Bank's 2025 Credit Card Debt Analysis by Bankrate
In the United States, managing and paying off credit card debt remains a significant challenge for many individuals. However, a range of well-established and evolving strategies can help Americans regain control of their finances. Below, we outline some of the most effective methods for tackling credit card debt.
Debt Repayment Methods -----------------------
Two popular strategies for repaying credit card debt are the Snowball Method and the Avalanche Method. The Snowball Method involves listing all credit card debts from smallest to largest balance (regardless of interest rate), making minimum payments on all but the smallest debt, and aggressively paying down the smallest balance first. Once that debt is eliminated, the payments are rolled over to the next smallest, building momentum as each account is cleared. The psychological benefits of early "wins" can increase motivation.
On the other hand, the Avalanche Method prioritises paying off the card with the highest interest rate first while making minimum payments on others, then moving to the next highest rate, and so on. This strategy minimises the amount of total interest paid, making it mathematically optimal for those who are disciplined and want to save the most money over time.
Balance Transfers and Consolidation -----------------------------------
Another tactic for managing credit card debt is to transfer high-interest balances to a new card with a 0% introductory Annual Percentage Rate (APR), often for up to 21 months. This gives a grace period to pay down debt without accruing interest, provided the balance is paid in full before the promotional period ends. This strategy is effective when coupled with a disciplined repayment plan.
Consolidating multiple credit card debts into a single personal loan with a lower interest rate can also help simplify payments and potentially save on interest. The result is a single monthly payment and the removal of temptation to reuse the paid-off credit cards. However, missed payments can still harm credit scores and incur higher costs.
Budgeting and Increased Payments --------------------------------
Regularly reviewing and adjusting your budget is crucial, especially in response to changes in income or expenses. Allocating more money to debt repayment—sometimes by cutting discretionary spending or increasing income through side gigs—can accelerate payoff timelines. Additionally, paying more than the minimum due can significantly reduce both the payoff time and interest costs.
Structured Support and Counseling ----------------------------------
Nonprofit credit counseling agencies can help enroll consumers in structured debt management plans, which often negotiate lower interest rates and waived fees, consolidating payments into a single monthly amount. These plans typically last 3–5 years and have less negative impact on credit scores compared to settlement or bankruptcy. Seeking help from reputable nonprofit credit counseling agencies is recommended for those overwhelmed by debt. Agencies can offer personalised advice and help negotiate with creditors.
Comparison Table: Major Debt Payoff Strategies -----------------------------------------------
| Strategy | Key Features | Best For | Caveats | |-------------------------|----------------------------------------------------------|---------------------------------|---------------------------------| | Snowball Method | Pay smallest balance first, build momentum | Motivation, quick wins | May pay more in interest | | Avalanche Method | Pay highest interest rate first, minimise total cost | Saving money, disciplined | Slower initial progress | | Balance Transfer | 0% APR period to pay down debt interest-free | Temporary, focused pay down | Must pay off before promo ends | | Consolidation Loan | Single monthly payment, lower rate | Simplification, lower interest | Still debt, credit risk | | Debt Management Plan | Structured, lower rates, agency mediation | Overwhelmed, multiple cards | Credit impact, no new cards |
Additional Tactics ------------------
- Making more frequent, smaller payments can reduce the average daily balance on which interest is calculated, further lowering total interest paid. - Credit counseling agencies may negotiate directly with creditors for more favourable terms within a Debt Management Plan. - Building a budget that accommodates debt repayment as a priority helps prevent the cycle of debt recurrence.
Conclusion ----------
No single strategy is universally best; the right approach depends on individual motivation, discipline, financial situation, and goals. Combining methods—such as a balance transfer followed by the avalanche or snowball approach—is common. For those struggling with credit card debt, nonprofit credit counseling and structured debt management plans provide a viable path forward. The key is to choose a strategy that maintains motivation and aligns with your financial realities, adjusting as necessary when circumstances change.
Younger generations, such as millennials and Gen Zers, are more likely to delay financial decisions because of credit card debt. As of June 2025, 46 percent of American credit cardholders carry a balance. Emergency expenses are the primary cause of credit card debt for nearly half (45%) of credit card debtors. More than 84% of credit card debtors say their credit card debt impacts their financial choices, with 28% citing day-to-day expenses such as groceries, childcare, and utilities.
If you only make minimum payments on your credit card balance, you could be in debt for 217 months and pay $9,254 in interest based on the average interest rate of 20.12%. 64% of credit card debtors have delayed or avoided other financial decisions because of their debt. 45% of credit card debtors say their debt comes from emergency/unexpected expenses. Emergency and day-to-day expenses are the most common reasons for credit card debt.
Credit card debtors have delayed helping family and/or friends, donating to charity, spending on wellness, healthcare, and making home purchases. The percentage of credit card debtors who have carried a balance for at least a year has increased from 53% to 60%. The bottom line is that it's important for credit card debtors to have a plan for debt payoff before interest gets out of control. Debtors might consider signing up for a balance transfer card, working with a reputable nonprofit credit counselor, and adjusting their income and expenses to leave room for repayment.
Approximately 19% of credit card debtors have carried a balance for at least five years. Bankrate has been a go-to source for personal finance data since 1976. Credit card debtors have delayed or avoided financial decisions such as saving for an emergency, investing, buying a vehicle, and making home purchases due to their debt. About a quarter (23%) of credit cardholders don't think they'll ever pay off their debt. Lower-income cardholders and women are more likely to have credit card debt. Around half of Americans carry credit card debt. Credit card interest rates currently average above 20 percent.
Credit card debtors have delayed continuing education and/or job-related training courses, different and/or new employment, having children, and getting married. The percentage of credit card debtors who have carried a balance for at least a year has increased from 53% to 60%. The bottom line is that it's important for credit card debtors to have a plan for debt payoff before interest gets out of control. Debtors might consider signing up for a balance transfer card, working with a reputable nonprofit credit counselor, and adjusting their income and expenses to leave room for repayment.
Personal-finance management can be a struggle, particularly when dealing with credit card debt. Although the Snowball and Avalanche Methods are popular for paying off credit card debt, the choice between them depends on one's financial situation, discipline, and personal motivation. The Snowball Method focuses on paying the smallest balance first to build momentum, while the Avalanche Method prioritizes paying off the card with the highest interest rate to save the most money in the long run.
