Americans owe $1.26 trillion on their credit cards, just short of the all-time record. And with the Federal Reserve raising interest rates again, carrying a balance is about to cost more.
Here’s where card debt actually stands, what the newest numbers show and what you can do about it if you’re one of the millions of people carrying a balance from month to month.
How much credit card debt do Americans have?
Card balances rose $21 billion in the spring to $1.26 trillion, according to the New York Fed’s latest household debt report, covering April through June. That’s close to the record of $1.28 trillion set at the end of last year. Total household debt, including mortgages and car loans, is about $18.8 trillion. Auto loan balances hit a new record of $1.71 trillion.
The more worrying number is how much of that card debt has gone bad. The share of card balances at least 90 days late climbed from 7.6% in mid-2022 to 12.8%, CNBC reported. New York Fed researchers cautioned that part of that is old, charged-off debt still sitting on credit reports, not just people falling behind right now. They described a “K-shaped” economy, where higher-income households are fine and many others have little cushion between paychecks.
Is credit card debt still going up?
It depends which month you look at. The Federal Reserve’s consumer credit report released Wednesday showed revolving credit, which is mostly credit cards, actually fell in August, at a 4.2% annual rate, to about $1.35 trillion. That came after months of strong growth earlier in the year. One month doesn’t make a trend, and the New York Fed’s next quarterly report in November will show whether balances kept climbing over the summer.
How much interest are people paying?
A lot. For cardholders who carry a balance and pay interest, the average rate at banks was 22.36% in the latest Fed data. On a $6,000 balance, that’s roughly $1,340 a year in interest if the balance stays about the same.
It’s likely to rise. The Fed raised its benchmark rate in September for the first time since 2023, and minutes released this week show most officials expect another hike by year end. Card rates follow the Fed’s rate closely, usually within a billing cycle or two.
What can you do about credit card debt?
- Pay more than the minimum. Minimum payments are built to keep you in debt for years.
- Go after the highest rate first. If you have several cards, put extra money toward the one charging the most interest.
- Ask for a lower rate. If you’ve paid on time, call and ask. It works more often than people think.
- Look at a 0% balance transfer carefully. They can help, but watch the transfer fee, usually 3% to 5%, and have a plan to pay it off before the promo ends.
- Get free help. Nonprofit credit counselors affiliated with the National Foundation for Credit Counseling can set up a debt management plan, often at lower rates.
The BeezLoop Take
The numbers say something that headlines about a “strong consumer” miss. A big share of Americans are paying 22% interest to cover groceries, rent and bills that cost more than they did a few years ago. The Fed is raising rates to fight inflation it says comes partly from tariffs and energy costs, which means families get squeezed twice: higher prices at the register, then higher interest on the card they used to pay them.
Card companies are doing fine either way. Banks earn more as rates go up, and Congress has talked for years about capping card interest without doing it.
The open question: how much higher can rates go before more families stop being able to make even the minimum payment?
Also on BeezLoop: Fed minutes show most officials expect another rate hike by year end, and what a 5% 10-year Treasury yield does to your mortgage and car note.
Sources: Federal Reserve Bank of New York, Household Debt and Credit Report · Federal Reserve G.19 Consumer Credit, Oct. 7 release · CNBC · 6abc (video)
