In the fourth quarter of 2023, U.S. credit card debt increased, reaching $1.13 trillion, an increase of $50 billion, or 4.6%, from the previous quarter. A variety of factors contributed to this increase, including rising interest rates and inflation. Increased credit card debt means Americans pay more in interest and have less eligible income to use for financial goals, such as retirement savings.
Main recipients
- Average credit card debt in the U.S. is at an all-time high.
- It is affected by factors such as interest rates, inflation, and personal spending habits.
- Credit card debt varies by age group and country.
- Strategies for paying off credit card debt include snowballing debt and debt consolidation techniques, debt consolidation, and balance transfer credit cards.
Average Credit Card Debt in the U.S.
According to the Federal Reserve Bank of New York, Americans carried $17.5 trillion in debt in the fourth quarter of 2023, of which $1.13 trillion was credit card debt. Mortgage balances accounted for $12.25 trillion of the total, and auto loans accounted for $1.61 trillion.
The average balance per cardholder hit an all-time high of $6,360 in the fourth quarter of 2023, according to credit bureau TransUnion.
Credit card interest rates reached an average annual percentage rate (APR) of 21.47% in the fourth quarter of 2023, up from an average APR of 15.05% in 2019. Higher interest rates make it more difficult to pay off balances. Balances are lost because most of the minimum monthly payment goes toward interest rather than principal.
Credit card debt by age
When breaking down credit card debt by age, Generation X accounts for the largest share at 33.8%. The breakdown of remaining credit card debt by generation in the fourth quarter of 2023 is as follows:
- Millennials: 29.4%
- Baby Boomers: 26.7%
- Generation Z: 6.3%
- Silence: 3.8%
More broadly, this reflects where each generation is now relative to their peak consumer years.
Regional differences in credit card debt
Breaking down credit card debt by state, according to data from credit bureau Experian, Alaska has the highest average credit card debt at $7,863, and Iowa has the lowest at $5,227 (as of the latest data, the third quarter of 2023). Perhaps not surprisingly, Alaska ranks sixth in cost of living, while Iowa ranks ninth, which may explain some of the difference.
The remaining five states with the lowest credit card debt are:
- Wisconsin ($5,242)
- Kentucky ($5,304)
- West Virginia ($5,348)
- Mississippi ($5,415)
Credit card debt remains high in the remaining five states (and one district)
- Washington, D.C. ($7,548)
- New Jersey ($7,401)
- Connecticut ($7,381)
- Maryland ($7,282)
Strategies for paying off credit card debt
When you’re ready to pay off your credit card debt, there are a number of methods you can use to achieve your goal. These include:
Debt Snowball Method
With the snowball method, you pay off your smallest debt first by paying off smaller amounts on other credit cards first, then using the extra money to pay off the smaller debt. Once the first debt is paid off, pay off the next smaller debt and repeat the process. Continue until all cards are paid off.
Debt Cancellation Methods
Similar to the snowball method, the avalanche method prioritizes paying off debt, meaning you pay off the card with the highest interest rate first, rather than paying off the card with the smallest debt first.
Debt Consolidation Loans
In debt consolidation, a personal loan provides a lump sum of money to pay off all your credit card debt. You then make monthly payments on the loan over a certain period of time. Personal loans have lower interest rates than credit cards, which can save you money over the life of the loan.
Transfer credit card
Some credit card companies offer credit cards that allow you to transfer balances from other credit cards. Typically, balance transfers have a lower interest rate or even 0%, but only for a limited promotional period, such as one year. Balance transfer credit cards usually charge a fee based on the amount you transfer, but as long as you pay off the balance before the interest rate goes up, you’ll save money on interest.
Addressing the Root Causes of Credit Card Debt
To avoid taking on more credit card debt, it helps to know you have credit card debt in the first place. Many people use credit cards to pay for everyday expenses when their income isn’t enough to pay the bills. Others may overspend even when they know they won’t have the money to pay off the debt anytime soon. Therefore, it’s important to have a plan to pay down your credit card debt and limit new debt.
Create a budget
Listing all your expenses gives you a clear picture of what you need to pay each month. To create a budget, divide your monthly mortgage payment and see how you can pay for all your fixed expenses (mortgage, car loan, etc.) as well as your variable expenses (groceries, credit card bills, etc.). Using a debt settlement app can help you organize your debt and create a repayment plan.
Try to negotiate a lower interest rate
If you are having trouble paying your credit card bills on time, contact your credit card issuer immediately to ask if they can lower your interest rate. While you can’t lower your interest rate over the life of your account, you can lower your interest rate over a shorter period of time to help you pay off your balance.
How does average credit card debt in the U.S. compare to previous years?
As of 2020, average credit card debt in the United States continues to rise. In the fourth quarter of 2020, the average credit card debt per borrower was $5,103. As of the fourth quarter of 2023, that number is $6,360.
Are there any states with particularly high or low average credit card debt?
According to the latest data, the average credit card debt in all 50 states and Washington, D.C. ranges from a low of $5,000 to a high of $7,000. Alaska has the highest average credit card debt at $7,863, while Iowa has the lowest at $5,227.
What complications might arise from consolidating credit card debt with a personal loan?
Applying for a personal loan to consolidate your credit card debt may lower your credit score slightly, in part because the lender will do a closer look at your credit file. However, as you make your repayments on time, your credit score should improve again.
Also note that if you keep an account open after you pay off a credit card, it can be good for your credit score, even if you don’t plan to use the card again. That’s because your credit score takes into account your credit utilization ratio (the amount of revolving credit you have compared to how much you’re currently using) and the average age of your credit accounts.
in conclusion
Americans’ credit card debt has skyrocketed over the past year. In fact, the average credit card debt per consumer is at an all-time high. Consolidating your credit card debt and managing it effectively can help you live within your means, help you save for retirement, and free up money for big expenses like a new car or college tuition.
