7 Smart Credit Card Strategies Amid the $1.18 Trillion Debt Surge
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Written by
Dawn Allcot
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Edited by
Levi Leidy
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Reviewed by
Jasmin Baron
Credit card debt in the U.S. reached an all-time high of $1.21 trillion in 2024, according to data from the New York Federal Reserve. Although balances dropped in the first quarter of 2025 to $1.18 trillion, delinquencies rose to 4.3% across all types of loans. That’s not to mention the debt Americans are accruing through buy now, pay later (BNPL) programs and wage advances.
Even in light of mounting consumer debt, credit cards can still be a healthy part of your financial life if used responsibly. Follow these smart strategies to avoid interest charges, reduce your balances and protect your credit score.
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Set a Budget for Spending
Responsible credit card use begins with a budget.
First, make a list of all your expenses, including the ones that stay the same from month to month (like your rent or mortgage payment) and those that can fluctuate (like your grocery bill). Then, write down your total income. Ideally, you’ll have enough to pay your required bills without using credit cards. If not, you’ll need to consider where you can cut expenses or increase your income.
If you’re used to overextending your budget with credit cards, you’ll need to set some limits for yourself. For example, only make a credit card purchase if you’ll have enough money by the time your bill is due to pay it off. At the very least, you should have enough to make the minimum payment, but you’ll avoid paying interest when you pay off your credit card in full every month.
Know How To Read Your Credit Card Statement
When you first begin using a credit card, learn how to read your credit card statement. The most important information is your available credit, total balance, minimum payment due and the due date.
If you have a credit card that earns cash back, points or miles, you’ll also find information about the rewards earned and redeemed in the current statement period and your total rewards balance.
All this information should also be available through your credit card app or online account. The important part is to make sure you’re monitoring it regularly, so you don’t miss a payment or miss out on valuable rewards.
Keep an Eye on Credit Card Interest
Your credit card statement also includes another very important section: your interest charges. If you carry a balance on your credit card instead of paying the bill in full each month, you’ll be charged credit card interest. You might notice a table on your credit card statement showing how much interest you’ll end up paying if you make only the minimum payment.
With the average credit card interest rate at 21.91%, according to February 2025 data from the Federal Reserve, it can cost you a lot to overlook interest charges.
Be Aware of Credit Card Fees
Likewise, your credit card statement should also break down the fees you can be charged (and if you can’t find them there, they should be in the credit card agreement you received upon signing up for the card, or on your issuer’s website). Examples of common credit card fees include:
- Over-the-limit fee
- Late fee
- Balance transfer fee
- Foreign transaction fee
- Cash advance fee
- Annual fee
Many of the best rewards credit cards have annual fees. Before opening one of these accounts, be certain that you’ll earn enough in rewards points, cash and other credit card perks to make the fee worthwhile.
Make a Plan To Pay Down Debt
If you’re facing unmanageable credit card debt, create a plan to tackle it sooner, rather than later.
Many experts recommend the snowball method. This involves paying off your smallest balance first, to build up momentum, before moving onto the larger ones. On the other hand, some people prefer the avalanche method, where you tackle the card with the highest interest rate first to save from making those costly payments. Either way, continue making minimum payments on the rest of your cards.
Once you’ve made a plan and successfully paid off one card, put that money toward the next card on your list until you are debt-free.
Consider Debt Consolidation
If you’re in too deep to make more than the minimum payments on any of your credit cards, consider debt consolidation in the form of a personal loan, which often has a lower interest rate than credit cards.
You could also open a balance transfer card, which comes with a 0% introductory annual percentage rate (APR). However, most of these cards charge a balance transfer fee of around 3% to 5%, and you’ll want to make sure you can pay off the balance by the end of the introductory period, or you’ll end up in the same situation you started with: saddled with interest.
Leverage Credit Card Rewards
Once you’ve paid off your credit card debt, you can start to enjoy credit card rewards like cash back, travel points and other benefits. This is the point where using credit cards can become fun and financially healthy, just as long as you’re in the habit of paying off your balance each month so you don’t start any new cycles of interest or long-term debt.
