The credit card debt dilemma: Trends, causes and solutions

In the last 25 years, American credit card debt has risen from $478 billion in 1999 to its current $1.115 trillion, according to LendingTree data . Although inflation slowed down since its peak in 2022, people’s credit card habits have not slowed down.

The latest credit card data by WalletHub predicts credit card debt will increase to more than $120 billion by the end of 2024 for multiple reasons:

• Americans are still vacationing this summer, even though nearly 50% of the population is still paying off the debt they incurred last summer.
• Nearly one in three said they expect to have more credit card debt by the end of 2024.
• As many as four in five said they don’t see paying off their credit card debt as a top priority.
• 45% of Americans continue to spend money on credit cards, on which they’ve already accumulated debt.

“Our research has also shown that people are not eager to give up their vacations to help cut costs. U.S. consumers do want to pay off their credit card debt. They just can’t seem to get any momentum,” WalletHub Editor John Kiernan said, per the study. “At some point, something has to give. Let’s just hope it doesn’t topple the economy when it happens.”

High interest rates also continue to be a factor behind the growing credit card spending as the Federal Reserve has tried to combat heightened inflation.

People are using “credit card debt to supplement their incomes to maintain their purchasing power,” Mark Zandi, chief economist at Moody’s Analytics, told TIME Magazine . The current average interest rate on a credit card is 24.84%, the highest LendingTree has reported since beginning to track that information in 2019.

“The good news is card growth has slowed and lenders have tightened their underwriting,” he added. “There are some signs that things are starting to stabilize and level off.”

Tips for paying off credit card debt

Experian reported that the average American had $6,365 in credit card debt at the end of 2023. While nobody wants debt, unexpected expenses happen and debt can add up quickly.

To try and recover and not build up more debt, there are strategies to gradually pay credit cards off.

Focus on one debt at a time: If you have multiple credit cards, making one credit card off at a time to cover the largest or smallest debts is one option. The snowball method says to pay off the credit card with the smallest debt first. “Once you’ve repaid the balance in full, you take the money you were paying for that debt and use it to help pay down the next smallest balance,” according to Bank of America . The avalanche method is similar in theory to the snowball method but tackles the larger payments first.

Get a debt consolidation loan: Unlike credit cards, personal loans have a set repayment schedule and fixed monthly payments. By replacing multiple monthly payments with just one, debt consolidation loans can help a person secure a lower interest rate and simplify repayment processes.

Cut back on unnecessary spending: The most simple method can also seem like the most difficult. “Many people are reluctant to cut expenses, as they simply believe it’s too hard,” Anna Barker of LogicalDollar told Debt.org . Tracking your spending can help you realize what spending is necessary and what can be removed from reoccurring transactions.

Automate payments if possible: If the problem isn’t that you don’t have the funds, it’s just that you can’t remember to submit a payment once a month, set up auto payment. It can help you avoid late fees, build credit and save time. It’s still important, however, to check and make sure bill statements are correct — it’s convenient but not guaranteed accurate.