Managing Credit Card Debt

Managing Credit Card Debt

Credit card companies draw us in with the promise of rewards on purchases and interest-free payments. And when there is something we want that is out of our reach, or a bill we have to pay that we can’t afford until our next paycheck, it’s an easy answer to our financial woes. But those same credit cards that have the ability to help us in the short term, can also lead to more trouble in the long term.

While eighteen- to twenty-nine-year-olds have the lowest debt overall, this age group holds the highest percentage of credit card debt, ranging from 18 to 22 percent. They are also the age group with the highest rate of delinquency, up to 90+ DPD (days past due). But credit card debt can affect anyone, and while it stays in lower percentages for consumers in their thirties and forties, the percentages do start to go back up when they enter their fifties. The average credit card debt per borrower is $5,554.00.

Credit card usage has become more the norm than the exception. To know when you should or shouldn’t use a credit card, you should have a better understanding of how credit cards work and your spending habits.

Understanding Credit Card Debt

Before a consumer can get a handle on their credit card debt, they must first understand what the debt is. A credit card debt is anytime a balance is carried over from one month to the next on a credit card. On average, consumers carry three to four credit cards in their wallets and only pay the minimum payment. The more credit cards a consumer makes a payment on, the less they will pay per card per month. When this happens, it doesn’t take long for credit card debt to increase, as the interest continues to grow on the unpaid balance, and it will take longer to pay off.

The incentives credit cards offer are not always a benefit. For example, if you receive one point per dollar spent, and you need thirty thousand points for a one-night hotel stay, is that hotel worth the three thousand dollars you have to spend? And the interest that will be added if you don’t pay it off in the first month? And interest free is typically only good for a certain time frame. If you can’t pay if off before it expires, then interest is added, and you will have a larger debt to pay that you might not be able to afford at all.

So if you have credit cards, how do you know if you are managing your credit card debt or if it is managing you? Following is a list to help understand if your credit card debt is healthy or not.


Is Your Credit Card Debt “Healthy”?

A consumer may not know they are carrying too much credit card debt until they can no longer manage the payments, for whatever reason. As a rule, a consumer should always keep their credit card balances under 30 percent of the credit limit. But just because someone might keep their balances low, doesn’t mean they have healthy credit card habits. A few ways to gauge if your credit card is snowballing out of your control is to consider the following questions:

  • Do you carry a balance from month to month?
  • Do you pay only the minimum payment?
  • Do you miss any payments?
  • Do you have more than three cards?
  • Do you justify purchases?

If you answered “yes” to more of these questions than “no,” then your credit card habits need work. You may be in a position where you can make a few minor tweaks and get yourself back on track. However, if you find that you are carrying too much credit card debt or are closing in on carrying balances that are too high, there are things you can do. Continue reading to see how to put a stop to credit card debt and develop healthier habits.


What to Do If Your Credit Card Debt is Too High

 If you find your credit card debt has gotten out of control, or is in danger of doing so, then there are some things you can do as a consumer. First, create a budget. See how much you can afford to pay toward debt per month. Consider making some sacrifices to pay the balances down. If it only allows to pay the minimum payment or less, then consider talking to your creditor(s) and making payment arrangements so you don’t fall behind, incur fees, or hear from collection agencies. You can also settle your balance for less, if you can make a lump sum payment, but know there are still ramifications to your credit if you choose to take this path.

If you continue to make payments, try to make them on time. Also, put your credit cards away rather than carry them with you. That will help avoid impulse buys. There are two methods that are known to work:

  • Snowball Method
    • This method offers a faster reward, because you tackle the smallest balances first. Once you pay off the lowest balance, you add that payment to the minimum payment of the next highest balance and so on, until your debt is completely paid off.
    • Pros – this method helps keep you motivated because you can see a significant decrease in your debt and it helps change bad spending patterns
    • Cons – it can cost more to pay off your debt 

Related: The Debt Snowball Method Explained

  • Avalanche Method
    • This method pays off the higher interest card first, then adds that payment to the next highest interest card, and so on. This will pay off credit card debt while paying less, since you’ll be paying less interest overall.
    • Pros – saves money
    • Con – can take longer to pay off debt, and have to create your own “reward” to help stay motivated for higher-balance cards

Related: The Debt Avalanche Method Explained

Whichever method you choose, make sure that it is affordable for you and something you can stick with. Credit card debt can be stressful, and the key to paying it off is not to add to that stress, but to make sure you can be confident to pay it off.

 When and if you become ready to dip back into maintaining credit cards, consider the following habits to help keep your credit card debt at a minimum.

 Good Credit Card Habits

 Developing good habits helps in every area of life, and credit card debt is no exception. If you want to continue to earn rewards and take advantage of credit card benefits, then consider sticking to your budget, never charging more than you can afford to pay back. When creating a plan to use credit cards, remember that the money you are “charging” is just a loan. Your plan for repaying the credit card debt should include a payoff date along with how much you can pay per month. This will help you keep from overspending and keep you on track financially.

A Final Thought…

If you have fallen on hard times or have just incurred too much credit card debt, there are other options for paying it off. There are credit counselors and, of course, bankruptcy. Falling behind on credit card debt can be difficult to overcome once you start missing payments. There is no shame in needing to seek help to get back on your feet. However, keep in mind that every option—whether it is debt settlement, debt consolidation, or bankruptcy—all come with their own set of consequences to your credit. But worse than utilizing one of these options is doing nothing at all.


Household Debt & Credit Report, Q1 2019
Debt Roundup 

Greta Gunselman is a personal finance freelance writer. Proud owner of a BA in English, she spends her time talking about finance over on Twitter (@thisgirlswalle1) and post-military life at If you’d like more information about Greta’s writing, please contact her through her website,

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