Credit card debt hits a new record high: 3 ways to tackle yours now

Americans are sinking deeper into debt, and the numbers prove it. According to the latest Quarterly Report on Household Debt and Credit from the Federal Reserve, released this week, the total household debt nationwide surged by $93 billion in the fourth quarter of 2024, bringing the overall total to a staggering $18.04 trillion. Credit card balances alone jumped by $45 billion from the previous quarter, hitting a record high of $1.21 trillion by the end of December. Aggregate delinquency rates also ticked up during the fourth quarter of last year, with serious delinquencies rising across credit cards and other types of lending.  

In other words, it’s clear that many Americans are struggling to keep up with their financial obligations. And while other types of loan products are contributing to the issue, the reality is that credit card debt is often the most difficult to manage due to the high interest rates these short-term borrowing products come with. For example, credit card rates are closing in on an average of 23% currently, and unlike fixed-rate loans, credit card balances compound and can also quickly spiral out of control when only minimum payments are made. 

And, with millions of Americans now relying on credit to cover everyday expenses in the face of rising inflation, tackling outstanding balances has become more critical than ever. If you’re one of them, the good news is that there are proven strategies to help you take control of your finances and start paying down what you owe. 

Chat with a debt relief expert about your best options now.

Credit card debt hits a new record high: 3 ways to tackle yours now

If you’re dealing with compounding card debt, here are a few effective ways to begin tackling it now.

Debt consolidation

One of the most effective ways to get a handle on credit card debt is through debt consolidation. This method involves taking out a single loan — typically with a lower interest rate — to pay off multiple credit card balances. By rolling multiple credit card balances into one lower-rate loan, you’ll streamline the repayment process and pay less in interest compared to your credit cards. 

Another popular approach is using a balance transfer credit card, which allows you to move high-interest balances onto a card with a temporary 0% interest period. If you qualify for a balance transfer offer and can pay off your debt within the promotional period, you could save significantly on interest. However, it’s crucial to be mindful of balance transfer fees and make sure you have a plan to pay off the balance before the introductory rate expires, or you could end up paying just as much, or more, interest when the regular APR kicks in.

Find out how to start tackling your debt today.

Debt settlement

For those who are significantly behind on payments, debt settlement, also known as debt forgiveness, may be an option. This approach involves negotiating with creditors to settle your debt for less than what you owe. You can approach this process on your own, but many cardholders opt to work with a debt relief company that can negotiate on their behalf to try and lower the total balance owed. 

But while debt settlement can provide relief, it comes with risks. Settling debt for less than the full amount can negatively impact your credit score, and creditors are not obligated to agree to a settlement — so there’s no guarantee that you’ll see a positive outcome. Any forgiven debt may also be considered taxable income, so it’s important to keep that in mind. 

Debt management

A structured debt management plan can be a lifeline for those struggling to keep up with credit card payments. These plans, typically offered by credit counseling agencies, involve negotiating lower interest rates and setting up a single, affordable monthly payment to cover all enrolled debts. Unlike debt settlement, debt management programs do not reduce the principal amount you owe, but they can make repayment more manageable and help you avoid late fees and penalties.

Enrolling in debt management requires closing your credit cards, though, which can temporarily impact your credit score. However, completing a plan — which typically happens within three to five years — can help rebuild your credit and provide a clear path to becoming debt-free. If you’re considering this option, working with a certified credit counselor can help you evaluate whether a debt management plan is the right solution for your financial situation.

The bottom line

Credit card debt is at an all-time high, and with rising interest rates and economic uncertainty looming, now is the time to take action. Whether you choose debt consolidation, debt settlement or a debt management plan, the key is to develop a strategy that aligns with your financial situation and long-term goals. Avoiding new debt, making consistent payments and seeking professional guidance when needed can also help you regain control of your finances and work toward a debt-free future. The sooner you take action, though, the better positioned you’ll be to build a stronger financial foundation.