Why Credit Card Debt Is Growing and How to Escape It

Jul 8 2026

Written by Dawn Allcot is a personal finance writer with more than two decades experience

Why Credit Card Debt Is Growing and How to Escape It

Credit card debt has grown by $482 billion since the first quarter of 2021. In fact, in the fourth quarter of 2025, it hit an all-time high of $1.277 trillion.

Credit card debt is a persistent problem because once you carry a balance, the amount you owe often just continues to grow. Minimum payments may or may not cover the interest accrued from that statement period. Throw in fees and the debt can just keep getting bigger unless you have a plan to chip away and pay off your debt over time.

Why Are Americans Carrying High Balances?

Credit card balances continue to grow in the US for a number of reasons. Interest and fees are just one aspect of the problem. A YouGov study from December 2025, reported by Bankrate, identified several primary reasons people are carrying credit card balances:

Medical bills
Home repairs
Car repairs
Childcare
Utilities
Groceries

The study didn’t factor in people who used their credit card to charge groceries or gas, for instance, to earn rewards and then paid the balance in full when it was due. However, it does point out the variety of expenses that represent the tough choices consumers have to make in today's economy. And credit card payments are often the "easy" way out.

How Much Debt Do Americans Carry?

If you have credit card debt, you’re not alone. The average credit card debt amongst cardholders with unpaid balances (not counting cards with a zero balance) was $7,886 in Q3 2025, the most recent year for which LendingTree analyzed data.

And the amount of debt tends to vary from U.S. State to State. Higher cost-of-living states like Connecticut and New Jersey carried average credit card debt exceeding $9,700 in Q3 2025, while the average balance in Mississippi was just $4,887.

The good news is that the majority of adult credit cardholders (55%) didn’t carry a balance in 2025. This shows that you, too, can escape credit card debt if you know the proper steps to take, create a plan, and stick to it. There are options you should consider to make it happen for you.

Consider Debt Consolidation

If you haven’t missed credit card payments, have a good credit score and find it hard to pay down balances, debt consolidation could be an option for you.

One easy way to consolidate card debt is by opening a new card with a 0% introductory APR and low balance transfer fees. This eliminates accruing interest for a defined period of time. That said, the key is to pay down the debt before the introductory period ends. Make a plan to pay down the debt and stick to it before the interest rate goes back up.

Homeowners can consider a home equity loan or home equity line of credit to pay off credit card balances. Each of these options uses the equity you have in your home to provide a tool to pay off card debt. The trap to avoid is to pay off your credit cards and then run up balances again wherein you plan to rely on your home's equity to repeatedly pay down common card debt. This cycle can lead to a dangerous cycle that ultimately leads to the risk of losing your home.

A third option is to take out a personal loan. This type of loan is often used to consolidate card debt and other types of debt and these loans due carry interest premiums. However, they are often at much lower rates vs. credit cards so make sure you do your homework before committing to take out a personal loan.

Choose a Payoff Method

If debt consolidation isn’t an option, finance experts often recommend one of two strategies to pay off debt over time:

Snowball Method: This is the "smallest to largest" approach. You tackle the card with the smallest balance first, regardless of the interest rate. Then you continue making minimum payments on all your credit cards. You put any additional money you can toward the card with the lowest balance. Once you’ve paid off that card, you then focus on the card that had the second highest balance. And you continue to do so until all cards are paid off.

Avalanche Method: This is the "highest to lowest" approach. When using this technique, you make a list of your cards based on interest rates, highest to lowest. Then you commit to make the minimum payments on all your credit cards, but pay any extra money toward the card with the highest interest rate (regardless of how much you owe). Your efforts go to paying off the highest interest rate card first. Once the highest interest card is paid off, you then move to tackle the debt on the card with the second highest interest rate. And continue to do so until all cards are paid off.

Snowball vs. Avalanche: Which One Is Best For You?

Financially speaking, using the avalanche method makes the most sense. By tackling the card with the highest interest rate first, you’ll save money on interest in the long run, as long as you don’t add any new debt. That said, this approach can take discipline, as it's often not a "quick fix" and requires time to see your balance drop to zero. You have to know it will take time.

If you’re the type of person who thrives when you see fast progress and you maintain motivation by seeking out small victories, the debt snowball method could work best.

If all your interest rates are similar, you can use the debt snowball method to gain a few early victories.

Pro Tip: With either method, you should apply any extra money, large or small, to your credit card balance. If you use cash-back programs like Rakuten, ShopBack, or Upside, apply your rewards to your credit card balance. You can also take on a side gig, putting any and all extra income toward paying off your card balances.

Negotiate Interest Rates with Your Creditors

Before you choose either the debt snowball or debt avalanche plan, you can negotiate interest rates. Credit card companies want to keep you as a customer and will often work with you, especially if you threaten to transfer balances to another card with a lower interest rate. Calling them and asking for a better rate can pay off.

You’re most likely to get an interest rate reduction if you:

1. Have a long history of on-time payments with the credit card company

2. Have a good-to-excellent credit score

3. Can mention balance transfer options

If the first representative you speak with says no, ask to speak to a supervisor or the retention department, because they may have more power to make the decision.

Negotiate Balances

If your credit card balances are so high they feel unsurmountable, you may want to negotiate the balances. For instance, if you have a card with a $2,000 balance, your provider may accept a $1,000 payment and forgive the rest of the debt.

Be aware that this decision often comes with financial ramifications:

The forgiven debt is typically reported as income to the IRS; you’ll receive a 1099 form and owe taxes on the money.The credit card issuer may close the card as part of the arrangement, which can lower your credit scoreThe account may show as “settled” or “settled for less than the full balance.”Past delinquencies may still show up on your credit report.

However, you may be able to negotiate with the credit card company to mark the account as “paid in full” and delete the collection record from your report.

Consider a Debt Management Plan

If you’re overwhelmed with debt and unsure where to begin, you might consider a debt management plan (DMP). If you enroll in a program DMP, you’ll work with a company to consolidate your credit card debt into one monthly payment, with an overall lower interest rate.

These companies often charge an enrollment fee plus a monthly fee for each account. You pay the counseling agency and they negotiate with your creditors and make payments on your behalf.

A DMP comes with significant drawbacks:

It can take 3 to 5 years to pay off your debtYou’ll need to close your enrolled accountsYou can’t open new credit while you’re enrolled in the planIt could reduce your credit score, since the organization typically wants you to stop making payments and close the accounts

However, at the end of the plan, you’ll be free of credit card debt and can start re-building your credit.

Be wary of for-profit organizations promising debt relief or debt settlement. Choose a company that’s a member of the National Foundation for Credit Counseling (NFCC).

Get Professional Help

Even if you decide to negotiate your credit card balances or tackle your debt on your own, you can still seek professional guidance to help you. Consider working with a non-profit consumer credit counseling service to help you stay on track.

Use Credit Cards Strategically in the Future

Once you’ve paid off your debt, it’s important not to go down the same path again. If you decide to open credit cards to earn rewards, set aside the money you’ve spent immediately so you can pay the bill when it comes due.

Maintaining a good credit score gives you several advantages for times when you need to borrow money, such as taking out a mortgage or buying or leasing a car. But you don’t have to stay stuck in an endless cycle of debt if you learn how to use credit responsibly.