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Average Credit Card Debt In The U.S. Is Rising — How Does Yours Compare?

Key Takeaways

  • Over the past year, credit card debt has increased for the first time since the start of the pandemic.
  • Credit card debt is attributed to pandemic assistance programs ending, inflation skyrocketing, and soaring interest rates.
  • Just because you have credit card debt, it doesn’t necessarily mean you can’t invest for your future. It’s dependent on personal circumstances.

After a brief waning, American credit card debt is on the rise again. If you’re one of the many Americans carrying credit card debt and wondering what to do about it, this article will cover how you stack up against the averages. We’ll also explore the societal circumstances that lead to this mass shared experience and how you might think about getting out of debt moving forward.

How much credit card debt does the average American have?

As of the third quarter of 2022, Americans hold $925 billion in credit card debt, which is a rise of $38 billion since Q2 2022. The Federal Reserve of New York says this is a 15% year-over-year rise – the biggest jump we’ve seen in more than 20 years.

If we look at last year’s Q3 data from Experian, we can see that the average credit card balance was $5,221 in 2021. If we add a 15% increase to that number, we see that the average credit card balance for Americans in Q3 2022 is somewhere around $6,004.

How have credit card balances changed since the pandemic?

At the beginning of the pandemic, Americans proved that when they received stimulus money – whether it came via direct checks, tax credits, or SNAP benefits to compensate for closed school food programs – they’d take that extra money and use it to better their financial health.

Between Q4 2019 and Q1 2021, credit card debt decreased from a starting point of about $930 billion down to $770 billion. This was also the time period when pandemic assistance programs were at their height, bringing more financial assistance to many American households.

American spending was down, as many Americans were careful about large crowds, travel, and other activities that could risk exposure to COVID-19.

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Despite the pandemic not actually ending, the first time the Biden administration no longer recommended the use of masks was Q2 of 2021. At this point more Americans started doing (and spending) more outside the home.

Throughout the rest of the year, the Biden administration, the Supreme Court, and Congress eliminated the vast majority of the financial support programs that were helping many Americans better their finances.

It also twilighted many of the programs that were protecting many Americans from sky-high medical bills from the coronavirus, which killed 460,513 Americans in 2021. The Consumer Financial Protection Bureau predicts that when we have the data in, the average medical debt burden for Americans will show negative impacts from COVID and related healthcare policies.

This was also the time period in which inflation ballooned, which means even basic necessities cost significantly more than they did in 2020 when Americans were paying down debt.

Q2 2021 is when we started to see credit card balances creep back up. Between this time and Q3 of 2022, they went from $770 billion nationwide back up near their pre-pandemic peak of $930 billion.

The latest spike when the Q3 2022 numbers were revealed showed that not only are we back at pre-pandemic levels, but credit card balances climbed at the fastest rate in over two decades between Q3 2021 and Q3 2022.

What do Higher Interest Rates Mean for Credit Card Debt?

The Federal Reserve has been raising interest rates since March 2022. They’ve gone up by 375 basis points in just 11 months, which means borrowing has quickly become much more expensive.

In fact, the average credit card’s interest rate is the highest it’s been since the Fed started tracking in 1994. In Q3 2022, the average APR of all credit cards was 16.27%, up from 14.51% in Q4 2021 before the Fed started raising rates. Those who are carrying a balance and actually paying that interest are seeing an average APR of 18.43%.

A portion of increased credit card debt could be due to these higher interest charges. Credit card debt began climbing even prior to the Fed rate hikes, but the increased interest rates certainly have not helped.

How many Americans are now delinquent on their credit card debt?

If you’re delinquent on your credit card debt, it means you’re at least 30 days late on your payment. The percentage of delinquencies was on a general downward trend from Q1 2020 through Q3 2021, falling from 2.66% to 1.56%.

Much like credit card balances, though, this number has reversed and trended upwards over the past year. In the last reported quarter (Q2 2022), the percentage of delinquent credit card accounts had progressively moved back up to 1.81%.

When your account is delinquent, you’ve incurred at least some interest charges. You may also be dealing with late fees and negative items on your credit report, which make it harder to borrow more money in the future.

How do you alleviate credit card debt?

There’s no shortage of ways one could strive to reduce or eliminate their credit card debt. Of course, throwing as much money as you can at the debt as quickly as possible is ideal.

But for those struggling to pay their credit card bill, there are credit cards with a 0% APR balance transfer offer. With this type of offer, you pay 0% interest on the debt you transfer for a set period (usually 12 or 18 months) as long as you make on-time minimum payments. Eliminating interest can make a massive impact on your total credit card debt.

You could also consolidate your credit card debt into a personal loan that carries a lower interest rate. Note that both of these strategies require a relatively healthy score.

If your credit score is unhealthy, it might be time to call up the credit card company to try to negotiate a lower rate. If things are bad enough, your card may be charged off – which leaves a severely negative scar on your credit report but can alleviate your debt burden.

If you’re already at this point, you may be able to negotiate interest rates with the credit card issuer themselves. Sometimes you can even get it down to 0%. At this point you can also attempt to negotiate the total amount due.

Should I invest or pay off my credit card debt?

There are no shortage of opinions on whether you should still invest while paying off credit card debt.

On the one hand, your credit card debt is likely incurring more interest than your investments will earn. If you’re investing over a long time horizon of multiple decades, you’re likely estimating your return to be between 4% and 8%, depending on how you run the math and how conservative you want to be with your assumptions.

If you’re average, your debt is costing you 16.27% APR in the here and now. That difference in rates leads some to conclude you shouldn’t invest until the credit card debt is gone.

But there is a counterargument. If you don’t invest now, you won’t have the money waiting for you in retirement. To get the best returns, you need as much time on your side as possible for compounding interest to work its magic. This means the money you invest today is more valuable in the long run than the money you invest tomorrow. While anyone with credit card debt should absolutely strategize a plan to pay it off in full, this argument would say you should also allocate money in your budget towards investing.

Yes, you want to handle your debt today, but you also want to have money in retirement.

A lot of personal finance issues are behavioral and unique to each individual’s circumstances. Whether or not to invest while you’re paying off debt is one of them. If you do choose to invest, consider using an Investment Kit, like Q.ai’s Value Vault. Q.ai takes the guesswork out of investing. Our artificial intelligence scours the markets for the best investments for all manner of risk tolerances and economic situations.

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