Credit Card Debt Study

While 2020 was a year to forget in most respects, Americans excelled in terms of paying off credit card debt, getting rid of a record $82.9 billion in debt. This is a major accomplishment, considering that consumers have added an average of $54.2 billion in credit card debt per year over the past 10 years.

The country’s credit card debt problem is far from solved, however. We still collectively owe nearly $1 trillion to credit card companies, and the average household balance remains too high, at $8,089. Both figures are also likely to rise as the economy reopens from the coronavirus pandemic. As a result, WalletHub’s early projection for credit card debt in 2021 is that U.S. consumers will add roughly $50 billion to their total balance.

Below, you can learn more about the current credit card debt landscape, including which cities have the most and least sustainable debts, according to the latest data available from TransUnion and the Federal Reserve.

Main Findings

Credit card debt decreased by a record $82.9 billion during 2020.

Consumers finished 2020 by adding $36.7 billion in credit card debt during Q4 alone.

Outstanding credit card debt increased by just 3.31% during Q4, compared to the previous quarter.

Since the end of the Great Recession, consumer performance has regressed on a year-over-year basis in 6 of every 10 quarters.

Year	Q1	Q2	Q3	Q4
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Legend: = regress, = paydown

At 2.53% for Q4 2020, the credit card charge-off rate is down 24.3% compared to last quarter.

Average Credit Card Debt per Household

The average household’s credit card balance is $8,089. That is $1,916 below WalletHub’s projected breaking point.

Credit Card Debt Decrease by City

*Overall Rank, 1 = Biggest Paydown

Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Federal Reserve and TransUnion.

Tips For Managing Credit Card Debt

1. 1. Make a Budget & Stick to It: It’s difficult to spend within reason or plan savings if you don’t know how your monthly spending compares to your take-home pay, or where that money is going. That is why you should rank-order your expenses – including debt payments, emergency fund contributions and other savings – and trim the fat, if necessary.Most importantly, once you develop your budget, make sure to stick to it or else you’ll have simply wasted your time.
   2. Build an Emergency Fund: With a safety net of cash to fall back on, you won’t be as likely to fall behind on your bills in the event of emergency expenses or unplanned joblessness. Your goal should be to gradually save about a year’s worth of after-tax income. In other words, set aside a little bit every month until you’ve got a nice cushion.
   3. Improve Your Credit: This might sound a bit counterintuitive, seeing as more credit could mean more debt. But improving your credit standing will have a dramatic impact on the cost of your debt. And reducing the cost of your debt will allow you to pay it off faster. Better credit can also make it easier to find a job or a place to live, both of which impact your bottom line.You can check your latest credit score for free and get personalized credit-improvement tips on WalletHub.
   4. Try the Island Approach: The Island Approach is a strategy that involves using a collection of credit cards, with each serving a specific purpose. For example, you could transfer your existing debt to a 0% balance transfer credit card to save on finance charges and get out of debt sooner. And you could use a rewards card or two – perhaps one with travel rewards and one with cash back, or maybe a store credit card – for purchases that you’ll be able to pay off by the end of the month.This will enable you to get the best possible collection of terms. It will also tell you when you’re overspending. Finance charges on your everyday spending cards will signal a need to cut back.
   5. Repay Your Most Expensive Debt First: Most people with serious credit card debt have multiple balances. If that’s the case for you, try the “avalanche method.” That means putting the majority of your monthly debt payment toward the balance with the highest interest rate and making the minimum payment required on the rest. Once your most expensive debt is paid off, repeat the process until you’re debt-free.
   6. Evaluate Your Job Situation: In some cases, all the budgeting and planning in the world won’t be enough to solve your debt problems. You may need to explore whether higher-paying opportunities exist for people with your background or consider acquiring some new skills to make yourself more marketable.This may require a bit of an investment in yourself, but as long as you get a worthwhile return, it’s money well spent.

Methodology

WalletHub’s quarterly credit card debt studies are based on analysis of the latest data on consumers’ finances available from TransUnion as well as the Federal Reserve and Bureau of Labor Statistics.

Quarterly changes in credit card debt levels include both the total amount outstanding (revolving credit, not seasonally adjusted) and charged-off debt (not seasonally adjusted) that is no longer on credit card companies’ books but consumers continue to owe. Outstanding and household debt amounts are adjusted for inflation with data from the Bureau of Labor Statistics.

City rankings reflect 182 of the largest cities in the country — including the 150 most populous U.S. cities, plus at least two of the most populous cities in each state.

Raw Data

Net Result of Consumer Credit Card Debt Q1 2008 – Q4 2020

Net Result in Debt Load – Green indicates that consumers decreased their debt relative to the previous quarter. Red indicates they increased their debt relative to the previous quarter.

Relative to Same Period – Green indicates that consumers either paid down more debt or accumulated less debt than they did in the previous two years. Red indicates that they either paid down less debt or accumulated more debt than they did in the same quarter in the previous two years.

Consumer Credit Card Debt and Charge-off Data (in Billions) Q1 1986 – Q4 2020:

*Numbers may differ from year to year due to the fact that the Federal Reserve regularly retroactively updating figures. Questions or requests for information can be directed to our media department.

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