Overdue Credit Card Balances Just Hit a 12-Year-High. Here's What You Can Do to Get Out of Debt

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Americans owe a total of $1.14 trillion in credit card debt, according to the Federal Reserve Bank of New York. That's a lot of money, particularly when you consider that credit card interest can run to 20% or 25% (and sometimes even higher). Those high APRs make it all too easy for credit card debt to become unmanageable.

Worryingly, too many Americans are having trouble making their minimum payments. Data from the Federal Reserve Bank of Philadelphia shows that the share of overdue balances is getting higher.

Indeed, the share of delinquent balances is now at the highest it's been since the organization started tracking the data in 2012. And 3.6% of credit card balances are 30 days past due, 2.59% are 60 days past due, and 1.9% are 90 days past due.

What happens if you fall behind with credit card payments?

Missing a credit card payment is not ideal, but it's a solvable problem. You will likely need to pay a late fee, and in some cases you may have to pay a penalty APR. If you are able to, pay the minimum as soon as possible. Your credit score will take a hit if the payment is more than 30 days late, and that damage gets more serious once you hit 60 or even 90 days.

If you can't make your minimum credit card payment, reach out to your card issuer. The ideal scenario is that you find the money from somewhere. But if you're in trouble financially, the sooner you tell your card company what's going on, the more likely you are to find a solution.

At the very least, your card issuer might waive the late fee. You might also be able to change your due date or temporarily modify your payments.

How to tackle your credit card debt

Carrying a balance on your credit card is a heavy financial weight. Not only does it put you at risk of falling behind with payments, but it also means you're losing a chunk of your paycheck to interest.

Unfortunately, tackling that debt can feel like an uphill battle. Try to take heart from the knowledge that other people have climbed that same debt mountain. You can do it, too. What's important is to make a plan and a promise to yourself that you'll keep plugging away at it.

1. Check in with your finances

I'll admit, this is one of things I always procrastinate. And once I do it, it's always easier than I thought it would be. Go through your bank and credit card statements. List out what you spend each month in different categories. And list what you owe on each card (assuming there's more than one), along with the APR.

The only way you're going to find extra cash to put toward those balances is by aggressively cutting costs. Try to identify areas where you can spend less. And consider taking on a side hustle or asking for extra hours at work to increase your income. Figure out how much you can realistically put toward debt repayment each month.

2. Decide what approach you will take to your debt

Two popular ways to pay down credit card debt are the debt snowball approach and the debt avalanche method. Whichever one you choose, try to automate your payments so the money goes toward debt before you can spend it on anything else.

The debt snowball involves tackling the smallest balances first. That way you get the satisfaction of paying each one down before moving to the next one. The debt avalanche will see you prioritizing the debt with the highest rate. Financially, it's more effective. But there's a psychological kick to the snowball method's quick wins that can make it easier to stay the course.

3. Consider debt consolidation

The difficulty with high-interest credit card debt is that it can feel as if you're accruing interest faster than you're paying down your balance. Debt consolidation is a way to roll your card balances into one loan, ideally with a lower interest rate. It simplifies things because you only need to worry about one payment. And, if the APR is lower, it can reduce the cost of your debt.

There are a few different ways to consolidate your credit card debt, particularly if you have a strong credit score. You might apply for a personal loan or debt consolidation loan. If you qualify for a balance transfer credit card with a low introductory rate, that may also give you a temporary respite from interest.

If you go the debt consolidation route, there is one big caveat: Don't use that hard-won breathing space to accumulate more debt. Otherwise you could end up carrying new credit card balances on top of your consolidated debts.

Key takeaway

It isn't so surprising that more and more Americans are struggling to keep on top of their credit card payments. High living costs have hammered people's budgets in recent years, making it hard to make ends meet. However, if you carry a credit card balance, the sooner you find ways to pay it down, the better. Unfortunately, debt is one of those problems that often gets worse if you ignore it.

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