Credit card debt hits record high of $1.23 trillion as economic inequality widens
Americans’ credit card balances soared to a record $1.23 trillion in the third quarter, an increase of $24 billion from the previous quarter.
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- According to GreenPath Financial Wellness, debt management programs can lower credit card interest rates, waive late fees, and bring delinquent accounts current and stop collection efforts.
- As word spreads about the 10% credit card limit, some people may mistakenly believe that the 10% limit has completed the transaction, further delaying actual assistance.
Measuring the personal pain that is hitting people buried under credit card debt and other bills often leads to absolute disbelief at today’s incredibly high interest rates.
The average interest rate on credit card debt for accounts with outstanding balances and eventually accruing interest was 22.3%, according to the most recent data released by the Federal Reserve in November. This is up from 16.28% in 2020. However, it is slightly down from the recent spike of 23.37% in Q3 2024.
But that’s not the only shocking number.
People who seriously lose sleep worrying about their bills often find themselves facing a surprising cash crunch each month, having to pay more money than they actually come in each month to cover credit card bills, groceries, car payments, utilities, and other expenses.
How much does the household owe?
Rick Bialobjeski, chief business development officer at GreenPath Financial Wellness, said the average budget deficit at the time someone seeks financial advice has increased significantly over the past five years as prices and interest rates soar.
The average monthly budget shortfall for customers who initially sought counseling from GreenPath jumped from $439 in 2020 to $904 per month in 2025. In 2021, it was as low as $162, he said.
Let it calm down. Some households save close to $1,000 each month.
“People tend to struggle and make things work even when it’s obvious that things aren’t working,” Bialobzeski said. “By the time people contact us, it could be a crisis situation.”
where to find help
Michigan-based GreenPath does not offer loans, but instead offers free debt counseling, including helping consumers create a budget. GreenPath serves the entire United States by phone and internet. (For more information, call 855-982-0062 or visit GreenPath.com.)
In Michigan, in-person counseling is available by appointment at our Detroit office. In-person locations may also be available elsewhere in the United States.
Additionally, consumers can connect with nonprofit counselors who are part of the National Foundation for Credit Counseling. (Visit nfcc.org or call 800-388-2227.) When calling your local nonprofit credit counseling agency, you must enter your zip code.
Bialobzeski said people currently seeking counseling from GreenPass are in worse economic situations than they were in 2020, including having more debt relative to their income and having much lower credit scores, meaning they will have to pay higher interest rates on their loans.
At the time of seeking counseling from GreenPath, the average credit score in 2025 was 582, down from 640 in 2020.
A credit score of 582 is considered “fair” or “subprime” depending on the scoring model. This makes it difficult to obtain new credit. And if you qualify, you’ll pay much higher interest rates than average.
In 2025, the average credit card usage rate for those seeking counseling through GreenPass was 28%, Bialobzeski said.
Burden by credit card
Oddly enough, Bialobzeski said that most consumers who contact GreenPass now aren’t usually struggling because of some random impulse purchase.
Instead, in response to affordability challenges in recent years, many consumers have turned to credit cards to cover everyday expenses. And it can turn into a cruel cycle.
He said people often don’t have extra savings for unexpected expenses and often rely on credit cards.
“When we talk to someone, it’s not a 15-minute conversation,” Bialobzeski said. Instead, your counselor will spend about 45 minutes digging into all your debts, household expenses, and your monthly payments and incoming payments.
“What we found is that budget deficits are widening and people are relying on credit cards to make ends meet each month,” Bialobzeski said.
“You can’t pay off the balance in full. If you don’t pay off the balance in full every month, you’re going to incur interest. And people quickly dig themselves into a hole they can’t get out of,” he said.
GreenPath offers counseling and debt management programs. The average debt amount in GreenPath’s debt management program is $17,667.
Debt management programs can lower interest rates on credit cards, waive late fees and over-the-limit fees, and bring delinquent accounts current and halt collection efforts, Bialobzeski said.
He said that by working with credit card issuers, GreenPath is able to negotiate lower interest rates and payments on credit cards.
“It could be zero,” he said. “In some cases, it could be even higher, such as 9.9%.”
A debt management program can reduce your credit card debt payments from an average of $589 to $390 per month. It can take an average of 50 months to pay off that debt through a debt management program.
The goal is to avoid filing for bankruptcy if possible and typically pay off credit cards and other unsecured debt within five years.
This program has a one-time setup fee of $50. Ongoing monthly fees average $37, but can go up to $75 depending on your debt amount and state of residence.
In 2025, GreenPath worked with more than 65,000 people to pay off nearly $300 million in debt at low interest rates.
As of January, approximately 52,000 people were actively paying down their debts under the GreenPath debt management plan.
Debt management plans are different from debt settlement companies, which often encourage you to stop paying your bills as a way to get your creditors to come to terms with you. Experts warn that this measure could negatively impact credit scores and increase late fees and other fees. Consumer watchdog groups warn that businesses that charge large upfront fees, promise to solve your debt for $1, or advertise “new government programs” to help individuals with credit card debt should be avoided.
It’s not enough to hold on to hope
People facing challenges should not wait to take action. Or you can keep hoping that somehow, all of a sudden, your credit card interest rate will be capped at 10%.
The National Credit Counseling Foundation warned that talk of the proposed 10% cap is “creating a new level of confusion” for many consumers. The fear is that some people may mistakenly believe that the 10% cap is a done deal, further delaying debt resolution support.
President Donald Trump’s call in January for a one-year cap on credit card interest rates of 10% has received much pushback from bankers. President Trump cannot legally issue an executive order that would set a nationwide interest rate cap. Such measures would require legislation to be passed by Congress.
In a speech at the Detroit Economic Club on January 13, President Trump said his proposed one-year mandatory 10% cap on credit card interest rates is part of a series of strategies to lower consumer costs.
“Interest rates are too high,” President Trump said at the Detroit Economic Club.
However, some influential figures are trying to remove the 10% cap. The American Bankers Association, the Consumer Bankers Association, the Independent Community Bankers of America, and others argue that a 10% interest rate cap would reduce the availability of credit.
Opponents argue that the 10% cap currently makes it impossible for credit card issuers to price the risk and cover the costs involved in doing credit card business.
According to the banking industry, consumers may expect fewer loan limits, fewer offers of lower interest rates and more modifications under mandatory caps.
The American Bankers Association estimates that if a 10% cap were in place, more than 4 million consumers in Michigan alone, or at least 72.9% of open accounts, would likely lose access to credit cards.
Industry groups estimate that more than 136 million consumers nationwide, or at least 73.6% of open accounts, would lose access to credit cards if bankers were forced to abide by a 10% cap on credit card interest rates. The American Bankers Association has a website with a state-by-state breakdown at ratecapreality.com so consumers can see the potential impact in each state.
In theory, if a 10% cap were set, credit card issuers could decide to close some accounts that have already been opened, Bialobzeski said. Some reports say the balance on that credit card may have to be transferred to an installment loan and paid back. Of course, bankers don’t want to lose their best customers, so it may be the weaker ones who are hit the hardest.
People who desperately need extra space on their budget may not be able to use credit cards for emergency expenses, he said. Instead, they may turn to high-interest payday loans and other predatory products.
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He said one of the bigger concerns about the proposed 10% cap is that it would require the credit card industry to change significantly, including taking steps to reduce access for many consumers.
“Many people who currently rely on credit cards will not have that option in the future,” Bialobzeski said.
The most vulnerable consumers include those whose work hours are unstable, whose pay fluctuates significantly from week to week, and whose monthly payments are minimal.
For now, people still have options to deal with their debts, especially since the 10% mandatory cap on credit card interest rates still needs parliamentary approval.
“What people need to realize is that they can contact their credit card company,” Bialobzeski said. “If they’re having trouble paying off their cards, credit card companies are usually willing to help.”
So the first step consumers should take is to directly ask their credit card issuers if they can lower their rates, he said.
Credit card issuers sometimes lower interest rates, typically between 2% and 12%, for a limited period of time, such as three to nine months, to give individuals time to repay their debts, Bialobzeski said.
Contact personal finance columnist Susan Tompol: stompor@freepress.com. follow himr X @tompor.
