U.S. Credit Card Debt Hits $1 Trillion, Leaving Americans Wondering How to Get Out of Debt

Do you remember when you got your first credit card? Remember when it felt like free money? That is at least until you got hit with your first bill, and reality started setting in. While some of us may be more knowledgeable about our credit cards now, others are still struggling with credit card debt.

According to Experian, 61% of Americans have at least $6,000 in credit card debt. And according to a Bankrate report, 60% of credit card holders have been in debt for at least a year. With over half the country's population trying to dig themselves out of a financial hole, it's clear that credit card debt is at an all time high.

In fact, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data, the total consumer credit card debt reached a record-breaking $1.03 trillion in Q2 2023. This compared to the $986 billion in debt in Q1 2023.

As of this August 2023, just over 578 million credit card accounts were open, so this number is not expected to take a dip anytime soon.

With credit card debt reaching the trillions, millions of Americans are dealing with finance woes and trying to figure out how to pay off debt faster. While there's no simple or quick fix to paying off your debt, there are steps you can take that will help speed up the process.

How Does Credit Card Debt Get So High?

Try to wrap your head around how much money $1 trillion is. Spoiler alert - it's a lot. Trying to picture $6,000 is a little easier, but it's still a lot if you're part of the 61% of people with that amount of credit card debt. Although you may be making your monthly payments on time, it may seem like the debt never goes down. Why is that?

You're Not Paying Off Your Balance

The first reason is you may be using your credit card and only paying part of it. So, let's say you go to dinner and spend $55. You put it on your credit card with the intention of paying it back. When you get the bill, it's just easier to pay $50, instead of the entire $55 because what's the harm? While $5 isn't likely to break the bank, those numbers can start to add up.

You're Overspending

A swipe here and a swipe there may seem harmless until you get the bill. That night out with friends was more expensive than you thought, and you just had to get those new shoes. While you should allow yourself treats every now and then, it becomes a problem when it's digging you into a financial hole.

To help combat this, it's important to identify areas where you could cut back. If it's not a necessity, consider using cash instead.

You Have High Interest Rates

The third reason is probably the scariest - interest rates. According to Forbes Advisor's weekly credit card rates report, the average credit card interest rate is 27.81%. Although your card's annual percentage rate (APR) can differ from the nationwide average, many Americans find themselves in a financial hole because their card continues to accrue interest.

This means that even if you're making payments on your credit card, the interest charges can make it feel like you're barely making a dent.

How to Get Out of Credit Card Debt

Credit card debt can leave you feeling stressed and hopeless, but there are strategies you can apply to your life to help you get out of credit card debt faster. While you can't expect these changes to happen overnight, and you may have to make some lifestyle changes, nothing will feel better than not having that looming credit card bill every month.

Learn some of the best tips and tricks that real people have used to help pay off credit card debt.

1. The Avalanche Method

If you find yourself stuck with a credit card with a high interest rate, the avalanche method may be right for you. This method is especially useful for people who have multiple credit cards or have taken out multiple loans.

In order to apply the avalanche method, start by determining your interest rates on each credit card. Your card with the highest interest rate will be what you'll focus on paying off first going forward. For the other cards with lower interest rates, you'll make the minimum payment. Once you pay off the card you're focusing on, you'll continue to apply the same method until all your credit card debt is paid off.

Applying this method can help you tackle the biggest amount of interest you'll owe, and ultimately, save you money in the long run. According to a 2022 YouGov survey, 15% of surveyors use this method to help pay down their credit card debt.

2. The Snowball Method

While the avalanche method can be a smart strategy to help eliminate big interest charges, it may feel grueling for people motivated more by smaller achievements. If this sounds like you, the snowball method may be more ideal. With the snowball method, you start by sorting your debt from smallest to largest. Then, you start paying off the smallest amounts first.

The goal is to provide not only less debt, but a feeling of success and motivation to continue paying off the rest of your credit card debt. Once you pay off your smallest debt, you will continue to work your way up the debt ladder until you're ready to tackle your biggest one.

According to a YouGov survey, 17% of surveyors use this method to pay off debt - just slightly higher than the avalanche method.

3. Consolidate Debt to a Transfer Balance Card

If you have multiple credit cards, and you want to keep better track of your payments, consolidating it to a transfer balance card may be a good option. It's important to note that this option is best for people with good to excellent credit as you have to apply for this type of card, and you may have the opportunity to get a 0% APR.

Using a transfer balance card instead can help you save money in the long run while not having to worry about multiple credit card payments.

According to NerdWallet, some of the top rated Balance Transfer credit cards with 0% APR are: Discover it® Balance Transfer, Chase Freedom Unlimited®, Wells Fargo Active Cash® Card, and Citi Double Cash® Card.

4. Limit Your Spending

One of the more obvious, but arguably hardest, strategy when it comes to paying off your credit card debt is to limit your spending. The first step in this process is to review and monitor what you're putting on your credit card. As painful as it may seem, take a look at more than just the price tag on your credit card bill. Look at what you've been buying, and if it's absolutely necessary.

If you actually didn't need that Starbucks on Monday morning or you didn't need to go shopping over the weekend, then it's time to start eliminating unnecessary spending.

Get Out of Debt Quick

Dealing with credit card debt can be overwhelming, but you have options to help pay off those debts. By using one or more of these strategies, you can pay off your credit card debt faster than ever before. Take control of your finances today to help raise your credit score, get out of debt, and live a less stressful day to day.