Credit Card Usage in America

Americans love credit, and rightfully so—use someone else’s money to pay for goods and services and pay them back when the balance is due. But anyone who’s received a new credit card recently and actually flipped through the included mountain of paperwork may have noted the interest rate on unpaid balances. According to Lending Tree, the average credit card interest rate Americans paid in March 2024 was 24.66%.

You read that right: 24.66%.

True, this is unsecured debt, and rates are higher than they have been in a long time. Still, that is an extremely high borrowing cost if not paid off on time. The chart below gives you an idea of how credit card interest rates have trended in the past decade—in short, movements were relatively modest until 2022.

Although the volume of other types of debt remains relatively stable, the number of credit card accounts continues to grow. This could be because more people are going into credit card debt, or because of more people (like me), who open additional credit cards to earn rewards and deals.

And while credit card delinquencies are on the rise, they are not in historic territory by any means.

The median credit card balance is around $2,700, according to the Survey of Consumer Finances (with $6,100 being the average). The numbers don’t sound that big, but they can certainly add up once you factor in those massive borrowing rates.

The 45% of people who carry a balance are paying some of the highest borrowing costs imaginable. It’s the biggest form of anti-compounding in all of finance. Carrying a credit card balance from month to month is one of the worst financial decisions you can make. The best advice is to make that your top priority when attacking your consumer debt.

Brant Jones, CFP®