Here’s How Your Credit Card Debt Stacks Up to the Average American

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Carrying a credit card balance is very common, and the average balance increased by 10% over a year. Learn how to cope with your credit card debt here. [[{“value”:”

Owing money on credit cards is costly. According to the Federal Reserve Bank of St. Louis, the average interest rate was 21.59% as of February 2024.

Credit card debt is also pretty normal. In fact, data shows many consumers owe money to creditors and have charged a good amount on their cards. To help you understand how what you personally owe compares to your peers (and how to cope), let’s dive into the details.

This is how much the average American owes on a credit card

According to data from the credit bureau Experian, the average credit card balance among consumers in the third quarter of 2023 was $6,501. This was a 10% increase compared to the year before. Collectively, Americans carrying these balances owe close to $1.07 trillion in total.

Carrying a $6,501 balance can be pretty costly. At the 21.59% average credit card interest rate, someone making 2% minimum payments on a balance of this size would have a monthly payment of $130.02. They would take more than 30 years to become debt-free by paying only the minimum, and would pay a grand total of $36,610.75 before the card was fully paid off.

Unfortunately, not only does the typical American owe a lot of money to creditors, but they’re also using a pretty large percentage of their available credit. In fact, Experian’s data showed that the average credit utilization ratio in the U.S. is 29%. Credit utilization ratio is measured by calculating credit used vs. credit available. If it’s above 30% — which the typical American is really close to — this can hurt your credit score.

What should you do if your credit card debt or utilization ratio is too high?

If you’re like your peers and owe a lot of money on a card — especially relative to the card’s limit — you should know your situation is normal. But that doesn’t mean it’s great.

If you stick with the status quo, you could be in debt for a long time to come and could find fewer affordable borrowing options in the future if your credit score is damaged by a high utilization rate.

You don’t have to stick with the status quo, though. You can take control of your debt situation. You can do this by:

Exploring refinancing options. You could potentially get a personal loan and use it to pay off your credit cards. If the rate on your loan is lower, this would make debt payoff more affordable. A balance transfer card could also allow you to reduce your interest rate to 0% during a promotional period that usually lasts 12 to 15 months. Both of these options aren’t a substitute for debt payoff, but they make payoff easier.Develop a payment plan. Get serious about trying to repay what you owe ASAP. If you can make large extra payments toward your card balance, you’ll become debt-free way faster. All the extra you pay should go toward reducing your principal balance. Consider taking on a temporary side hustle — all the cash you earn (less taxes) can go toward your debt.Make a plan for future credit card use. You don’t want to get out of debt only to find yourself struggling with it again. Make a detailed budget to live on so you can ensure you’re able to pay off your card in full each month. And be careful to avoid charging more purchases on a card that already has a high utilization rate.

By taking these steps, you can make a meaningful change to your debt. If you have more credit card debt than your peers, it’s important to address it — or risk paying a lot of interest over time.

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