Credit card debt just hit a new high. Here's how to tackle yours now.
Credit card debt has been a growing issue nationwide over the last couple of years and it appears that the issue isn't under control just yet. According to the latest household debt report from the Federal Reserve Bank of New York, credit card debt hit a staggering $1.17 trillion in the third quarter of this year, up from $1.14 trillion in Q2 2024. This sharp increase highlights the growing financial strain many Americans face as the lingering impacts of high inflation continue to reduce disposable incomes, leading more people to rely on credit to make ends meet.
This uptick in credit card debt comes at a time when the costs associated with carrying a balance on credit cards are also soaring. The average credit card interest rate is currently over 23%, a record high, which significantly compounds the amount cardholders owe — and for less-than-prime borrowers, the rates can be significantly higher. As the credit card interest accrues, balances can grow at an alarming pace, creating a cycle that's difficult to break. For many households, this means paying down debt feels like an uphill battle.
The impact of rising credit card debt can be profound in terms of your financial health, so if you're carrying a revolving credit card balance from one month to the next, it's important to tackle it as soon as possible. Luckily, there are various strategies you can use to help you manage and reduce your credit card debt.
Get rid of your credit card debt now.
How to tackle your growing credit card debt now
If you're watching your credit card balance grow month after month, it may benefit you to consider using these strategies to tackle it:
Consider debt consolidation
Debt consolidation is an option for those with multiple high-interest credit card balances. This approach involves combining all your existing debts into a single, more manageable loan, ideally at a lower interest rate. By doing so, you replace multiple monthly payments with a single payment, simplifying your finances and potentially reducing your monthly costs.
That said, consolidating debt typically works best for those with a good or fair credit score, as lenders may require a decent credit history to qualify for lower rates. If you choose this strategy, it's also essential to avoid taking on additional credit card debt after consolidating your balances.
Learn more about the debt relief strategies that could benefit you today.
Transfer your balance to a new card
A balance transfer card can also be an effective tool for paying down credit card debt, especially if you can secure one with a 0% introductory APR. Many balance transfer offers allow you to transfer high-interest balances to a new card with no interest for a period, usually between 12 and 21 months. This interest-free window can give you time to make significant progress on your debt.
Keep in mind, however, that balance transfer cards often come with a transfer fee — typically 3% to 5% of the transferred amount — which should be factored into your decision. This option is generally best suited for people with strong credit scores who can commit to a disciplined repayment plan, as the promotional period is temporary and interest rates will increase once it ends.
Settle your debt for less
For those with overwhelming credit card debt, debt forgiveness (also known as debt settlement) might offer a way to reduce the total amount owed. Debt forgiveness involves negotiating with creditors to reach an agreement on a lower payoff amount. While you can try to negotiate directly with your creditors, many people work with a debt relief company that will handle negotiations on their behalf.
Debt forgiveness can be beneficial for those who cannot realistically repay their full balances. However, it's important to note that debt settlement may negatively impact your credit score and not all creditors will agree to settle for a lower amount than what you owe.
Utilize a debt management plan
Debt management plans are structured repayment plans offered by nonprofit credit counseling agencies. When you enroll in a debt management plan, the agency works with your creditors to roll your debts into a single monthly payment, often at a reduced interest rate. This option can simplify the repayment process and reduce the amount of interest you'll owe over time, making it easier to pay off your debt within a set time frame.
It's worth noting, though, that these programs usually take three to five years to complete, so they may not be the best option for someone looking for a quick fix. As a result, debt management plans are a good fit for those who need help budgeting and are committed to a long-term approach to debt repayment.
The bottom line
If you're feeling overwhelmed by your credit card debt, remember that you're not alone — and there are effective strategies available to help you manage it. By exploring options like debt consolidation, balance transfers, debt settlement and creditor negotiations, you can create a plan tailored to your financial situation and work toward becoming debt-free. The sooner you take action, the better positioned you'll be to overcome the challenges of high credit card debt and move toward a healthier financial future.
