5 Big Financial Goals That Get Harder To Reach When You’re Drowning in Credit Card Debt
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Written by
Dawn Allcot
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Edited by
Levi Leidy
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Reviewed by
Jasmin Baron
Total household debt in the U.S. reached $18.2 trillion in the first quarter of 2025, according to the Federal Reserve Bank of New York’s quarterly report on household debt and credit. Of that, $1.8 trillion comes from credit card debt. And although that figure fell by $29 billion since 2024, it’s still a staggering number.
Using smart strategies for credit card use, including paying rewards credit cards in full at the end of each month, can put money in your pocket. But carrying credit card debt leads to interest charges and an endless cycle of minimum payments that can make it harder to achieve your financial goals.
Here are five ways credit card debt holds people back from their biggest money-related dreams — and a practical way to break that cycle of debt.
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Buying a House
Buying a house becomes harder if you have credit card debt. First, it’s harder to save for a down payment if your money is going toward credit card payments. Plus, a high debt-to-available-credit ratio lowers your credit score.
You need a good credit score to secure the best mortgage rates. Additionally, lenders look at your debt-to-income (DTI) ratio before approving your mortgage application. Ideally, your back-end DTI, which is your debt-to-income before your mortgage payment, should be 35% or less, according to Experian.
Carrying too much debt can make you a bad candidate in lenders’ eyes, and can make you feel as if you’ll never afford a home.
Buying a Car
High credit card debt can make it harder to obtain an auto loan for the same reasons. High credit utilization lowers your credit score, making it harder to get approved for a low-interest loan. Meanwhile, high monthly credit card payments can make it harder to save for a down payment on a car. Even if you don’t plan to finance your vehicle purchase, credit card debt can make it harder to free up cash for a car.
Starting a Business
A recent study from career resource website Zety revealed that 17% of Americans would start a business or go back to school if credit card debt didn’t hold them back. Credit card debt necessitates steady income to avoid missed payments, and launching a business can make that hard.
Roughly 23% of businesses launched in 2022 failed in their first year, according to the most recent data from the U.S. Bureau of Labor Statistics. Even if you stay the course, your business may not be profitable in the first year. Combine that risk with the $3,000-plus the Small Business Administration estimates it costs to start a microbusiness, and the added expense combined with lack of income makes it difficult for anyone struggling with credit card debt to start a business.
Going Back to School
The Zety survey made it clear that credit card debt is holding many Americans back from their dreams. For some, that dream involves going back to school, perhaps for personal enrichment or to enter a new career field. The average cost of in-state tuition in the U.S., according to the Education Data Initiative, is $9,750 per year.
If you have $25,000 in credit card debt at the average annual percentage rate (APR) of 21.37%, and made consistent monthly payments of $825 per month, it would take you 45 months to pay off the debt. You’d pay $11,423 in interest, more than a year’s worth of college tuition.
Starting a College Fund for Your Children
If you had an extra $850 per month that wasn’t going toward credit card debt, you could also consider starting a college fund for your children. Some college savings plans can earn yields from around 5% to 17%. Your investment, at a 10% return, could yield $164,766 after 10 years — more than enough to cover tuition costs for a private university for four years.
Tips To Pay Down Debt
Have these figures opened your eyes and made you more determined than ever to pay down high-interest credit card debt? That’s understandable. The good news is that it’s possible to pay off your credit card debt as long as you create a budget and make a plan.
First, consider transferring balances to one of the best balance transfer credit cards to take advantage of a 0% intro APR for 18 months or more. If you can transfer all your high-interest balances, make a plan to pay off your debt before the 0% APR time frame runs out.
If you still have high-interest debt, pay as much as you can toward the card with the highest interest rate and continue to pay the minimum on your other cards. Experts call this the “avalanche” method of debt repayment.
If you’re the type of person who is motivated by small victories, start with the card with the lowest balance first. When that card is paid off, put that money toward your next-highest balance card. This is called the “snowball” method, designed to build momentum.
Whichever method you choose, the important thing is to start taking steps to pay off your debt and keep your eye on the prize of your long-term financial goals.
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