Credit Card Debt Has Reached An All-Time High – Here’s What You Should Know

Mary Gilmore, Staff Writer

This month the New York Federal Reserve released a report citing American credit card debt has reached an astonishing $1.21 trillion which shatters its previous records. American household debt, which includes credit card debt, mortgages, and loans, has now reached $18.04 trillion. 

Credit card debt was once stable for the past two decades before the COVID-19 pandemic. However, after the pandemic hit, Americans had trouble maintaining their jobs and other financial related issues. Households began to use up their savings which in turn led to an increase in credit card balances both during and post-pandemic. 

ABC News spoke with news correspondent Elizabeth Schulze and senior industry analyst Ted Rossman who stated that the data is from Q4 of 2024, meaning it was taken from the end of last year. Rossman said this means a lot of the data could be misinterpreted, as a trend like this usually occurs late in the year. Many Americans spend more money nearing the holiday season raising credit card debts higher. However, compared to previous holiday seasons, this record high has never occurred before. 

Many experts believe this increased debt is attributed to the high inflation rates America is experiencing. Inflation was a central aspect of the 2024 presidential election with many Republican representatives, including President Donald Trump, emphasizing that groceries were too high under the Biden Administration. “Stubborn inflation has shrunk a lot of Americans’ financial margin for error from slim to about none, forcing people to lean more heavily on credit card debt,” Matt Schulz, chief credit analyst for LendingTree, commented on NBC News. 

Another striking discovery is the interest consumers must pay with their debt has increased. A statement by Bankrate explained that the average credit card interest rate is 20.10% percent. This is ever so slightly down from a record-high 20.79% percent record last summer. 

In an attempt to combat inflation, the Federal Reserve has been trying to adjust these interest rates. Consumers with existing debt need to pay higher interest rates but people fear it could lead to a cycle of debt struggling to keep up with their payments.While high interest rates are intended to stop consumer spending, they seem to be generally ineffective.

Although debt and inflation is high, consumers seem to still be spending at their average rate. Surprisingly, in a report by ConsumerWise, consumer optimism reached its highest level since before the pandemic in Q4 of 2024. This could also be an indicator for the high levels of credit card debt in Q4, as consumers did not want to decrease their spending. 

In light of this, financial experts urge consumers to adopt tighter spending habits while prioritizing paying their high-interest debt. Credit counseling services and debt management programs are highly recommended for those seeking to regain control of their finances. It’s crucial that Americans fight back and help policymakers make the right choices to bring down debt.