More Americans are taking on credit card debt and holding it for longer

WASHINGTON (TNND) — More Americans are taking on credit card debt and holding it for longer as the cost of living continues to rise and many households struggle to keep up with daily necessities or having enough saved to cover unexpected emergencies.

U.S. consumers are increasingly being forced to turn to credit to cover their expenses with many unable to pay off their balances at the end of the month, saddling them with expensive debt that forces them to put off other purchases or cut back on spending that powers the American economy.

Nearly half of Americans with a credit card carry a balance, 22% of which say they don’t think will ever be paid off, according to a new Bankrate survey. Sixty-one percent of Americans who have credit card debt have been in debt for at least one year, a jump from 53% in late 2024.

The most common reason in the Bankrate survey for carrying credit card debt was emergency expenses like unexpected medical bills, home or vehicle repairs at 41%. About 1 in 3 people in debt cited day-to-day expenses like groceries and utility bills, a sign of the struggles some Americans are having trying to keep up with inflation that has been running above the Federal Reserve’s goal of 2% for nearly four years.

“A lot of this comes back to the cumulative effects of inflation, just year after year of price growth and higher interest rates,” said Bankrate senior industry analyst Ted Rossman. “Prices have grown an average of 25% over the past five years, and a lot of people’s wages have not kept pace.”

The constant rise in prices has added up to a 25% jump in costs compared to before the pandemic, which comes as wages have struggled to keep up with the pace of inflation. The gap between pay increases and inflation has also shrunk this year as the labor market hit a standstill. Frustrations over steadily climbing prices and challenges landing a job for people who are out of work have escalated this year, driving consumer sentiment downward in a warning sign on the outlook of continued spending.

Despite the persistent inflation, American consumers so far have continued to open up their wallets since the pandemic and kept the economy afloat facing headwinds like higher interest rates, rising prices and massive tariffs. The U.S. economy grew by 4.3% in the third quarter of last year, the most recent government data available, driven by consumer spending.

But the question is how long that will last with budgets getting stretched to the brink and the increasing share of spending being done by upper-income households in what economists have described as a “K-shaped” economy. A Bank of America Institute report published last month showed spending from the top third of the income spectrum climbed 4% over the year into November, while spending from the lowest third was up less than 1%.

The credit card data is another sign of stress for lower- and middle-income Americans who are facing hard choices about what to cut back on and whether they can continue to spend.

“The credit cards are actually a perfect illustration of that trend, because you’ve got the haves who pay in full every month,” Rossman said. “There are some lower- and middle-income people who benefit from rewards, but by and large, the credit card market is very split and then you also have people that are stuck in a very expensive debt cycle.”

Trump said in a social media post over the weekend he wanted to impose a one-year, 10% cap on credit card interest rates. There is some bipartisan interest within Congress to institute a cap but it’s unclear whether the proposal has enough support to become law.

Average credit card rates are around 23% and can climb even higher for borrowers with lower credit scores, according to Federal Reserve data. Some 195 million people had credit cards in 2024 and run up $160 billion in interest charges as credit card debt has continued to soar to all-time highs, moving over $1 trillion in the third quarter of 2025, the Federal Reserve Bank of New York said.

A November report from TransUnion found the average level of debt per credit card borrower was $6,523. If a borrower was to only make minimum payments on the balance at a 19% rate, it would take them more than 14 years to pay it off and pay nearly $6,500 in interest.

Putting a cap on credit card interest rates could help people struggling to pay off their debt faster by making their payments go further to pay down principal balances and reduce the total amount they owe. But the cap would only apply to future balances and comes with drawbacks like restrictions on borrowing such as limiting credit limits or closing accounts for people with poor credit scores.