Americans now hold a record amount of credit card debt — nearly $988 billion, according to the Federal Reserve Bank’s latest data.
“As inflation rose to near 40-year high levels, many consumers have used credit to help manage their budgets, leading to record- or near-record high balances,” Michele Raneri, vice president of U.S. research and consulting at TransUnion, said in TransUnion’s “Q1 2023 Credit Industry Insights Report.”
On average, Americans carry around $5,733 in credit card debt, according to TransUnion’s latest report. But when you break it down by age, most carry more than that.
Those between the ages of 40 and 49 hold an average of about $7,600 in credit card debt — the highest of any age bracket, per TransUnion data provided to CNBC Make It.
“Gen Xers can be especially squeezed by credit card debt because they’re living expensive years right now,” Ted Rossman, senior industry analyst at Bankrate.com, told CNBC in January. “They might be sandwiched between caring for elderly parents and raising their own kids — maybe even putting them through college.”
On the other hand, the youngest credit card users between the ages of 18 and 29 have around $2,900 of debt, per TransUnion’s data. This is understandable since most people in that age group are just beginning to use credit cards.
Here’s the average amount of credit card debt Americans hold at every age, according to TransUnion.
“More people are carrying more debt, and those balances cost more than ever,” Rossman tells CNBC Make It.
Not paying off your credit card bill in full each month has become more costly. Interest rates are currently hovering a little above 20%, according to Bankrate’s May 31 analysis. This time last year, credit card interest rates were around 16% on average.
That’s due to the Federal Reserve’s numerous interest rate hikes since March 2022. Since raising rates makes borrowing money more expensive for consumers, the Fed continued to increase them in an effort to slow inflation.
Although credit card debt is often caused by practical things such as emergencies or day-to-day living costs, it can be hard to stop racking up more debt once the cycle starts, Rossman says.
If your credit card debt is beginning to feel unmanageable, here are two payoff strategies to try.
0% balance transfer credit card
Signing up for 0% balance transfer card is Rossman’s top tip for tackling credit card debt. (Check out this list of the best balance transfer cards from CNBC Select.)
If your card has a high annual percentage rate, these types of cards will allow you to move that debt over to a new card with a 0% APR introductory period that can last as long as 21 months. This will allow you to chip away at your debt without incurring interest charges every month.
Rossman recommends dividing the total amount you owe by the number of months in the interest-free period to come up with a level payment plan you’ll be able to stick to.
It’s important to note that not everyone will qualify for a balance transfer, and sometimes you may not be approved to transfer your total credit card balance. Typically, you need a good to excellent credit score in order to be approved and the likelihood of gaining that approval tends to decrease if your score is below 670, according to Experian.
Be sure to keep an eye on any payment deadlines in order to avoid late charges. Additionally, review the balance transfer fee, which can range between 3% to 5% of the amount you’ve moved onto the new card.
Consolidate your credit card debt
If you have multiple balances on different credit cards, a personal loan can be a useful form of consolidation, Rossman says.
This strategy involves applying for a personal loan large enough to cover your total debt. If you’re approved, you can pay off your credit cards right away, and then repay the loan at a more favorable rate. The average interest rate for personal loans is a little over 11% as of May 31, per Bankrate.
If you have a strong credit score, you may be able to get a personal loan with an interest rate as low as around 7% and pay it back over five to seven years, Rossman says.
It’s important to note that your credit score may be impacted if you miss a payment and once you’ve used up all of the funds from your personal loan, you’ll need to apply for another one to receive more money.
DON’T MISS: Want to be smarter and more successful with your money, work & life? Sign up for our new newsletter!
Get CNBC’s free report, 11 Ways to Tell if We’re in a Recession, where Kelly Evans reviews the top indicators that a recession is coming or has already begun.
CHECK OUT: This loan calculator shows how quickly you can get out of debt
Ex-FBI counterspy chief Charles McGonigal pleads guilty in payment plot
Britain uses UN speech to show that it wants to be a leader on how the world handles AI
Undercover Tampa officer speaks out after fentanyl exposure on the job
NASA’s Mars sample return mission unrealistic, report finds
Eat eggs or drink milk? Then you’re no feminist, say animal rights activists in the latest woke protest against those who have a non-vegan diet
Republican lawmakers pass millions in new funding for crisis pregnancy centers as Democrats push back
Peloton's Cody Rigsby Is Entering His Author Era
Marvel Studios’ VFX Staff Unanimously Votes to Unionize
Long Island preparing for effects of Hurricane Lee
Adobe Firefly AI Is Out of Beta in Photoshop and Illustrator
Janelle and Christine Brown Weigh in on Meri and Kody Brown’s Marriage: Kody Has Been ‘Mean and Cruel’
China pushes supercomputing goal despite US curbs
The fall equinox is here. What does that mean?
Why ‘Outsider’ Prince Harry and Meghan Markle Won’t Accept Invite to Upcoming Major Event for Royal Family Member
Is the ATACMS tactical missile already in Ukraine?
News20 hours ago
Huawei’s new AI strategy aims to transform industry
Lifestyle13 hours ago
‘Squid Game: The Challenge’ Trailer Has 456 Real People Risking It All for $4.56 Million; Netflix Sets Premiere Date
Tech22 hours ago
Amazon’s generative-AI-powered Alexa is as big a privacy red flag as old Alexa
News21 hours ago
Elon Musk’s Dad Shares Deadly Secrets of Fabled Emerald Mine
Finance13 hours ago
GM And Stellantis Layoffs Number Thousands As Strike Tensions Escalate
News20 hours ago
Biden, 80, sparks more questions about his age and health by repeating the same story almost word-for-word TWICE in just a few minutes
Sport12 hours ago
First trans NFL cheerleader compares role to becoming doctor, says no one will stop ‘this show’
Tech11 hours ago
iOS 16.7 arrives for older iPhones and people who don’t want to upgrade