It’s normal to have credit card debt, but what constitutes “too much” credit card debt will depend more on your individual situation than on how you stack up against others.
Credit cards often have high interest rates, and avoiding credit card debt altogether might be great. But life happens. For example, you have to deal with unexpected bills that you are unable to pay back right away.
How much credit card debt is too much will vary depending on your financial circumstances. However, regardless of your circumstances, you can schedule the repayment of your credit cards so that you can allocate your funds to other financial objectives.
How Much Credit Card Debt Is Too Much?
You can examine your income, expenses, interest paid, and total debt payments to determine how much credit card debt is too much for your household. You may have too much credit card debt if:
- You cant afford to make more than the minimum payments
- Most of your monthly payments go toward interest
- Your credit card balances are increasing each month
- Having credit card debt is making it harder to pay for essential purchases.
In other words, if you don’t see a clear way to pay off your balances, you may have too much debt.
Don’t Compare Your Debt to Averages
Many large consumer research groups have reports and insights on average household credit card debt by year, age, and state. These reports’ average balances typically range from $4,500 to $6,500, however some indicate that balances held by younger and middle-aged consumers increased in 2022.
These reports can be misleading when used as a benchmark, but they can also be fascinating and possibly useful for comprehending broader trends. Credit card companies typically report credit card balances to the credit bureaus at the end of each statement period, or roughly three weeks before the bill is due. This means that the statistics are frequently derived from anonymized credit report data.
For example, someone might spend $5,000 on their credit card and pay their bill in full every month. The average credit card balance on their report could be $5,000, even if they aren’t making any interest payments or revolving any debt.
Comparably, someone might use a credit card with a promotional 200 percent annual percentage rate (APR) to finance a large purchase without having to pay interest. This might not be a sign that the person has debt they can’t afford to pay off, but rather a wise financial decision.
Americans are being CRUSHED by credit card debt and it’s about to get worse
FAQ
Should I leave a little balance on my credit card?
Is it good to carry some credit card debt?
What is an appropriate amount of credit card debt?
Is it good to keep some credit card debt?
What if you’re in credit card debt?
One of the worst things that you can do when you’re in credit card debt is pay only the minimums. Minimum payments equate to only 2-3% of the balance owed on the card, so if you don’t start upping your monthly payments, you’re going to be in debt for a very long time. This also means that you’ll be shelling out thousands in interest.
Is there too much debt on a credit card?
“Too much” debt depends on the cardholder and their financial situation. According to consumer credit reporting agency Experian, the average consumer debt on credit cards in 2022 was $6,365. For some, this might be too much debt but for others this might be their average monthly spend on a credit card.
Should you use a credit card to pay off debt?
Consider not using your credit cards while you’re working on cutting your debt. Paying for things with cash or a debit card can ensure that you don’t rack up debt as you’re trying to pay it off, which can be a frustrating experience. Most importantly, make sure you’re making at least the minimum payments on all of your outstanding debts.
Are You struggling with credit card debt?
Many Americans are struggling with credit card debt. Credit card balances rose by $48 billion in the third quarter of 2023 to $1.08 trillion — a record high, according to a Federal Reserve Bank of New York report. Given inflation and continued high interest rates, those balances are expensive to carry.