Americans are borrowing more than ever. Between rising prices, flat wages, and ongoing financial shocks, many households have turned to credit cards and loans just to stay afloat. For some, it’s about covering emergencies. For others, it’s how they pay for everyday basics like food, gas, or rent.
But borrowing comes at a cost—especially with interest rates on the rise. So why do people keep taking on debt, even when they’re already struggling to manage it?
Why Borrowing Keeps Rising in America
When prices rise faster than wages, many people don’t have enough cash to cover essentials. That’s what’s been happening in the U.S. over the last few years. While inflation has cooled slightly since its 2022 peak, the cost of food, housing, and other basics is still high—and income hasn’t kept pace.
At the same time, many Americans lack emergency savings. According to a 2024 Bankrate survey, more than one in three U.S. adults would need to borrow money to cover a $1,000 emergency. With limited savings and higher prices, credit cards have become a lifeline for millions.
Some people also face irregular income or surprise expenses like car repairs or medical bills. In those cases, turning to credit might feel like the only option.
How Much Debt Are Americans Carrying?
As of early 2025, U.S. household debt has reached a record high of $18.2 trillion, according to the Federal Reserve Bank of New York. This includes everything from mortgages to student loans—but one of the most alarming increases has come from credit card balances.
Credit card debt now totals about $1.17 trillion, a figure that has continued climbing even as interest rates rise. Here’s a breakdown of common debt types in the U.S.:
- Mortgages: Still the largest portion of household debt, at nearly $12 trillion
- Auto Loans: Totaling about $1.6 trillion
- Student Loans: Roughly $1.6 trillion, though changes to federal repayment plans may affect this number
- Credit Cards: $1.17 trillion, with many households paying hundreds or even thousands in interest each year
When debt becomes this widespread, it’s not just about overspending. For many people, borrowing is a short-term solution to a long-term problem: expenses outpacing income.
Why Credit Card Debt Stands Out
Not all debt works the same way. Credit cards, in particular, can be much more expensive to carry than other types of borrowing. That’s because of their high interest rates and the way balances can grow quickly if not paid off in full each month.
As of June 2025, the average interest rate on credit cards was 25.37%. That’s significantly higher than rates on most auto loans or mortgages. And if you’re only making the minimum payment, interest can pile up fast—leading to hundreds or even thousands of dollars in extra charges each year.
According to the American Bankers Association, there are three general types of credit card users:
- Transactors use their cards regularly but pay off the balance each month. They avoid interest charges and often use credit cards to build credit or earn rewards.
- Revolvers carry balances month to month. This group pays the most in interest and fees and is the main source of profit for credit card companies.
- Dormant users have credit cards but rarely use them. These accounts stay open but inactive.
While transactors avoid interest by paying in full, revolvers often get stuck in a cycle of debt. And with such high rates, even a modest balance can be difficult to pay off.
Who Is Most Affected by Rising Debt?
Credit card debt doesn’t affect all households the same way. Lower-income families and certain age groups tend to carry the heaviest burdens.
A 2024 Bankrate survey found that 58% of cardholders with annual household incomes under $50,000 carry a balance from month to month. That percentage decreases as income rises: 54% for those earning between $50,000 and $79,999, and 43% for households making $100,000 or more.
Age also plays a role. An analysis from WalletHub found that Generation X carries the most credit card debt, with an average balance of $9,557. That’s more than baby boomers ($7,658), millennials ($6,229), or Gen Z ($3,282).
For many households, especially those with limited savings, credit cards fill the gap when unexpected costs arise. But over time, high balances and rising interest can make it even harder to get ahead.
What You Can Do About Debt
If you’re concerned about your debt, especially high-interest credit card balances, you’re not alone—and there may be steps you can take to reduce the pressure.
Start by reviewing your monthly spending. Look for areas where you can trim costs, even temporarily, to free up money for debt payments. If possible, try to pay more than the minimum each month. This can help lower your balance faster and reduce the amount you pay in interest over time.
If your budget is already stretched thin, you’re not out of options. Some people explore debt consolidation, which may allow you to combine multiple unsecured debts into a single monthly payment—sometimes at a lower interest rate. This approach won’t reduce what you owe, but it can make payments more manageable.
Others may consider debt settlement, which typically involves working with a company that negotiates with creditors on your behalf. In some cases, creditors may agree to accept less than the full amount owed. This option isn’t right for everyone and can come with risks, so it’s important to fully understand the process and possible impacts on your credit before moving forward.
Before choosing any solution, it’s a good idea to understand how different options might affect your overall financial situation. Reputable nonprofit credit counseling agencies can help you explore what’s available based on your needs.
Closing Thoughts
While debt can sometimes serve as a short-term solution, it often adds long-term strain. Understanding where your debt comes from, how it affects you, and what options are available can make a real difference.
Whether you’re managing balances now or trying to prevent them from growing, you’re not alone—and there are resources that may help. Taking the first step, even if it’s just reviewing your finances or reaching out for support, can put you on a more stable path forward.
