U.S. Credit Card Debt Tops $1 Trillion: What Does This Mean for You?

illustration of man with flag standing on mountain of dollar bills

What is 1 trillion? 1,000,000,000,000. One million million. One thousand billion. If you laid one trillion dollar bills end to end they would reach into space past the sun.

$1 trillion is a staggering number — and it is also the amount of total credit card debt U.S. consumers have collectively tallied, sailing past the $1 trillion mark in August of 2023. Broken down into a smaller number, that $1 trillion means that the average American household is carrying $6,568 in credit card debt.

It's the Economy, Smarty-Pants

So how did we get here? The good news is it's not all bad shopping habits. The bad news is it is caused by macroeconomic factors that have made life more expensive.

Why? It starts with COVID. Yes, still. The economy has been going through unusual growth cycles after all the pent-up demand that was created by the initial phase of COVID when spending, travel, dining out and more just completely stopped. That pent-up demand paired with supply-chain disruptions created the staggering inflation we experienced in late 2021 and through 2022.

The good news is inflation has cooled — partly helped along by the Fed, our government's central bank. The Fed increased interest rates in order to try to cool off the economy and lower inflation. Yay! It worked. The downside? Interest rates are now higher than they have been in 22 years. Which means that credit card debt is more expensive than ever.

This jaw-dropping sum brings up critical concerns about the status of personal financial health in the United States and the variables contributing to this financial calamity. In the following article, we answer Frequently Asked Questions by exploring various contributing factors you need to be aware of, as well as solutions for reducing your personal credit card debt and enhancing your financial well-being.

What Steps Can You Take to Pay Off Debt?

Fear not, the situation isn't entirely bleak! There are multiple methods for chipping away at your debt and seizing control over your finances. Here are some tried-and-true strategies:

7 Approaches for Lightening Your Debt Load

  1. Evaluate Your Liabilities: Compile a comprehensive list of all your debts, their respective interest rates, and minimum required payments. This offers a comprehensive view of your financial landscape — and it's a critical first step. A recent survey showed that many Americans don't even know what interest rate they are paying on their debt. Don't let that be you, since the interest rate is what makes credit card debt expensive in the first place.

  2. Tighten Up Your Budget: You will want to make a meticulous budget that captures all the money that comes in and all the money that goes out. This is Ground Zero for getting a grip on how much cash you have available to direct to debt payoff. Take a good hard look at all your monthly expenses, and consider what you can drop for the 2 to 3 years it may take for you to pay off your debt. Keep your eye on the prize: spending money when you don't owe money is a freedom you deserve, and that's what you're going for.

  3. Consider Whether Balance Transfer Can Work for You: If you believe you have enough cash in your budget to pay off your total debt in 18 months, you might be able to find a 0% balance transfer offer. But don't make this move if you aren't absolutely certain you can pay off all your debt in the initial-offer timeframe. It is very likely that the rate at the end of the promotional period will be even higher than what you are paying now.

  4. Find Side Gigs that Work for You: Finding ways to earn extra income can put you on the path to make larger credit card payments. Every extra dollar you earn saves you money in compounding interest. There are plenty of driving and delivery jobs available, and you can also check on local job boards. Or turn a hobby you love into part-time work, whether that's gardening, fixing cars or making (and selling) jewelry.

  5. Speak to Your Creditors: Many creditors are open to discussing modified terms, like reduced interest rates or payment plans. It never hurts to ask.

  6. Research Debt Consolidation Loans: That's why we're here. The financial consultants at Patriot Funding are at the ready to walk you through your debt consolidation options. Debt consolidation can make paying off your debts easier — by giving you just a single monthly payment to make, with a fixed interest rate that won't go up with future Fed rate increases.

The most important move you can make with your credit card debt is to make a plan and get going on paying it down.

It's Time to Act on Reducing Your Debt

Hitting the $1 trillion mark in credit card debt serves as a crucial reminder for Americans to reevaluate their financial choices. By understanding the root causes and committing to proven strategies for debt reduction, reversing this troubling trend is indeed possible.

Reach out to us today, and let us guide you toward financial freedom and a life unburdened by debt.