Americans now owe $1.28 trillion on credit cards, more than any time on record

Debt jumps $44 billion in three months

Americans now owe a record $1.28 trillion on credit cards.

That figure comes from the Federal Reserve Bank of New York’s latest report on the fourth quarter of 2025. Balances jumped $44 billion in just three months, up 5.5 percent from the same period in 2024.

The NY Fed has tracked credit card debt since 1999, and this is the highest level on record. Total household debt across all categories reached $18.8 trillion.

Everyday costs drive credit card use

The cost of housing, cars, groceries, and insurance has risen faster than wages for many Americans, and credit cards are picking up the slack.

A survey by debt company Achieve found 55 percent of cardholders now carry balances to cover everyday needs like food and utilities. A separate Bankrate report found 46 percent of cardholders carry a balance.

Holiday spending in the fourth quarter also pushed totals higher, as it does every year. NY Fed researchers noted consumer spending held up through the end of 2025 despite some weakening economic signs.

Balances surged 60 percent since the pandemic

Credit card balances bottomed out at $770 billion in the first quarter of 2021. Since then, they have climbed roughly 60 percent, adding about $510 billion.

Government stimulus checks and reduced spending during lockdowns drove balances down temporarily. Once that support faded, borrowing picked back up and has not slowed.

The jump from pandemic lows to today’s record shows how quickly debt can build when household costs outpace income.

Interest rates average about 21 percent

High interest rates make every unpaid dollar more expensive. The average credit card interest rate sat at about 21 percent in the fourth quarter of 2025.

For cards actively charging interest, the average climbed to about 22.3 percent. New credit card offers averaged close to 24 percent.

The Federal Reserve cut its benchmark rate three times in 2025, which brought rates down slightly. Even so, credit cards remain one of the most expensive ways to borrow money.

Delinquency hits its highest rate since 2017

More borrowers are falling behind on payments. The overall delinquency rate rose to 4.8 percent of all outstanding debt in the fourth quarter, up from 4.5 percent in the third quarter.

That marks the highest delinquency rate since 2017.

Transitions into serious delinquency, meaning 90 or more days past due, increased for credit cards, mortgages, and student loans.

The share of credit card debt becoming delinquent in the fourth quarter reached 8.69 percent.

Young and lower-income borrowers hit hardest

NY Fed researchers said the pain falls hardest on younger and lower-income borrowers. Delinquency rates in the lowest-income neighborhoods have risen faster than in wealthier areas.

Among borrowers ages 18 to 29, serious delinquency rates reached about 5 percent as of the third quarter of 2025, more than double the rate a year earlier.

Mortgage defaults are also climbing in lower-income areas and places where home prices have dropped.

Researchers describe a K-shaped economy

NY Fed researchers said the data fit what economists call a K-shaped economy, where wealthy Americans gain ground while others slip further behind.

Higher-income households are building wealth through stock market gains and rising home values. Lower-income households are cutting back on basics and draining savings to keep up.

Achieve’s survey found 51 percent of consumers used risky financial stopgaps in the past three months, like reducing spending on essentials or emptying emergency funds.

175 million Americans carry credit cards

About 175 million Americans have at least one credit card, and roughly 60 percent of them carry a revolving balance from month to month. Among those with credit card debt, 41 percent said an emergency expense caused it.

Another 33 percent pointed to day-to-day costs like groceries, childcare, and utilities. Nearly two-thirds of cardholders with debt said it has caused them to delay or avoid major financial decisions.

Trump calls for a 10 percent interest cap

In January 2026, President Donald Trump called on credit card companies to lower interest rates to 10 percent for one year. He set a deadline of Jan. 20, the first anniversary of his second inauguration.

The proposal drew bipartisan support from some lawmakers, including Sen. Josh Hawley of Missouri and Sen. Bernie Sanders of Vermont.

A Vanderbilt University analysis estimated a 10 percent cap could save consumers $100 billion a year in interest.

Banks refuse to lower their rates

Banks and industry groups pushed back hard, arguing a cap would force them to cut off credit to millions of borrowers.

The Bank Policy Institute estimated more than 14 million households could lose access to credit under a 10 percent cap.

JPMorgan Chase’s chief financial officer said people would “lose access to credit on a broad basis,” especially those who need it most.

As of the Jan. 20 deadline, most banks kept their rates unchanged. No law or executive order exists to enforce the cap.

Fed researchers are watching for a broader trend

NY Fed researchers said they need first-quarter 2026 data before they can tell whether the fourth-quarter jump is seasonal or part of a bigger trend.

The Fed’s Survey of Consumer Expectations found fewer people expect to be better off financially a year from now. Tariffs could raise prices on everyday goods, adding more pressure on household budgets.

Without wage growth or lower interest rates, the $1.28 trillion figure may keep climbing.

Steps consumers can take right now

Experts recommend starting with a plan to pay down high-interest credit card debt first. Balance transfer cards with 0 percent introductory rates can reduce interest costs temporarily.

Debt consolidation loans can combine multiple balances into one fixed-rate payment.

Two common strategies are the snowball method, which targets the smallest balances first, and the avalanche method, which tackles the highest interest rates first.

Financial advisers say the most important step is to stop adding new charges to cards that carry a balance.

This article was created with AI assistance and human editing.

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