Why Americans’ Credit Card Debt Is Growing at the Fastest Rate in 20+ Years — And How To Fight It

Shot of a young woman holding her credit card while using her cellphone at home.
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Most of us have at least some of it, but collectively, we’ve reached a staggering high. We’re talking about credit card debt. Over the last three months of 2021, Americans’ credit card balances grew by $52 billion, with balances reaching a total of $860 billion. This is the largest quarterly increase in the 22 years the data has been around, according to the Federal Reserve Bank of New York. This massive amount will be a difficult height to come down from, especially considering that we’re still racking up debt like crazy, with no indication of slowing down. 

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What is going on here? Why have we dug ourselves in so deep a hole? Is it the impact of inflation? The cost of housing? Student loans? Interest rates? 

It’s a bit of all of these things and more. 

The Debt Outlook Is ‘Pretty Bad’ 

Julie Ramhold, consumer analyst at DealNews, describes the current consumer debt situation as “pretty bad,” which may be putting it lightly. 

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“As of last November it was reported that the average American has over $90k in debt, and considering that inflation has hit a 40-year high, it’s becoming harder to get out of debt,” Ramhold said. “Add to that interest rates could continue to climb.” 

Some may say that the debt we carry is our fault, plain and simple. And they would have a point, but only to a short extent. Credit card debt is largely the result of crushing external factors well beyond our individual control. In other words, we’re strapped for cash and all but forced to put some expenses on our credit cards if we want to live some semblance of a decent life. 

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Prices Are Soaring

“The increase in prices of our most expensive purchases, such as a home, cars, and education, is what has really impacted households,” said R.J. Weiss, founder of The Ways To Wealth. “While wage growth has been OK, we’re seeing double-digit increases in the prices of these things, and people are starting to feel the squeeze.”

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Student Loans Are Crushing Us 

“Especially for younger generations, the odds of having student debt are higher than not,” Ramhold said. “It’s fairly rare to see a new graduate with zero student loan debt, which shouldn’t come as a surprise given that the US Department of Education reports student loan borrowers owe a collective $1.6 trillion in federal and private loans, although that number may be $1.7 trillion or higher now.”

Housing Costs Hang Impossibly Over Our Heads

“It was hard enough to buy a house a few years ago, especially for people already trying to manage other debt, but now, with home prices having absolutely skyrocketed, it’s near impossible,” Ramhold said. “And if you can afford a home, then you should expect to pay a fair amount of money, even over the value of the home.”

Payday Loans Work Against Us 

“Another area of debt is payday loans,” said Robert Bailey, servicing manager at PaydayLoans Help. “Here we are talking of over 7 billion in loan fees annually. It also has 12 million users annually, and the numbers keep rising. The reason for this is the number of Americans who live hand-to-mouth is large. Getting by is a strain on the finances. Therefore, Americans choose to take out loans of between $300 to $500 on average to make it through the month.”

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Healthcare Is Bleeding Us Dry

“Between 50% and 55% of Americans have some form of medical debt, even with health insurance, which means those are more costs that have to be paid out-of-pocket,” Ramhold said. “These put a serious strain on Americans and their financial situations.”

How To Fight Back: Start by Voting

How do we tackle the crisis of debt? How do we end the vicious cycle. We might start in an unexpected position: by thinking big and taking our ire and frustration with us to the voting booth. 

“[Voting] is a really underrated move that a lot of people probably don’t think about, especially if they think their vote doesn’t count, but it’s one of the things we can collectively do to change the national situation,” Ramhold said. 

Get the Word Out 

We might also want to use our voices to create an echo chamber around the issue. 

“Get the word out,” Ramhold said. “Collectively we can do a lot by drawing attention to the debt crises and clearing up any misinformation people have, especially if it’s of the variety that people got into debt by poor spending habits so they ‘deserve’ it.”

Refinance Your Loans 

“As individuals, look into refinancing your loans,” Ramhold said. “If you can refinance to get a lower payment, but continue to pay more than the minimum, you can knock out the debt faster overall.”

Take Advantage of the Student Loan Moratorium 

The Biden administration recently extended the student loan moratorium, allowing Americans to pause student loan payments through the end of August. If you’re in student loan debt, don’t let this opportunity to take a breather pass you by. 

“Take advantage of the moratorium on student loan payments to repay other debt obligations and secure yourself for when those payments come due again,” said Michael Micheletti, head of communications and marketing at Unlock Technologies

Tap Your Home Equity 

“One of the benefits of the real estate market is that many homeowners have tappable home equity that could solve their immediate financial challenges,” Micheletti said. “This isn’t meant to suggest using your home as an ATM, but there are ways to access home equity now that did not exist during the last financial crisis. Homeowners can use those funds to pay off debt and fund large, needed purchases.”

Use Credit Cards Sparingly 

“Individuals can use credit cards sparingly, unless they have the cash reserves to pay off purchases before the end of the month,” Ramhold said. “Doing so means paying off bills before they have a chance to accrue interest, which will keep credit card debt from mounting in the first place.”

Employ the Avalanche Method

How we tackle our existing debt is critical. Ramhold recommends implementing the avalanche method

“List all your debts in order from highest interest rate to lowest,” Ramhold said. “Then, focus on paying off the debt with the highest interest rate first; don’t neglect the others, but pay the minimum or slightly over on those. Then once the highest interest rate debt is paid off, move on to the next and so on until you’re debt-free.

Plan for Bad Times

“There’s no easy answer for how we collectively get out of this, but if we study history, we do know that things can change very fast,” Weiss said. “So, as an individual, it’s important to live within your means, have a clear plan to achieve your goals, and not get too caught up in the day-to-day changes you can’t control.”

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About the Author

Nicole Spector is a writer, editor, and author based in Los Angeles by way of Brooklyn. Her work has appeared in Vogue, the Atlantic, Vice, and The New Yorker. She's a frequent contributor to NBC News and Publishers Weekly. Her 2013 debut novel, "Fifty Shades of Dorian Gray" received laudatory blurbs from the likes of Fred Armisen and Ken Kalfus, and was published in the US, UK, France, and Russia — though nobody knows whatever happened with the Russian edition! She has an affinity for Twitter.
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