Credit card debt affects millions of Americans
Financial debt can useful—loans can help people buy homes, attend college and afford essential goods and services. Credit cards offer convenient access to credit, allowing you to make purchases now and pay later. But when credit card balances linger and exceed their due dates, they can become a serious financial burden.
According to the Federal Reserve Bank of New York, in the first quarter of 2025, “Total household debt increased by $167 billion to reach $18.20 trillion in the first quarter, according to the latest Quarterly Report on Household Debt and Credit. Credit card balances fell by $29 billion from the previous quarter to stand at $1.18 trillion.” Eighteen trillion dollars is a substantial amount of consumer debt.
Credit card debt is especially challenging because it often carries much higher interest rates than other forms of debt, like mortgages or personal loans. These interest rates are typically expressed as an annual percentage rate (APR).
The U.S. government agency the Consumer Financial Protection Bureau reported in 2023 that APRs continue to grow, and that “Over the last 10 years, average APR on credit cards assessed interest have almost doubled from 12.9 percent in late 2013 to 22.8 percent in 2023 — the highest level recorded since the Federal Reserve began collecting this data in 1994.” But APR for some cards can exceed 30 percent. In contrast to credit card interest rates, historical mortgage or personal loans for several years have usually been well under 10 percent and have generally hovered several points above and below 5%.
How credit card debt affects credit reports and credit scores
Your personal credit history is a record of your financial behavior—including credit cards, loans, bill payments and other transactions. This history is used to compile your credit report, which is maintained by the three major U.S. credit reporting bureaus: Equifax®, Experian™ and TransUnion LLC
These companies gather data to create a snapshot of your financial reputation. Lenders, insurers and other service providers use credit reports to decide whether to extend credit, determine interest rates or set borrowing limits. Your report can even affect how much you pay for insurance.
Tied closely to your credit report is your credit score—a number that summarizes your overall creditworthiness. Most credit scores range from 300 to 850 and fall into categories like poor, fair, good, very good and excellent.
Carrying high or ongoing credit card debt can lower your credit score, which may lead to higher borrowing costs, increased insurance premiums or even credit denials. Fortunately, with a solid plan and consistent effort, it is possible to reduce and eliminate credit card debt.
How to start reducing credit card debt
There is no one-size-fits-all solution to paying off credit card debt. But the most important step is making it a priority. That may require lifestyle changes, such as cutting back on nonessential spending. According the national credit reporting agency Experian®, following are two strategies for tackling this kind of debt:
Pay down the credit card with highest interest rate debt first since it is probably the most expensive debt to carry.
- First, list out all your debts and the interest rates attached to them, in order from the debt with the highest interest placed at the top and then continuing down the list with the lower interest rate debt. Credit card debt is likely to be at the top of the list, or close to it.
- Next, if you can, for all but the highest debt, pay the what the card issuer (or other debt provider, such as bank for a loan) considers to be the minimum monthly payment, which may slow down some debt that’s growing larger.
- For the highest debt, make as large a monthly payment as possible to stop debt from accumulating and to begin reducing the debt.
- Once the highest interest rate is paid off, which may take a while, you should be able to have more money to move down the list and pay off the next highest debt.
Wipe out smaller, more manageable types of debt first to have more money available to focus on the largest credit card debt.
- Some consumers may find that facing months or years of payments to whittle down their biggest credit card debt may be daunting and difficult to sustain since the payoff seems like a too-distant goal.
- A different approach, that for some consumers may provide more of a sense of positive accomplishment, is to again rank their debt and the interest being paid on it and then take on more of a from the “bottom-up” approach.
- Instead of taking on the biggest, highest-interest rate debt right away, first pay off a few smaller, lower interest rate debts, since completing them provides a sense of progress and then frees up more money to hit the higher credit card debt harder.
This concludes How to Pay Off Credit Card Debt - Part 1. Part 2 of this post will continue on the blog in a few weeks.
Interested in more advice on personal money management, online safety, and avoiding scams?
Please look into some of the free Delta Community Financial Education Center live workshops which are available to both Credit Union members and the general public. The Financial Education Center's Events & Seminars page has a registration form for its monthly, no-cost webinars with practical, actionable advice on managing personal finances, including saving and spending suggestions. The work of the Financial Education Center reflects Delta Community’s mission to help both its members and others in the community achieve financial success throughout their lives.
Delta Community has some more timely financial advice worth looking at:
Free financial counseling might help BALANCE™ your debt
BALANCE™ is a financial education and counseling organization that offers free services to Delta Community members. Some of its services include credit report reviews, debt management, and information on budgeting, money management and home buying.
Visit the BALANCE™ website to learn about their education and assistance programs. Members can also speak with certified credit and housing counselors to get personalized guidance.
Want to connect with a Financial Coach about your specific situation? Call 1-888-456-2227 to speak with a Financial Coach today.
Note that the services offered through BALANCE™ are separate and distinct from any business conducted with Delta Community and are not guaranteed by, nor are they obligations of, the Credit Union.
