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What Is the Average American Credit Card Debt?
By Rachael Paul-Heinz MONEY RESEARCH COLLECTIVE
A credit card can be an easy and convenient way to pay for almost anything, including online shopping and even some bill pay. But for many Americans, credit card swiping can lead to debt that’s difficult to control.
How much credit card debt does the average American have?
Credit card debt in America is rising. At the end of 2022, Americans owed a combined $986 billion in credit card debt. The U.S. has roughly 131.2 million households, meaning the average American carries about $7,515 in credit card debt. This rate has been steadily increasing since 2014, with significant spikes in 2020 and 2022.
Making just the minimum or low payments on monthly credit card bills can lead to a bad credit score. Some common demographic statistics can help tell the story of who is carrying credit card debt and how much money they owe to creditors.
Average credit card debt by state
Credit card debt varies widely by state and region. According to a 2022 Credit Karma credit analysis, Alaskans carry the highest average amount of credit card debt, at over $7,700. Ranking with the lowest amount of credit card debt is Iowa, with an average credit card debt amount of just over $5,000. The rest of the United States falls between these two extremes.
According to the same credit analysis, average credit card debt is also regional. Beyond Iowa, many other Midwest and Southern states report lower average credit card debt, including Wisconsin, Kentucky, South Dakota and Indiana. States with higher average individual credit card debt are spread throughout the United States, with a slight concentration on the East Coast (Connecticut, Virginia, New Jersey and Maryland).
Average credit card debt by age
Credit card debt is not limited to people of a certain age or generation. According to Credit Karma, the generation with the highest average credit card debt is Generation X (those born between 1965 and 1980), at about $7,900 of average debt. Gen X is followed closely by Baby Boomers (born between 1946 and 1964), who average about $7,285 in credit card debt.
According to the Credit Karma study, younger generations carry less debt. Members of Generation Z (born between 1997 and 2012) hold an average of just over $2,500 in debt, which is more than 60% less than that of their parents and grandparents. This may be because Gen Z-ers haven’t been eligible to use a credit card for as long or because credit protection and oversight have improved since they became adults.
Average credit card debt by gender
Men carry more credit card debt than women — on average, an additional $125 — and have significantly more debt in the areas of car, personal and mortgage loans. However, women carry slightly (2.7%) more student loan debt. The credit scores of men and women are nearly equal. This is despite men still consistently drawing higher income than women, women more consistently working in lower-paid occupations, and more women leaving the workforce to care for children or elderly relatives.
Average credit card debt by race
While 80% of Americans have credit cards, only 65% of Black consumers and 72.5% of Hispanic consumers do. People who identify as Caucasian (non-Hispanic) have the highest reported average credit card debt, at about $6,900. Individuals who identify as Hispanic or Latino have an average credit card debt of about $5,500. The lowest average debt amount by self-reported race is about $3,900 per cardholder for non-Hispanic Black or African Americans.
Average credit card debt by income
There are also clear trends in average credit card debt by income bracket. People in the higher income brackets tend to carry more average debt. Americans in the top bracket for annual earned income carry an average of over $12,000 in debt. Those in the next bracket — earning $130,000 to $175,000 annually — are next, with just under $10,000 in average debt. And the debt average continues falling as the income brackets get lower.
This linear trend could be because those in lower income brackets are less able and willing to take on debt or have credit cards with lower debt limits. Those in lower income brackets might also carry less debt because they might have less of a cushion or safety net to pay down hefty interest rates or accrued debt.
How to pay off credit card debt
Paying off credit card debt can feel insurmountable when combined with the rising costs of many everyday household items and expenses, even if you hold the best credit cards with the most competitive interest rates. If you’re looking for a way to decrease your credit card debt, there are a few simple strategies you can try.
Pay more than the minimum payment
Credit card companies are designed to make money by charging varying interest rates to customers who can’t or won’t pay their full statement balances during each billing cycle. Many Americans can get trapped in an endless loop of making charges, not paying the full amount owed and accruing soaring interest payments that put them even further behind in settling what they owe.
If you can, a simple way to start cutting down your debt is to pay more than the minimum statement balance. This will decrease the interest rate and fees you owe, bringing your overall total to a lower amount. Paying more of your total credit card statement each month could also help your credit score and even earn you rewards from your credit card provider, like an increased spending limit or extended statement cycles without penalties.
Follow a debt repayment strategy
There’s no shortage of financial advisors, personal finance blogs and debt-reduction books and programs available to the modern consumer. Appealing to and tailored for debt holders of all races, ages, locations, genders and occupations, these resources prove there’s truly something for everyone looking for a reasonable and easy-to-follow strategy for debt repayment.
Debt repayment strategies vary based on several factors, including the amount of debt you need to pay, the number of indebted cards you hold, your credit score and your current income. These programs’ common thread is helping indebted Americans find the tools, organization and motivation to reevaluate their spending strategies, reallocate their income and funds towards paying off debt, and rebuild a good credit score.
Let’s look at a couple of standard methods for debt repayment.
The snowball method
The snowball method is all about starting with small repayments and gradually growing, or “snowballing,” the effect your payments will have.
If you choose to use the snowball method, you’ll start by organizing the amount of debt and the minimum required payments for each credit card. From there, you’ll focus on paying off the lowest balance first instead of equally spreading payments across multiple cards or paying off cards without a cohesive strategy. You’ll put the bulk of your debt-repayment budget towards that specific card and only pay the minimum required amounts on your other accrued-debt accounts. Once you pay off your lowest balance, you’ll shift your focus towards paying off the card with the next-lowest balance and work your way up until all of your debt has been satisfied.
Why does the snowball method work? It helps you focus on small wins, organize your debt into manageable “chunks” and reduce your number of concurrent growing debt cycles. By starting small and growing, you’ll pay what you owe and have a better idea of the future spending limits you’ll need to stick to.
The avalanche method
If you want to take the opposite approach of the snowball method, consider the avalanche method for paying down your credit card debt.
While the snowball method starts with the card with the lowest balance, the avalanche method asks you to start by paying off the card with the highest interest rate while only paying the minimum amount required on the other cards. Like with the snowball method, you’ll organize your debt, identify the card with the highest balance and put your energy towards bringing it back to zero, using a fixed monthly budget dedicated towards debt remediation.
As with the snowball method, the avalanche method focuses on small wins, self-education about the actual amount of debt you owe and a clear strategy for becoming debt neutral. It helps you “dig out” from under cripplingly high interest rates and mounting debt across multiple cards.
Negotiate your debt down
It might surprise you to learn that some debt is negotiable. Creditors — including credit card companies, insurance companies and other lenders — offer strategies and compromises designed to help users manage their outstanding debt. This could include agreements like extended debt payment schedules, a break in interest rates or renegotiated minimum monthly payments.
Many debt-settlement companies will perform this service on your behalf, but it can be done without paying a third party for help. You’ll want to get a good handle on your debt and look for debt-consolidation strategies and tactics that have worked for other debtors in similar situations. You’ll also want to have a plan in place before you contact the credit card company and self-identified negotiation limits — that is, how much you’re willing to compromise.
Creditors want to make money, but they are human and know the value of retaining customers, even if it results in some debt forgiveness on their part. A strong negotiating strategy can be essential to your debt-reduction process and remove collections from your credit cycle.
Remove inaccurate information from your credit report
To lenders, credit card companies and banks, your credit report is your financial report card and is the primary indicator of your monetary stability and credit health. It’s your responsibility to improve your credit score by ensuring this report is accurate, current and positions you attractively to take on future debts if you need them.
Your credit report is yours, and you can work with reporting agencies to update it if you find it includes inaccurate information. This could be anything from inaccurate reporting of unpaid debt, unreported paid debts/credit cards or your basic demographic information (address, occupation or marital status). Erroneous information can negatively affect how creditors and lenders perceive you, so the information they have about you must be correct.
Considering taking out a debt consolidation loan
If these strategies don’t work, or you cannot deploy them due to the amount of debt you hold or your financial situation, you can take out a debt consolidation loan. These loans do precisely what the name suggests: they combine your debt into one lump sum to help you pay it off reasonably and negotiate with debt collectors on your behalf.
Debt consolidation loans come with high interest rates, which is a critical point to consider if you don’t believe you’ll be able to pay both the principal debt and your loan’s interest rates. Debt consolidation loans will also appear on your credit report, which could negatively impact your credit score and future crediting opportunities. But for some, a debt consolidation loan is a solid first step toward debt freedom.
What your credit card balance says about your overall financial health
The amount of debt you carry on your credit card can be a clear indicator of the state of your finances and your relative financial health. If creditors and lending companies see you’re carrying significant monthly debt without a consistent payment plan, they may be less willing to offer you loans for things like business investments, mortgages, auto loans or student loans for you or your dependents.
A high unpaid credit card balance can also help you gauge your financial aptitude and savings strategy. If you’re consistently carrying outstanding credit card debt, are you saving for the future or spending too much from day to day? What is your monthly budget for required and optional expenses, and are there ways to rebalance your costs based on your income?
As more Americans move to using credit cards instead of cash for almost every expense, and online shopping with credit cards continues to grow, consider your credit card debt and how it might be a powerful barometer for you and your family’s total financial health.
Does your credit card debt resemble the average American household?
Check your credit score regularly and compare your credit card debt to the average American household. How do you stack up, and what can you do to cut the debt?