Credit card debt inches closer to a fresh high
In the second quarter of 2025, credit card balances have seen a moderate increase, reaching near-record highs, according to recent data. This trend, which has been observed in 12 out of the past 13 years, is projected to continue throughout the rest of the year, following the typical seasonal pattern and economic factors such as inflation, interest rates, and consumer sentiment.
As of mid-2025, outstanding credit card balances stand at approximately $1.21 trillion, just shy of the all-time high of $1.211 trillion recorded in Q4 2024. This pattern is consistent with historical trends where balances tend to decline slightly in Q1 due to New Year debt pay-downs and tax refunds, and then rise through Q2 and Q3, spiking again in Q4 due to holiday spending.
Despite some economic uncertainties, such as concerns about tariffs, recession, and cost of living, hard economic data like spending and the job market have been stronger than consumer sentiment surveys, supporting ongoing balance growth. Additionally, the average credit card interest rate remains high, around 20%, reflecting broader inflation and Federal Reserve interest rate decisions.
This economic environment, coupled with rising credit card delinquencies, indicates stress in consumer finances, particularly among households struggling with debt amid inflation and higher living costs.
For those carrying high-cost credit card debt from month to month, it's crucial to address this issue with practical steps to pay off the debt once and for all. If you only make minimum payments at the average rate of 20.13%, you'll be in debt for 217 months (more than 18 years) and will end up paying $9,259 in interest.
Cutting back on expenses can make a big difference in debt payoff. For example, canceling little-used subscriptions, eating out less often, and finding cheaper entertainment options can help reduce monthly expenses and accelerate debt repayment.
If all funds from a side hustle were put toward the average credit card balance of $6,371, it could be paid off in just over seven months. Alternatively, reputable nonprofit credit counseling agencies like Money Management International and GreenPath offer debt management plans with an interest rate of around 6% over five years.
For those looking for a balance transfer option, the U.S. Bank ShieldTM Visa® Card offers a 24-month balance transfer promotion with 0% interest on balance transfers and new purchases. However, after the promotion period, the variable APR for the card becomes 17.74% - 28.74% depending on the cardholder's creditworthiness. The card also has a transfer fee of 5% or $5, whichever is greater.
In summary, the rising trend in credit card balances aligns with typical seasonal behavior and is strongly influenced by prevailing economic conditions. To manage debt effectively, it's essential to prioritise paying off high-cost debts like credit cards, cut back on expenses, and consider balance transfer offers or debt management plans when appropriate.
- Given the current trend of credit card balances reaching near-record highs, effective debt management in personal-finance is vital, especially for those carrying high-cost credit card debt.
- In the face of rising credit card interest rates and increased living costs, it's crucial to take practical steps, such as cutting back on expenses or exploring balance transfer offers and debt management plans, to address the issue of high-cost credit card debt.
