Nerdwallet American Credit Debt: How to Manage and Reduce

Credit debt can be overwhelming, but it's not impossible to manage. The average American has over $6,300 in credit card debt.

To start tackling your debt, it's essential to understand the interest rates you're paying. According to NerdWallet, the average credit card interest rate is around 19.52%. This means that for every $100 you borrow, you'll pay around $20 in interest over time.

Making more than the minimum payment on your credit card bills can help you pay off the principal balance faster. In fact, paying just $25 more per month can save you over $1,000 in interest over the life of the loan.

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The average credit card limit in the US is around $26,000, with the highest credit scores having an average combined limit of over $40,000.

According to the Consumer Financial Protection Bureau, an estimated 190.6 million adults in the US had a credit card at the end of 2021. This number has been steadily increasing, with 88% of people aged 65 and above having credit cards.

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The average credit card interest rate in the US is around 22.8%, with store cards having a higher average interest rate of 27.7%. This can add up quickly, with the total amount paid in credit card interest topping $100 billion in 2022.

Here are some average credit limits by credit score tier:

The average credit card debt in the US is around $10,563 per household, with 43% of American adults having revolving credit card debt.

About 190.6 million adults in the U.S. had a credit card at the end of 2021.

88% of people age 65 and above have credit cards, a number that has stayed roughly steady since 2013.

Among people ages 25-64, 82% have credit cards, up from 76% in 2013.

The biggest increase in card usage has been among those under 25; in that group, 64% have credit cards, up from 56% in 2013.

Here's a breakdown of how many people in each credit score tier had at least one credit card in 2022:

An estimated 190.6 million adults in the U.S. had a credit card at the end of 2021, which is about 75% of the total adult population.

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If you're curious about which states have the highest and lowest average credit card debt, let's take a look. Alaska tops the list with an average credit card debt of $7,863.

Residing in these states can have a significant impact on your financial situation. Residents of Alaska carried the highest average credit card debt at $7,863 in the third quarter of 2023.

The states with the lowest average credit card debt are actually quite interesting. Arkansas has the lowest average credit card debt at $5,667, followed closely by Vermont at $5,638.

If you're wondering which states are doing better in terms of credit card debt, here are the top 5 states with the highest average credit card debt in Q3 2023:

And on the other end of the spectrum, here are the 5 states with the lowest average credit card debt in Q3 2023:

Credit card debt in circulation is a staggering number. As of the fourth quarter of 2022, there were 754 million credit cards in circulation in the U.S.

This total includes both general purpose credit cards and private label cards. General purpose cards, which can be used anywhere, account for 548 million open accounts.

The number of general purpose credit cards has been steadily increasing over the past decade, with a 41% rise from 389 million accounts in 2013.

This growth in credit card usage has led to a significant amount of credit card debt in circulation.

Average credit card debt varies significantly across the United States. In the third quarter of 2023, Alaska residents carried the highest average credit card debt at $7,863.

Some states have much lower average credit card debt, with Iowa residents having the lowest at $5,227. This is a stark contrast to the highest debt-holding states.

Here's a breakdown of the top 5 states with the highest average credit card debt:

And here's a list of the 5 states with the lowest average credit card debt:

The average credit card limit varies depending on the credit tier. For general purpose credit cards, the average account credit limit was $8,260 in 2022.

However, if we break it down further, we see that credit limits differ significantly based on credit scores. Let's take a look at the average credit limits by credit tier.

Here's a breakdown of average credit limits by credit tier:

On a per-cardholder basis, the average total credit limit across all cards was around $26,000 in 2022.

It's interesting to note that average credit card debt varies significantly across different states in the US. Alaska residents carried the highest average credit card debt at $7,863 in Q3 2023.

The contrast is stark when compared to Iowa, which had the lowest average credit card debt at $5,227 in the same quarter. This highlights the importance of understanding regional differences in debt levels.

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In 2002, cardholders paid a whopping $3.2 trillion toward credit card debt, which is roughly equal to the amount spent on credit cards that year.

Paying your balance in full is the recommended course of action, and it's a trend that's been on the rise - the share of payments that cover the full balance has risen 8 percentage points since 2015.

If you're not paying your balance in full, you're likely paying interest, and the average rate charged on credit card accounts that incurred interest was a staggering 22.80% as of November 2024.

The total amount paid in credit card interest topped $100 billion in 2022, with $30.5 billion paid in the fourth quarter alone - an all-time high in absolute dollar terms.

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The average interest rate on credit card accounts that incurred interest is 22.80% as of November 2024, according to the Federal Reserve.

This means that if you don't pay your credit card balance in full each month, you'll be charged an average interest rate of 22.80% on that balance.

Store cards typically have higher interest rates than general purpose cards. In late 2022, the average APR on private label cards was a full 5 points higher than the average APR on general purpose cards.

The total amount paid in credit card interest topped $100 billion in 2022, with finance charges increasing steadily year-over-year before a two-year dip during the COVID pandemic.

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People paid a whopping $3.2 trillion toward credit card debt in 2002, which is roughly equal to the amount spent on credit cards that year.

Paying your balance in full each month is the recommended course of action, as it means you're only charging what you can afford to pay off. This approach also helps you avoid getting charged interest on purchases.

About 44% of credit card payments were for the full balance in 2022, which is an 8 percentage point increase since 2015. This trend suggests that more people are taking control of their debt.

Paying less than 10% of the balance is still a common practice, with 33% of payments falling into this category.

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To pay off your credit card debt faster, consider having a concrete repayment goal and strategy. This will help keep you on track.

Paying more than the minimum payment is a good strategy, as it can save you money in interest charges over time. The average amount of credit card interest being paid is rising due to Federal Reserve rate increases and rising amounts of revolving credit card debt.

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Automating your payments can be a huge help, but make sure you have a steady enough cash flow to avoid overdraft charges. This is especially helpful if you're neurodiverse and struggle with forgetfulness or procrastination.

Paying down some credit card debt can improve your credit score by lowering your credit utilization ratio, and you're more likely to save on interest charges.

Having a concrete repayment goal and strategy will help keep you — and your credit card debt — in check. Consider paying more than the minimum payment on your credit card bill, as this can save you money in the long run.

Banks make money off the interest they charge each billing period, so paying only the minimum can lead to a longer payoff period and more interest paid overall. The average amount of credit card interest being paid is rising as a result of Federal Reserve rate increases and rising amounts of revolving credit card debt.

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Automating your payments is an easy way to make sure your debts are being paid, but be sure to have a steady enough cash flow to avoid overdraft charges. You can also use the debt snowball approach, where you prioritize your debts by amount and focus on wiping out the smallest one first.

The debt avalanche approach is similar, but instead of paying off the card with the lowest balance first, you pay off the card with the highest interest rate. This can be a faster and cheaper method than the snowball approach.

Paying your balance in full each month is the recommended course of action, as it means you are charging only what you can afford to pay off and you won't get charged interest on purchases. In 2022, about 44% of credit card payments were for the full balance, a trend that has been increasing since 2015.

Curious to learn more? Check out: Why Credit Card Debts Are Called Unsecured Debt

Reducing your living expenses can be a game-changer when it comes to paying off credit card debt. By cutting back on unnecessary expenses, you can free up more money to put toward your debt.

Negotiating with service providers can help you save big on bills like internet, cell phone service, and car insurance. Many companies are willing to work with you to find a better deal.

Prioritizing free or low-cost experiences is a great way to live frugally without sacrificing too much. Consider trying new outdoor activities or taking advantage of local events.

Setting and sticking to financial boundaries is crucial for keeping your expenses in check. Make a budget and stick to it, and you'll be amazed at how much you can save.

Here are some specific ways to lower your living expenses:

Debt management plans are created with the help of a credit counseling agency, which negotiates new terms with your creditors and consolidates your credit card debt.

You'll pay the counseling agency a fixed rate each month, and your credit accounts may be closed, and you may have to forgo new ones for a period of time.

To lower your living expenses, you can negotiate with your service providers to get a better deal on internet, cell phone service, car insurance, and more.

Prioritizing free or low-cost experiences, such as setting and sticking to financial boundaries, can also help you free up more money to put toward eliminating your credit card debt.

Some frugal-living hacks include negotiating with service providers and prioritizing free or low-cost experiences.

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The Consumer Financial Protection Bureau has been working to regulate late fees on credit cards. In March 2024, they issued a rule that would cap credit card late fees at $8.

The maximum late fee allowed by law was previously $30 for the first late payment and $41 for each additional late payment within six months. This significant change aims to provide relief to consumers who struggle with debt.

The U.S. Chamber of Commerce filed a lawsuit to try to block the rule from taking effect, highlighting the ongoing debate around debt management and reduction.

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A debt management plan can be a helpful tool in getting your finances back on track. It's created with the help of a credit counseling agency, which negotiates new terms with your creditors and consolidates your credit card debt.

You'll pay the counseling agency a fixed rate each month, and your credit accounts may be closed, which means you won't be able to use them for a period of time. This can be a good option if you're struggling to make payments and need some relief.

To qualify for a debt management plan, you'll need to work with a credit counseling agency that's accredited by a reputable organization. They'll help you create a plan that's tailored to your needs and budget.

It's worth noting that a debt management plan may not be the right solution for everyone. However, it can be a good option if you're struggling to make payments and need some relief.

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Here are some average credit limits to consider:

Keep in mind that your credit utilization ratio is also important, which is the percentage of your credit limit that you're using. For example, if you have a credit limit of $10,000 and your balance is $2,060, your utilization ratio would be 20.6%.

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Decide on pursuing debt settlement if you're willing to potentially lower the amount you owe.

Debt settlement can be a viable option, but it's essential to understand that creditors may not always agree to accept less than the amount you owe.

Under debt settlement, a creditor typically agrees to accept a lump sum payment that's less than the total amount you owe.

You may need to hire a debt settlement company to negotiate with creditors on your behalf, which can be a risk.

Debt settlement companies often charge fees for their services, which can add up quickly.

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Debt can be a real emotional rollercoaster. A 2020 study found that nearly one-quarter of Americans have no credit history or are just starting to build one, and opinions on credit cards are all over the place.

Many people see credit cards as a double-edged sword - helpful for some expenses, but also potentially "dangerous" or "complicated". More than 7 in 10 people say they would go into credit card debt for certain expenses, according to a 2018 study.

It's no secret that credit card debt can be a source of regret. In fact, a 2018 study found that credit card debt and regret go hand in hand. And if you're struggling with debt, you're not alone - half of Americans emotionally overspend, while 87% would be embarrassed to admit having credit card debt.

Interestingly, more than two-thirds of Americans say there's more stigma in credit card debt than in other kinds of debt, according to a 2016 study. This perception can make it even harder to talk openly about debt and seek help when needed.

Here are some key statistics on the psychology of debt:

Debt can be overwhelming, but there are alternatives that can help you manage it.

You can consider taking out a fixed-rate debt consolidation loan to pay off your debt. Interest rates for personal loans tend to be lower than for credit cards.

Paying interest is still a reality, but it's often a better option than credit card debt.

Using a debt consolidation calculator can help you estimate your potential savings.

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If you're struggling to make ends meet, it may be time to seek help through debt relief. Consider debt relief options like bankruptcy or a debt management plan if you owe more than you can pay each month.

Struggling with personal finance and serious debt can lead to poor credit, making it hard to get back on track. Credit counseling can help you learn more about debt relief options.

If you're overwhelmed with credit card debt, consider seeking help to get back in control. Debt relief options can provide a fresh start, but it's essential to explore all your choices before making a decision.

Credit counseling can be a valuable resource in understanding your debt and creating a plan to pay it off. This can help you avoid further financial strain and improve your credit score over time.

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Credit card companies like American Express, Chase, and Citi have varying interest rates, with some as high as 25.99% APR.

The average credit card debt per household in the US is around $6,300.

Some credit card companies offer rewards programs, such as cashback or travel points, which can be redeemed for statement credits or gift cards.

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JP Morgan Chase is the largest credit card issuer in the country, with cardholders charging a staggering $602.11 billion in the first six months of 2023.

American Express comes in second, with cardholders charging $547.56 billion during the same period.

Citi, Capital One, and Bank of America are also among the largest credit card issuers, with purchase volumes of $287.18 billion, $272.62 billion, and $244.15 billion, respectively.

Here's a list of the top 11 largest credit card issuers in the US, ranked by purchase volume:

Sign-up bonuses can be a great way to get a head start on rewards, but it's essential to understand the fine print. About 1 in 6 Americans opened a new credit card to take advantage of a sign-up bonus in the past 12 months.

A high sign-up bonus can be worth hundreds of dollars, but carrying a balance can quickly negate its value. If you're carrying a balance, the interest will outweigh the bonus and ongoing rewards in just 13 months, even if you're making payments.

A sign-up bonus of $500 is considered generous, and it's likely to come with an annual fee. We ignored this fee in our illustration for simplicity's sake, but it's essential to factor it into your decision.

Carrying a balance degrades the value of the sign-up bonus, and it's crucial to use it wisely. If your goal is to get free travel or a chunk of cash back, carrying a balance will only hinder your progress.

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NerdWallet's annual American Household Credit Card Debt Study provides valuable insights into the state of credit card debt in the US. The study analyzes data from multiple sources, including the Federal Reserve and the U.S. Census Bureau, to determine the amount of debt Americans are carrying, why they have it, and how it will grow.

The study has shown that credit card debt has been on the rise, with a surge in 2022 due to inflation and increased anxiety. In 2017, tens of millions of Americans put medical debt on credit cards as the cost of living continued to grow faster than household income. This highlights the importance of understanding the reasons behind credit card debt.

The study also reveals that income growth has not kept pace with inflation, leading to increased debt for many Americans. For example, in 2015, debt wasn't solely caused by irresponsible spending, but rather the result of incomes not keeping up with inflation. This is a crucial factor to consider when evaluating credit card debt.

Here are the key findings from NerdWallet's American Household Credit Card Debt Study:

The American Household Credit Card Debt Study reveals some eye-opening facts about credit card debt in the US. Every winter, NerdWallet analyzes data from multiple sources to determine how much debt Americans are carrying.

The study shows that credit card debt has slowed in growth, but people are still stressed about their finances. In 2023, rising interest rates made carrying debt more expensive, and paying it off more expensive too.

A notable trend in the study is the widening gap between income growth and inflation. This has led to increased anxiety among Americans, especially in 2022 when credit card debt surged anew. Medical debt is also a significant contributor to credit card debt, with tens of millions of Americans putting medical expenses on their credit cards.

Here's a breakdown of the study's findings:

Every year, NerdWallet releases a study on travel trends and credit cards, providing valuable insights for travelers. This study is a must-read for anyone looking to maximize their travel rewards.

Travel rewards credit cards are increasingly popular among younger consumers, with many cardholders letting points and miles pile up. This trend suggests that younger travelers are taking advantage of these rewards to fund their trips.

In 2022, most Americans were planning to travel, but millions were hanging back. This shift in travel plans highlights the impact of global events on travel habits.

Travelers who hold credit cards are sitting on a mountain of points and miles earned during the pandemic, according to the 2021 study. This accumulation of rewards is a great opportunity for travelers to redeem their points for free travel.

Here are the key findings from the annual travel study: