Credit Card Debt Has Hit a Record High — But Here’s How You Can Capitalize
Photo: Clay Banks / Unsplash

Credit Card Debt Has Hit a Record High — But Here’s How You Can Capitalize

Making sense of America's confusing credit card statistics

Depending on what trend stories you look at, now's either a scary, dangerous time to be an American with credit card debt, or it's one of the best times ever to take control of your finances. So... which is it? Well, let's take a look and explain.

First off: Some of the stories getting the most attention recently include a warning from the Fed (the Federal Reserve Bank that determines interest rates) that American credit card debt has hit $1 trillion. It's a not-very-welcome milestone that suggests people aren't saving as much money as they were during pandemic lockdown and that inflation and high interest rates are driving more people to buy on credit.

But wait! That bit of bad news is not the whole story. An analyst at brokerage eToro posted a chart on social media showing that even though Americans have a lot of debt, that debt only accounts for about 6 percent of the money people have in the bank—lower than it's been in the past.

So that's good, right? Even though the overall amount of debt is high, it's less of a burden than before. But that doesn't mean the outlook is rosy for most people. As Marketplace points out, credit card charge-off rates (basically debts not paid) and delinquencies are rising. That means more people are defaulting on paying off their credit cards or other types of loans. Not great!

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As you know if you've tried to buy a car or house, interest rates have gotten much higher than in past years and more loans are being turned down as well. This is bad for people trying to start small businesses or make home improvements. And student loan payments will resume this fall, which means millions more people will be saddled with debt payments every month again.

Related: The Science of Splitting Bills With a Partner, According to Eight Black Men

Is there any silver lining? Anything you can do? Well, obviously, pay off debt as much as you can and don't let interest balloon up on you. If your credit card has a high interest rate, try to switch to one with a lower APR or call your credit card company to see if you can negotiate a better rate.

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According to sites like NerdWallet, there are still good reward cards you can apply for that offer cash back programs or other perks. There's been some grumbling lately that an act of Congress meant to lower fees for merchants on credit card transactions could hurt reward programs, but that's just speculation at this point.

If you're really in a jam and don't know how to get out of debt, do your research before you commit to a debt-consolidation program. There are nonprofits that can help advise you and steer you away from shady services that won't fix your problem. When in doubt, consult the Consumer Financial Protection Bureau.