America’s credit card debt is setting new all-time highs. The total aggregate amount of credit card debt among U.S. consumers now tops the $1 trillion mark, with the $1.02 trillion in consumer credit card debt now surpassing the high water mark set just prior to the near collapse of the financial system in 2008-2009.

According to information from the New York Federal Reserve Bank, the average credit card debt per household has been rising since 2013, and now stands at nearly $8,377, per the prominent credit industry web site The total average balance per household that carries credit card debt is even higher: $9,600 per household, according to Federal Reserve data from 2015.

The average American household with credit card debt now pays about $1,300 per year in interest charges alone, according to a NerdWallet analysis of data from Experian, one of the three major consumer credit bureaus in the U.S.

Americans added $89.4 billion to their credit card balances during the year 2016. And while Americans generally repay a good portion of their household credit card balances in the first quarter of each year, thanks to Christmas bonuses, the $31.5 billion in debt pay-downs we saw in the first quarter of 2017 was sharply lower than the average debt reduction we’ve seen in recent years, says Alina Comoreanu, an analyst with WalletHub.

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Overall, revolving credit balances – the vast majority of which are credit card balances – are increasing at a 6.4 percent annual rate. Compare this to the 0.5 percent and 1.4 percent increases in 2012 and 2013, respectively.

The higher overall credit card debt levels, combined with the unexpectedly small reduction of credit card balances during the first quarter of the year are raising alarms among some observers, who fear the impact on the consumer of another economic downturn.

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Credit card debt is just part of the picture

The higher credit card debt levels represent just part of the total debt burden for most American households. On top of record high credit card debt levels, Americans are now facing higher college debt levels than ever. Student loan debt now exceeds $1.4 trillion – an increase of 150 percent over the past ten years, according to Experian data. The average Class of 2017 college graduate who graduates with college loan balances now carries $37,172 in student loan debt – with an average monthly student loan payment for those ages 20-30 of $351 (the median student loan payment for the same age cohort is $203). Overall, student loan debt has grown over 186 percent over the past decade, and student loan balances are continuing to expand by over 6 percent per year, according to data from the Federal Reserve Bank of New York – more than triple the rate of inflation, which is 1.7 percent for the 12 months ending July 2017.

Cost of living exceeds wage growth

The American consumer took a huge hit from the Great Recession, and both economic growth and wage growth have been disappointing. Data from Pew Research indicates that adjusted for inflation, real wages for workers have been flat or even falling for decades. Today’s hourly wage buys about as much as it did in 1979, while most sectors that have seen incomes advance relative to inflation have benefitted higher-wage households: Real wages for the top 10 percent of income earners have increased 9.7 percent, while falling by 3 percent over the same period for wage earners in the lowest quartile.  

But Americans can afford it… for now.

That said, in some ways, the American consumer is in a position to handle the higher credit card amounts in stride – in the aggregate, anyway. Despite the increase in average credit card and student loan balances, the average monthly debt service payment on total household debt taken as a percentage of disposable income is actually the lowest it’s been in decades, according to data from the St. Louis Federal Reserve.

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The reasons: The economy continues to recover, albeit slowly, from the 2008-2010 recession. The official U-3 unemployment rate is now just 4.3 percent – which is just about as close to full employment as it gets, and down from 4.9 percent from the year-ago period. Looking at the U-6 unemployment rate, which includes those marginally attached to the labor force, and those employed part-time for economic reasons, is now at 8.6 percent, down from 9.7 percent for the year-ago period.

The combination of the increase in employment, plus some welcome upward pressure on wages as a result of the tighter talent market, has relieved some of the pressure on the median U.S. household. And while student loan debt is even greater than total credit card debt, millions of borrowers are benefitting from income-based repayment programs on federally-guaranteed student loans, which keeps payments at a manageable level, relative to income.

Overall household debt now amounts to 79.5 percent of the total gross national product. That figure has been rising over the last few years, but it is still much lower than the all-time high of 95.5 percent set in the last quarter of 2007 (thanks to insanely high mortgage debt). The record low total household debt as a percentage of GDP was 23 percent, all the way back in 1952. (Then Americans discovered credit cards.)

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Americans are also going further into debt to buy cars. The total outstanding car loan debt now exceeds $1.17 trillion.  The average car loan has a term of 68.53 months, and an average monthly payment of $509 for new cars. The average American family with auto loan debt owes $29,058 on their cars.

Millennials, now comprising the majority of the workforce, are also the leading generational cohort when it comes to making retirement contributions. So while this generation has been hampered by high student loan balances, they haven’t quite been crippled by them.

Some still struggling

So things seem to be going well for families in the fat part of the bell curve. But that doesn’t mean there isn’t a lot of pain for the outliers: Households who have experienced prolonged periods of unemployment, for example, are likely to be struggling under much higher credit card balances than other households. For example, the 2016 Bankrate Financial Security Index report found that among American households with incomes below $30,000, 65 percent of them report having more in credit card debt than they have in emergency savings. And despite the general improvements in the overall economy and job situation, the percentage of American households that carry more credit card debt than emergency savings has deteriorated, with 52 percent reporting savings exceeding their credit card balances in 2016 – down from 58 percent in 2015

More recently, Bankrate’s 2017 Financial Security Index found that even with an improving economy, Americans on the margins are still facing severe financial strain:

  • 24 percent of Americans have no emergency savings at all. A glitch in their income would mean defaults on any outstanding debt they have, if they aren’t already defaulting.
  • Another 30 percent of Americans report having less than three months’ worth of basic expenses in emergency savings.
  • 54 percent of Americans, therefore, have less than the recommended three months’ expenses in short-term, liquid emergency savings that would allow them to weather storms like illnesses, job losses and interruptions to employment such as those being experienced this week by millions of Houston-area residents whose worksites are now underwater.
  • Lack of emergency savings is not related to age: 27 percent of Baby Boomers report that they have nothing in emergency savings, compared to 25 percent of Millennials. However, 38 percent of Baby Boomers report having at least six months’ worth of emergency savings, compared to 23 percent of Millennials. 
  • 5 percent of Americans report having saved nothing for retirement over the past year – a figure that’s remained unchanged for at least two years.
  • Part-time workers are having particular difficulty getting economic traction. 33 percent of them report having reduced their retirement savings in the past year, with only 17 percent reporting having increased it.

Americans have also been getting squeezed by both out-of-pocket medical expenses and rental housing costs – which as one would expect disproportionately affect the sick and the young or poor and middle class who have been knocked out of the homeownership market. Though Americans’ median incomes have grown by about 28 percent over the past 15 years, according to Bureau of Labor Statistics Data, average medical costs have risen by nearly 60 percent and food costs are up by nearly 40 percent over the same period – more than erasing any net gains in income after inflation is factored in.

Rental prices have also been increasing faster than the rate of inflation. This is good news for property investors and landlords, but it’s tough on the 38 percent of American households who are renting. Nationally, rents have been increasing at 2.9 percent per year – nearly double the national inflation rate of 1.6 percent, according to the August 2017 National Rent Report from

This isn’t just a phenomenon in New York and San Francisco. Rents have been on the rise in 92 out of 100 major metropolitan areas, according to the same report.

Put all of these factors together and things are getting tough on people on the left tail of the financial security bell curve. Even though unemployment is falling and overall economic sentiment is improving, we are beginning to see increases in credit delinquencies. The second quarter of 2017 saw 4.4 percent of credit card accounts fall into delinquency – an increase from 3.5 percent in the 2nd quarter of 2016. While these delinquency rates are much better than those in 2008, when new delinquencies reached as high as 11 percent and led many lenders to close accounts, shutting credit card borrowers off from new borrowing completely, the increase in delinquencies is still troubling.

Increasing interest rates favor savers, not borrowers

As the overall economy improves, the Federal Reserve has been gradually increasing interest rates. This is welcome news for older Americans who buy fixed annuities for income and who own certificates of deposit and other paper forms of wealth. They’ve long languished under artificially low-interest rates as Federal Reserve policy makers pushed interest rates to record lows and held them there to help stimulate the economy and keep it from falling into a deflationary spiral – a significant threat in 2008-2010.

But these gains for investors and net lenders come at the expense of net borrowers: Nearly all credit cards have variable interest rates that are tied directly to the U.S. Prime Rate. When the Federal Reserve increases interest rates, that means that anyone who holds credit card debt is facing bigger interest charges within a month or two. 

Getting a handle on credit card debt

Nearly every family would like to reduce or eliminate their debts – especially stubborn high-interest credit card debt, which carries an average interest rate of more than 16 percent as of this writing, according to data from But the average family is paying $1,500 going just in interest payments each year.  Many struggling families are paying much more than that, and with average credit card interest rates now over 16 percent, millions of families are finding their credit card balances a tough nut to crack.

The way out: “You’ve got to take ownership of your credit card debt,” says Beverly Harzog, author of “Confessions of a Credit Card Junkie” and “The Debt Escape Plan.”

Get mad

“Get mad at the debt,” says Dave Ramsey, a Nashville, Tennessee-based national television and radio talk show host and author of “Total Money Makeover.” For families struggling with debt, Ramsey advocates a “snowball method” of attacking debts: Write out every debt you have, in order, smallest balance to largest balance, disregarding interest rates. Then throw every dime you can muster at the smallest debt while making minimum payments on everything else.

“Mathematically, it’s not the most efficient method,” admits Ramsey. But he asserts people aren’t math. The idea is to harvest emotional energy, not mathematical reason – because getting an early goose egg on the smallest debt gives struggling debtors a quick emotional charge – and frees up that much money to attack the second smallest debt as soon as the first one is paid off. The result: An accelerating snowball, where debtors are able to make larger and larger payments as they work their way through the list.

Slash expenses

Of course, most families are going to have to make changes in their budgets to make a dent in credit card bills. For many of us, the quickest and most reliable way to generate some short-term savings for debt reduction is cutting back on restaurant meals. Americans spend 4.3 percent of their disposable income on food away from home – nearly half of their overall food budgets, according to the U.S. Department of Agriculture data.

Millennials – those between 20 and 30 – are particularly susceptible to overspending on food. The average Millennial now spends 44 percent of their food costs - $2,921 per year – on dining out, according to The Food Institute’s analysis of Department of Agriculture Data. That’s more than the much older Baby Boomers spend eating out each year – $2,629, despite having much lower incomes and levels of wealth.

Cutting restaurant bills is a double whammy – restaurants and bars are notorious for adding to credit card bills!

It also means learning to like peanut butter and jelly sandwiches – a staple of Beverly Harzog’s diet when she was clawing her way out of a credit card addiction in her 30s, or embracing what Dave Ramsey calls the “beans and rice, rice and beans diet.”

Save like crazy

Bankrate’s research team surveyed Americans on their biggest financial regrets – and the top regret, by far, was failing to save money early enough or aggressively enough. 39 percent of Baby Boomers cited the failure to save money for retirement early enough in life as their top financial regret. 23 percent of their predecessors, the Silent Generation, reported the same thing.

Guard your credit score. For consumers, this means your FICO score. FICO stands for the “Fair, Isaac Corporation,” which is the primary clearing house for credit information on American Consumers.

A strong credit score preserves your options: The stronger your credit score, the better deal you’ll be able to get on credit cards. You’ll be able to qualify for lower interest rates and bigger lines of credit. Many credit card issuers will send you your credit score (from at least one of the three major credit bureaus) on your monthly statement. Otherwise, you can get a free copy of your credit report from each of the three major credit bureaus – TransUnion, Experian, and Equifax – by visiting

You don’t have to obsess about your credit score each month. But you should be aware of what it takes to keep your credit score from plummeting and to help it improve over time. Here are the most important things you can do to improve your credit score:

  • Pay all accounts on time. Prompt payment of all your credit accounts is the most important factor in your credit score, and the best thing you can do to improve it. Your record of on-time payments or delinquencies accounts for 35 percent of your credit score, according to officials at the Fair, Isaac Corporation.
  • Don’t max out your credit cards. The second biggest factor in your FICO score is your credit utilization rate: The percentage of available credit that you’ve used up. Anything over 30 percent causes your credit score to deteriorate quickly. But not using any of your available credit can hurt your score, too. The optimal credit utilization rate seems to be between 7 and 10 percent.

About 30 percent of your FICO score is based on amounts owed as a fraction of the available credit.

  • Don’t close old accounts. FICO’s analysts have noticed that people who maintain successful credit accounts over many years are less likely to default than others. This translates into a better FICO score if you have older accounts. Roughly 15 percent of your FICO score is based on the length of your credit history If you must close accounts, close new accounts first, and keep old accounts open.

Pro-tip: If your parents have excellent credit, ask if they will add you to their oldest credit card as an ‘authorized user.’ This causes the card to be added to your FICO record, and you benefit from your parents’ history of on-time payments. They don’t have to actually give you a card, or the number. You get the benefit of the account on your credit score, even if they never give you the number and you can never make charges.

Furthermore, if you have children or grandchildren and you have good credit, add them as ‘authorized users’ on one or more of your oldest credit accounts. This can boost their scores and set them up for better offers of their own.

Put yourself on autopilot. Sign up for automatic bill paying. This works best for those with regular, predictable incomes and a bit of saving. But at least you won’t be late for anything, and you may see your FICO score rise.

Are You In Debt Trouble?

Many personal finance experts would argue that if you have any credit card balances at all that you aren’t paying off each month within the grace period, you have a credit card problem. Some people are comfortable holding modest balances, even if it’s not the mathematically optimal thing to do. But if two or more of the following circumstances apply to you, it’s probably time to take immediate action:

  • You find yourself avoiding opening your mail.
  • Your credit card balances are rising and you don’t know why.
  • You hide your credit card bills and spending from your family.
  • You are using one credit card to pay off another.
  • You are maxing out one or more of your credit card bills.
  • Your FICO score has declined in the last year.
  • You are anxious about money.
  • You are only making minimum payments on credit cards.
  • You are screening your calls to avoid creditors.
  • You are ashamed about talking about money.