in credit card usage and debt among my prospects and clients over the past few years,” he says.
Most of his clients say inflation – particularly higher prices for staples such as food, shelter, gas and utilities – is the reason, Menard says.
Brittany Brinckerhoff, a certified financial planner at Hilltop Wealth Advisors in Chapel Hill, North Carolina, has also seen clients take on more credit card debt in recent years.
She agrees that inflation is a major reason and adds that higher interest rates are making other liabilities more expensive, including mortgages, car loans and home equity loans.
All of these rising costs have forced more people to turn to credit cards to bridge their budget shortfalls.
Brinckerhoff believes the situation might get worse before it gets better, especially in light of the resumption of student loan payments in October. “This could add additional stress to many people’s monthly budgets,” she says.
Kassi Fetters, a certified financial planner and founder of Artica Financial Services in Anchorage, Alaska, says she is noticing more of her clients “using credit card debt as emergency money instead of having a cash emergency fund.”
Other clients are running up more credit card debt simply because they are not closely tracking their spending, she says.
What Can You Do to Lower Your Credit Card Debt?
If you are drowning in credit card obligations – or are worried that you are headed in that direction – there are several things you can do to get out of debt.
Brinckerhoff says the first step toward paying off your credit card debt is to gain a deeper understanding of your cash flow. Look at how much you are spending every month, and list your largest expenses.
“Looking at your expenses isn’t always fun,” she says. “But if you’re consistently building up credit card debt, you need to understand what is contributing to that.”
Once you have a better grasp of your spending, you can make a plan to pay down your debt.
“Figure out how much you can allocate towards credit card payments each month, and consider if there are any ways to reduce your living expenses so the debt doesn’t continue to accrue,” Brinckerhoff says.
If cutting expenses leads to more savings, you can use that extra money to pay down your balance even faster, she adds.
Monica Dwyer, a West Chester, Ohio-based certified financial planner, vice president and wealth advisor at Harvest Financial Advisors, says finding the approach that works best for you is key to paying down debt successfully.
She notes that many experts recommend paying off debts with the highest interest rates first, as this likely will save you more money over the long run.
“But some people find that paying the lowest-dollar debt owed gives you a sense of accomplishment and allows you to see some success, motivating you to keep going and tackling more debt,” she says.
Staying motivated will help you stick to your plan to pay down your debt. But even if you attack your debt enthusiastically at the start, your motivation may flag over time.
Once you commit to paying down debt, it’s important to take steps to stay on track, says Niv Persaud, a certified financial planner and managing director at Transition Planning & Guidance in Atlanta.
“Write your commitment to pay off credit card debt and display it where you will see it daily,” she says. “Make a poster with a bar graph or create a screensaver – whatever it takes to help you stay focused.”
Other steps Persaud recommends include creating a separate email account for retail emails. That way, you will be less likely to see new offers come into your regular email account and overspend.
On your phone, “remove text alerts from your favorite stores,” she says.
One great way to accelerate your debt payoff plan is to tap into a new source of income, Persaud says.
“Find a side hustle,” she says. “It’ll give you more income, and you won’t have time to spend money because you’ll be working.”
