If you’re finding credit card debt is getting harder to manage, you’re not alone. A combination of record amounts of debt and high interest rates have pushed many consumers to the breaking point.
That makes for a tough choice. It’s hard to get along without credit in today’s economy. And yet, more and more people are finding that if they keep using credit they’ll wind up deeper in a hole.
The right solution is to use debt management strategies to limit your use of credit, while helping you retain the access to credit you need.
Most Americans with credit card debt say it’s out of control
Recent survey data from H&R Block found that nearly half of American adults have credit card debt. That’s nothing new, but the extent to which people are struggling with that debt is eye-opening. According to H&R Block, roughly two-thirds of those with credit card debt say that it’s not manageable.
Young adults in particular are finding it hard to keep up. For Gen Z, which H&R Block defines as people born from 1997 to 2012, 76% of those surveyed who have credit card debt said it was not manageable. This is compounded by the fact that Gen Z debt often includes student loans, creating another demand on their paychecks.
Delinquency and default rates are up
A high percentage of survey respondents with credit card debt say it’s getting out of control, and the statistics on payment delinquencies and defaults back them up.
According to the latest Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York, serious delinquency rates on credit card debt have risen steadily over the past two years. Serious delinquencies are payments that are 90 days or more overdue. The percentage of credit card balances that are seriously delinquent is now the highest it’s been in over a dozen years.
Many of these overdue accounts end up defaulting. The Financial Times reported that the amount of credit card debt written off in the first nine months of 2024 was 50% higher than in the same period of the prior year. This is the highest level of defaults since 2010.
It’s getting harder to get credit
Even if you haven’t missed a debt payment, you might find it’s getting harder to get credit these days unless you have an excellent credit score.
The New York Fed has kept records on rejection rates for credit card applications since 2013. Except for a brief period during the pandemic, the rejection rate has never been higher than it is currently.
This means credit card companies are becoming very picky about who they’ll extend credit to. Unless you have a strong history of using credit successfully, you may find it difficult to get new credit in this environment. You might even find the borrowing limit on your existing credit cards cut.
➤ SEE MORE:How surging credit card delinquency rates can affect credit limits
Debt management strategies
With so many people struggling with unmanageable debt, it is especially important to keep your borrowing under control. Consider the following debt management tips:
Make sure your payments are on time
Payment history is the number one factor that determines credit scores. With credit card companies and other lenders becoming more demanding, it is especially important to maintain a good credit history. Otherwise you may find your access to credit restricted.
Always try to make more than the minimum required payment on your credit card bills
Minimum payment amounts are generally quite low compared to what you owe. That may make them seem affordable in the short term, but in the long term they’ll cost you more by taking you longer to pay off your debt. In fact, chances are that your new charges in any given month will exceed the minimum payment amount. That makes it difficult to reduce debt by paying just the minimum amount.
Create a budget that doesn’t rely on continued borrowing
In recent years, pandemic stimulus checks and the surge of inflation in 2021 and 2022 threw household spending habits out of whack. Now that things are more normal, it’s a good idea to set a budget based on today’s prices and conditions. A sustainable budget is one that doesn’t rely on carrying a credit card balance to make ends meet.
Try debt payoff strategies like the debt avalanche to reduce your credit card balances
There are several popular approaches to paying off debt. The debt avalanche approach is especially effective because it can reduce your interest charges. With this approach, you make the minimum payments on all your debts, and then put any money that’s left over towards extra payments on your highest interest debt. Attacking the debt with the highest interest first reduces your future interest charges the most. This allows more of your subsequent payments to go toward paying down your balance instead of paying interest.
➤ SEE MORE:How to eliminate credit card debt
See if debt consolidation can help you organize payments and reduce your interest rates
By paying off existing balances with lower-interest debt, you can combine multiple payments into one. You can also lower your interest costs. Look into debt consolidation loans and balance transfer credit cards to see if you can reduce your interest rate to pay off your debt faster.
➤ SEE MORE:What’s better for debt consolidation: a balance transfer card or a personal loan?
Consider credit counseling to learn what options you have
If you’ve tried the above options and still can’t figure out how to handle your debt, consider credit counseling. Managing debt can be confusing, but qualified credit counselors are used to dealing with it. They can help you understand your options so you can choose the best path towards paying your debts. They can also explain what rights you have when dealing with bill collectors.
If you’re struggling with credit card debt, you’ve certainly got plenty of company these days. However, that’s not really any comfort. The more people get behind or default on payments, the more demanding credit card companies are likely to get.
That’s why your best option is to get control of your debt before your access to credit is cut off.
