Credit card debt hits record $1.28 trillion. Here’s why and how to take it forward.

Debt balances continue to rise, according to the latest data from the Federal Reserve Bank of New York. The latest quarterly report on household debt and credit shows that total household debt rose by $191 billion, or 1%, in the fourth quarter of 2025 to a new high of $18.8 trillion.

Notably, credit card balances rose by $44 billion in the fourth quarter to an all-time high of $1.28 trillion; mortgage balances grew by $98 billion, totaling $13.17 trillion; and auto loan balances increased by $12 billion, for a total of $1.67 trillion by the end of 2025.

Delinquency rates also saw a sharp increase in the fourth quarter, with 4.8% of outstanding debt in some stage of delinquency, driven by defaults among younger and lower-income borrowers and new evidence of a bifurcation, or “K-shaped” economy..

Default transitions increased for credit card balances, mortgages and student loans, while auto loans and home equity lines of credit declined slightly. Student loan delinquencies continued to rise, with approximately 1 million borrowers in default and millions more delinquent on payments.

“If we look at the increase in debt (dollars outstanding), as more loans are originated, we would expect to see an increase in balances. However, looking at an average balance per account can give us a better picture of how American households are using their credit cards,” said Jesse Hardin, risk advisor at Equifax.

“For example, the average bank card balance per account in the U.S. was approximately $1,890 in November 2025, which is actually percentage-wise flat compared to November 2024,” Hardin said. “The consumer price index, which measures the price of goods and services paid by American households, rose by about 2.7% year-over-year in November 2025. So, against this backdrop, consumer credit card balances remain stable, on average, even as consumer prices rise.”

The ongoing affordability crisis has more Americans turning to credit cards to cover everyday expenses.

Bank rate Credit Card Debt Report 2025 found that 46% of American adults who have credit cards currently carry a balance, often because it’s the only way to meet everyday needs.

To make matters worse, average credit card interest rates currently hover above 20%.

“While US consumer debt is rising, the good news is that some delinquency rates have stabilized, while others are falling,” Hardin said. “Credit cards and personal loans are performing at or below delinquency rates experienced in 2024.”

“Also, many more recent vintages of loans in these products look healthier than loans issued immediately after the pandemic. That said, younger generations, especially Gen Z and some millennials, remain under pressure. The generational financial gap continues to grow,” Hardin added.

Experts say it’s important to look at the bigger picture to fully understand how so many Americans are in the red.

“While most pundits will rightly look at the recent economic numbers, I also look at the history of the American consumer,” said Howard Dvorkin, president of Debt.com and CPA.

“If they’re in their prime earning years, they’ve survived the perfect storm of recession, pandemic and inflation,” Dvorkin said. “The cost of housing doubled between 2018 and 2024. The cost of a new car doubled between 2011 and 2025. Meanwhile, purchasing power grew by less than 12% over that same period. With these economic factors working against them, where else will Americans turn? Not surprisingly, it’s credit cards.”

Carrying a credit card balance from month to month can be mentally and financially draining, especially if your credit card has a high APR and your minimum payments are barely touching your balance.

Making real progress starts with the right strategy. There is no one way to approach paying off debt; it’s just a matter of finding the method that works best for your situation.

Using a balance transfer cardfor example, it could be a good way to reduce the amount you are paying in interest. With a balance transfer credit card, you can move existing debt from one account to another. These cards offer a lower interest rate for a limited period of time – often at 0% APR that can last a year or more.

Once your balance is transferred (usually within a specific time period and for a fee), you can start paying off the principal balance. When the introductory period ends, the issuer will begin charging interest on any remaining balance at the regular APR.

Another option: a debt consolidation loan. This simplifies your monthly payments if you have more than one credit card with different interest rates and replaces them with a new fixed rate loan and monthly payment.

Depending on your situation, you may not even need a separate loan or credit card; you may be able to make progress in paying down your debt by implementing strategies such as the snowball or avalanche method that targets your smaller balances first to build momentum or your larger balances first to pay the least amount of interest over time.

So what if you’re in a real bind and can’t make any credit card payments? Well, you’re not completely lost. There are still steps you can take to improve your financial situation.

Notify your creditors: Your credit card company may be willing to work with you to lower your monthly payment or put your payments on hold for a period of time, especially if there are extenuating circumstances at play. However, they can only help you if you are transparent and proactive about your financial situation.
Consult a credit counselor: Don’t be afraid to seek professional help if you feel like your credit card debt is spiraling out of control and you can’t find a way out. You can find a qualified credit counselor through National Credit Counseling Foundation or the Financial Counseling Association of America. They can help you come up with a debt management plan that works for you.
Once you’ve made this plan, follow it: Consistency is key. Once you have a budget and debt management plan, being consistent and avoiding financial habits that can derail your progress are key to eliminating credit card balances and achieving financial freedom.