2026 Could Be the Worst Year To Rely On Credit Cards — Here’s Why
Written by
Paige Cerulli
Edited by
Rebekah Evans
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For many, credit cards are a convenience and, at times, a lifeline. They’re helpful in financing larger purchases and many individuals turn to them when they need to cover expenses while waiting on their next paycheck to arrive. While it’s always important to use credit cards cautiously, 2026 could be the worst year to rely on credit cards — find out why below.
Inflation Is High
We’re currently facing high inflation rates and those rates impact what you’ll pay when you finance a purchase. According to Trading Economics, the United States inflation rate reached 2.9% in August 2025, which was the highest rate since January 2025. Prices for food, used vehicles and new vehicles rose the fastest.
Given the high inflation rates, you’ll ultimately pay more when you use a credit card to fund purchases. Steven Conners, founder and president of Conners Wealth Management, explained that any sort of borrowing, whether through a credit card, a mortgage or a car loan, is more expensive when inflation is high. “It becomes more expensive and riskier to take on more debt when you may have to pay between 12 and 25% annual rates,” Conners said. “Even if your rate is lower than that range, it still is very expensive to service debt when interest rates are higher due to inflation and you are increasing your risk or ability to pay the debt back when it’s so expensive.”
Interest Rates Are Unpredictable
Martin Lynch, president of the Financial Counseling Association of America (FCAA), explained that individual banks, which issue credit cards, can make their own decisions about interest rate reductions and increases. It’s difficult to predict just what might happen to credit card interest rates in 2026.
“If the Federal Reserve reduces the federal funds rate, banks will, in turn, adjust their prime rate, which is usually the benchmark rate for their consumer credit card accounts,” Lynch explained. “However, even though many experts expect multiple rate reductions next year from the Fed, APR reductions by individual banks often lag behind the Fed for a variety of factors that include their own perception of economic trends, default rates, et cetera.”
According to the Consumer Financial Protection Bureau (CFPB), after you’ve had a credit card account for one year, the credit card company can increase your interest rate for new purchases as long as they provide you with 45 days of notice before the rate change. Given the current uncertainty of the economy, it’s possible that credit card companies might increase interest rates in 2026, so you would pay more interest on your credit card balance.
That said, Conners said interest rates on credit cards may decline in 2026. “At the time of this writing, jobs are fading and workers are being laid off at many large companies,” he explained. “This may mean that prices may drop, just like oil has dropped and gasoline prices are more favorable than they were.”
Employment Is Unstable
Employment and the United States economy are unstable, which makes relying on credit cards particularly risky. “Our current economy is like a ship entering uncharted waters,” Lynch said. “We’ve seen rising unemployment and rising inflation in recent months.” If you’re concerned about rising unemployment and aren’t entirely certain that your job is secure, it’s a good idea to think about spending less and waiting for the job market and economy to stabilize.
If you’re having trouble navigating rising prices and reduced income, consider having a discussion with an FCAA-member agency, which can review your budget and credit report for free. “If you’re still working, but your credit card balances are reaching your limits, a debt management plan could be an option,” Lynch explained. Many consumers aren’t aware that, because you’re working with an FCAA-member agency, your creditor may agree to reduce your interest rates and waive any past or over-limit fees. Generally, consumers come to see us with around 25% interest rates and fees. Working with creditors, we can get them down to about 8% — a significant savings.”
Alternatives to Credit Cards
Conners explained that he always sees credit card usage as negative, unless you can completely pay off the balance before your monthly payment due date. “You work too hard to pay high rates of interest to a large finance company,” he said. “It isn’t tax deductive either, so do your best to avoid credit cards in 2026, just like any other year.”
Instead, Conners recommended that consumers save up cash for the items they want to purchase. “It will take discipline, but it will make life much easier if you don’t use credit cards unless it’s an emergency,” he said. While interest rates could be lower in 2026, they’re still high when you consider how much interest you’re ultimately paying on your purchases.
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