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If you’re like most Americans, you love your plastic and swiping or tapping through your day. In fact, about 84% of Americans have at least one credit card, with the average wallet holding three.

The national love affair with credit cards is built on their convenience, how they provide a line of credit to enable buying things we can’t quite afford to pay for with cash, and those enticing rewards that are often offered.

But the picture is not altogether rosy: As a nation, US citizens have more than $1 trillion in credit card debt. And with interest rates averaging over 20%, that debt can be hard to chip away at.

To help you better understand how credit cards work, how much credit card debt people typically have, and what are smart strategies for paying down credit card debt, keep reading. You’ll learn interesting facts as well as helpful hints.

10 Facts About Credit Card Debt

Ready to learn more about credit card debt, a form of revolving debt? These 10 credit card facts will help you better understand who has how much debt and where difficulties paying the balance typically crop up.

1. More Than Half of Americans Have Outstanding Credit Card Debt

A majority of active credit card accounts carry a balance, according to the American Bankers Association. The specific figure is 56%. This indicates that carrying a balance is a common situation for many Americans, even with the eye-wateringly high interest that’s charged.

Recommended: Tips for Using a Credit Card Responsibly

2. Households with Credit Card Debt Owe an Average of Almost $8,000

American families had an average credit card balance of $7,951, according to calculations using Federal Reserve Bank of New York and US Census Bureau data. In 2013, that figure was $5,508.

Just because this is the norm, it doesn’t mean that it’s ideal: The best-case scenario is to only charge as much as you can afford to pay off in full every month.

3. It Can Take More Than a Decade to Pay Off $7,951 in Debt

Racking up credit card debt takes much less time than getting rid of it. Let’s assume that like the average American, you have $7,951 in credit card debt, as noted above.

At the current average interest rate of 21.19% on existing accounts, with a $150 monthly payment, it would take you 158 months — or 13 years and two months — to pay that off. And you would pay $15,606.40 in interest, or almost twice the original amount you charged!

But the more you can pay each month, the faster you’ll extinguish the debt. In this example, if you increase your monthly payment to $500, you’d pay off the debt in just a year and seven months and only spend $1,465.06 in interest. These scenarios are, however, assuming that you are not accruing new debt and therefore paying off larger credit card bills.

4. Gen Xers Have the Most Credit Card Debt

Ready for more credit card facts? Here is how age and debt intersect. Gen Xers, the generation that includes people born between 1965 and 1980, have the highest average credit card balance: $9,589. Next in line are Baby Boomers, born between 1946 and 1964, who have somewhat less debt — $8,192 on average — than Gen Xers.

5. Alaskans Have the Highest Credit Card Debt

In a state by state analysis of credit card debt, Alaska residents led the pack with $7,324 per person. Those who live in Wisconsin were found to have the lowest at $4,987.

6. 42% of College Students Have Credit Card Debt

The habit of carrying credit card debt unfortunately starts early, with more than four out of 10 college students carrying a balance on their credit cards. Of these, 28% say their debt exceeds $2,000. They say they accumulated that amount due to nonessential purchases, such as impulse buys, Uber rides, or fancy coffees.


💡 Quick Tip: To avoid paying interest, pay off your credit card bill in full and on time each month. Only making the minimum payment each month can lead to paying a lot in interest over time.

7. One in Three Americans Owes More On Credit Cards Than They Have Saved

This may be a scary fact about debt, but one in three US adults owes more on their credit card than they have saved. In fact, 36% say this is the case, versus just 22% a year earlier. That shows a two-sided problem: too much spending and too little saving.

Recommended: Paying Off $10,000 in Credit Card Debt

8. Richer People Have Credit Card Debt Longer

More interesting credit card debt facts: People who earn more than $100K a year are more than two times as likely as lower earners to have credit card debt for five years or longer. Among six-figure earners, 72% say they have had debt for at least a year vs. 53% of those who earn less than $50,000 per year. When considering those who’ve held credit card debt for five years or more, you’ll find that 27% of the high earners vs. 13% of the lower earners are in that situation.

Perhaps this statistic suggests that high-earners feel they have the means to handle debt and therefore don’t rush to repay it.

9. Men Have More Debt Than Women

Men have an average of $6,357 in credit card debt, while women have an average of $6,232. Perhaps not a huge difference, but so much for the myth of women shopaholics using credit cards to fill an overflowing closet with shoes.

There are many potential reasons for this difference, but some studies have found that women are less comfortable with debt.

10. There’s a Good Chance You’ll Die With Credit Card Debt

Here’s the last of these debt facts, and it can be a grim one: Nearly three-fourths of Americans are in debt when they die, according to one benchmark study.

And 68% die with credit credit card balances — more than the share who have mortgage debt (37%) or car loans (25%) when they pass away. That’s not exactly a desirable legacy. Although family members don’t generally become responsible for the debt, it may be taken out of the deceased person’s estate.

Why Is Credit Card Debt So Common?

There are many reasons that Americans have so much credit card debt, from rising healthcare and educational costs to lack of emergency savings to a cultural consumerism that encourages people to live beyond their means.

Regarding that last point, you may hear about the phenomenon referred to as Fear of Missing Out or FOMO spending, which is a modern version of “keeping up with the Joneses.” In other words, because your friends, coworkers, or influencers you follow on social media are buying something, you feel you should as well.

Or perhaps part of the problem can be explained by what is known as lifestyle creep. This situation occurs when you earn more money but your spending rises too, so your wealth doesn’t grow. For example, if you took a new, higher-paying job and decided to lease a luxury car or take a couple of lavish vacations, your wealth wouldn’t increase, though your credit card balance might.

Tips on Avoiding Credit Card Debt

Perhaps these facts about debt will motivate you to work on avoiding a credit card balance. If so, the following strategies could help.

•   Review different budgeting methods, and find one that works for you. Many people use the popular 50/30/20 budget rule, for example. Also, see if your bank offers tracking and budgeting tools to help you rein in spending.

•   Gamify savings. You might try sleeping on it rather than making impulse buys to see if the urge to spend passes; it often does. Or go on a spending freeze for a specific period of time or for a certain kind of purchase (say, no dining out in March; no clothing purchases in April).

•   Try buying with cash or your debit card vs. plastic. That will help prevent your debt from snowballing.

•   Consider trying a balance transfer card, which typically gives you a period of zero interest during which time you can pay down what you owe.

•   In terms of a debt payoff strategy, you might investigate getting a personal loan with a lower rate than what your card charges. That could allow you to pay off the plastic debt and then have more manageable monthly payments.

•   Seek help if you are really struggling to get your debt under control. Nonprofit organizations can help you accomplish this.

Opening a Credit Card

Now that you know some facts about credit card debt and ways to pay it off, you may be looking for a new card that better suits your financial and personal goals. Shopping around to compare features, such as interest rates and rewards, can be a wise move.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What are the main causes of credit card debt?

Credit card debt can crop up in a variety of ways. Sometimes it’s because expenses get pricier, whether due to lifestyle creep or inflation. Other times, it’s not being mindful about daily spending and making impulse buys. Given how many Americans have more credit card debt than money saved, it’s a common but challenging issue.

How much does the average person have in credit card debt?

Credit card debt facts reveal different angles on this number. The average American household has $7,951 in credit card debt. Some studies put the individual figure at $5,573.

How serious is credit card debt?

Credit card debt can be very serious. It’s high-interest debt, and it can be difficult to pay off. It can make it hard for individuals to save for their future and can negatively impact their debt to income ratio, which can be an issue when applying for loans.

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Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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There is a sinking feeling in your gut that comes with credit card debt, especially when it starts to feel unmanageable. While negotiating a credit card settlement might not sound like a fun solution, there are scenarios when it may make sense. Let’s dive in.

The Difference Between Secured and Unsecured Debt

First, let’s talk about the type of debt a credit card typically is. When a credit card company issues a credit card, it’s taking a big chance on getting its money back, plus interest. It’s more than likely that the credit card you have is considered “unsecured.”

All that means is that it isn’t connected to any of your assets that a credit card company can seize in the event that you default on your payments. Essentially, the credit card company is taking your word for it that you are going to come through with the monthly payments.

Secured debt works a bit differently. They’re backed by an asset, like your car or home. If you default on a secured debt, your lender could seize the asset and sell it to pay off your debt. Mortgages and auto loans are two common types of secured debt.


💡 Quick Tip: With lower fixed interest rates on loans of $5K to $100K, a SoFi personal loan for credit card debt can substantially decrease your monthly bills.

Credit Card Debt Negotiation Steps

The process of negotiating credit card debt usually begins when you have multiple late or skipped payments — not just one. A good first step is to find out exactly how much you owe, and then research the different options that may be available to you. Examples include a payment plan, an increase in loan terms or lowered interest rates.

Once you have that information, you’re ready to negotiate. You can start by calling your credit card company and asking for the debt settlement department. Or, you can send a note by email or regular mail.

You may have to go through a number of customer service reps and managers before striking a deal, but taking the initiative can show creditors that you are handling the situation honestly and doing what you need to do.

When you do reach an agreement, be sure to get the agreed-upon terms in writing.

Types of Credit Card Debt Settlements

Lump Sum Settlement

This type of agreement is perhaps the most obvious option. Essentially, it involves paying cash and instantly getting out of credit card debt. With a lump sum settlement, you pay an agreed-upon amount, and then get forgiveness for the rest of the debt you owe.

There is no guarantee as to what lump sum the credit card company might go for, but being open and upfront about your situation could help your cause.

Workout Agreement

This type of debt settlement offers a degree of flexibility. You may be able negotiate a lower interest rate or waive interest for a certain period of time. Or, you can talk to your credit card issuer about reducing your minimum payment or waiving late fees.

Hardship Agreement

Also known as a forbearance program, this type of agreement could be a good option to pursue if your financial issues are temporary, such as the loss of a job.

Different options are usually offered in a hardship agreement. Examples include lowering interest rate, removing late fees, reducing minimum payment, or even skipping a few payments.

Why a Credit Card Settlement May Not Be Your Best Option

Watching your credit card balance grow each month can be scary. Depending on your circumstances, a settlement may be the best solution for you.

However, it’s not without its drawbacks. For starters, a settlement may result in your credit card privileges being cut off and your account frozen until a settlement agreement is reached between you and the credit card company.

Your credit score could take a hit, too. This is because your debt obligations are reported to the credit bureaus on a monthly basis. If you aren’t making your payments in full, this will be noted by the credit bureaus.

That said, by negotiating a credit card settlement, you may be able to avoid bankruptcy and give the credit card company a chance to recoup some of its losses. This could stand in your favor when it comes to rebuilding your credit and getting solvent again.

Solutions Beyond Credit Card Debt Settlements

Personal Loan

Consolidating all of your high-interest credit cards into one low-interest unsecured personal loan with a fixed monthly payment can help you get on a path to pay off the credit card debt. Keep in mind that getting a personal loan still means managing monthly debt payments. It requires the borrower to diligently pay off the loan without missing payments on a set schedule, with a firm end date.

For this reason, a personal loan is known as closed-end credit. A credit card, on the other hand, is considered open-end credit, because it allows you to continue to charge debt (up to the credit limit) on a rolling basis, with no payoff date to work towards.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

Transferring Balances

Essentially, a balance transfer is paying one credit card off with another. Most credit cards won’t let you use another card to make your payments, especially if it’s from the same lender. If your credit is in good shape, you can apply for a balance transfer credit card to pay down debt without high interest charges.

Many balance transfer credit cards offer an introductory 0% APR, but keep in mind that a sweet deal like that usually only lasts about six to 18 months. After that introductory rate expires, the interest rate can jump back to a scary level — and other terms, conditions, and balance transfer fees may also apply.

Credit Consumer Counseling Services

Credit consumer counseling services often take a more holistic approach to debt management. You’ll work with a trained credit counselor to develop a plan to manage your debt. Typically, the counselor doesn’t negotiate a reduction in debts owed. However, they may be able to have your loan terms increased or interest rates lowered, which would lower your monthly payments.

A credit counselor can also help you create a budget, offer guidance on your money and debts, provide workshops or educational materials, and more.

Many credit counseling agencies are nonprofit and offer counseling services for free or at a low cost. You can search this list of nonprofit agencies that have been certified by the Justice Department.

The Takeaway

When credit card debt starts to become unmanageable, negotiating a credit card debt settlement may be an option to consider. There are different types of settlement options to consider. Understanding what’s available to you — and what makes sense for your financial situation and needs — can help you make an informed decision. If a settlement isn’t right for you, there are other solutions, such as a personal loan or credit counseling services, that may be a better fit.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Student loans don’t just help you pay for your college education. They also allow you to build a credit history, which can be useful when it comes time to get a mortgage or take out a car loan. The key, though, is to make regular on-time payment – or you may wind up with the sort of credit history that negatively impacts your ability to borrow money in the future.

Here’s a look at how student loans can affect your credit score.

How Is My Credit Score Calculated?

First, it can be helpful to know how your credit score is calculated. There are several types of credit scores, but FICO scores are the most commonly used by top lenders.

Your FICO score is calculated using five categories of data found in your credit reports, which each category weighted differently.

Category	Weight in Scoring
Payment History	35%
Amounts Owed	30%
Length of Credit History	15%
New Credit	10%
Credit Mix	10%

Based on these calculations, there are a few ways you can build good credit and maintain a good credit score. Paying your bills on time is a big one, since your payment history is the most heavily weighted factor. Paying down existing debt and keeping credit card balances low will also have a big effect. Less impactful, but important strategies, also include diversifying the types of credit you have, avoiding opening too many new accounts at once, and keeping accounts open to lengthen the average age of your credit history.

What Student Loan Factors Affect My Credit Score?

Now that you know how credit scores generally work, you might be wondering how your student loans specifically impact your score.

Again, one of the biggest ways your student loans can affect your credit is whether or not you pay them on time. If you’re a responsible borrower who continually makes on-time student loan payments, you will see positive shifts in your credit score over time.

But if you fail to repay a loan or continually make late payments, your credit score will likely see a dip. If you default on your student loan, your credit score could drop significantly. The lender may also send your account to a collections agency, and you may have a more difficult time securing credit in the future.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

How Does a Late Student Loan Payment Affect My Credit Score?

Making payments on time is important, but what you might not realize is exactly how damaging late payments can be. Even if your credit history is pristine, it only takes one report of 30 days past due to change your score. Once a late payment is reported to the credit bureaus, it could remain on your credit report for up to seven years.

To help ensure your payments are on time, you might want to set up an automatic payment plan. Most lenders will even give you a small discount on your interest rate for doing so. If you know you can’t make a payment on time, talk to your lender or loan servicer right away. The Department of Education, which is the lender for four types of Direct Loans, and even some private lenders, offer loan deferment or forbearance. These options allow a borrower to temporarily suspend payments, which will minimize the impact on their credit score.

Does It Hurt to Pay Off Student Loans Quickly?

Repaying student loans quickly will always improve your credit score, right? Not necessarily. In fact, you could even see a small, temporary dip in your credit score right after paying off a loan. There are several reasons for this. If student loans are your primary source of open credit, closing those accounts means you’re no longer building payment history. Prematurely paying off a loan can also change your credit mix or credit utilization.

But credit score is just one factor to consider when deciding how quickly to pay off a student loan. You may want to think about how much extra interest you’d pay by leaving the account open. Carrying a high loan balance could also make it harder to qualify for new loans, which is something to keep in mind when it comes time to buy a home or car.

Notorious Big Bad D’s: Delinquent and in Default

Student loans affect credit scores in a variety of ways, but the worst thing you can do is ignore your monthly loan payment. If you’re even one day late with a payment, you’ll be considered delinquent and may be charged a penalty.

Once a missed payment is more than 90 days delinquent, your loan servicer will report it to the three major national credit bureaus. This could lower your credit score and hurt your ability to get a new credit card or qualify for a car loan or mortgage.

After 270 days of a missed student loan payment, your status changes to default and your student loans are due in full along with any accrued interest, fines, and penalties.

(Note that the on-ramp that’s in place for federal student loan repayment from October 2023 through September 2024 temporarily shields borrowers from the most immediate consequences of delinquency and default.)

Will Rate Shopping Different Student Loan Lenders Hurt My Credit?

When you’re shopping around for the best interest rate possible on a private student loan, lenders may pull your credit file. This is called a hard inquiry, and each one could temporarily knock a few points off your credit score.

To help protect your FICO score, try to finish shopping for rates and finalizing your loan within 30 days. Researching rates and getting quotes ahead of time can give you a good idea of whether you’ll qualify for a loan before you formally apply.

You may also want to ask lenders if they can tell you the interest rate you would receive without doing a “hard” credit pull, which might affect your score. You can’t get a loan without an eventual hard inquiry, but getting prequalified allows you to compare interest rates without impacting your credit score.

Will Refinancing Student Loans Help My Credit?

Because refinancing involves taking out a new loan with new terms to pay off existing debt, refinancing student loans affects your credit score—both positively and negatively.

In the short-term, refinancing will involve a hard credit inquiry and may cause a temporary ding to your credit. Again, as long as you keep your loan shopping to a short period, multiple inquiries will be treated as one, and should have a minimal impact on your score.

In the long-run, refinancing student loans at a lower interest rate can have an indirect positive effect on your credit. For example, if refinancing lowers the amount you pay each month, you may be more likely to make payments on time. You may also pay off your loans faster, which can help you reduce your overall debt and improve your score. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.)

If you refinance federal loans with a private lender — in effect, turning your federal loans into a private loan — rest assured that credit bureaus don’t view these two types of loans any differently. However, when you refinance your federal loans, you will lose certain federal protections, such as income-driven repayment plans, deferment or forbearance, and loan forgiveness programs.

Do I Need a Good Credit Score to Take Out a Student Loan?

Your credit score may be a factor when you’re applying for a student loan. It all depends on the type of loan you’re planning to take out. Most federal loans don’t have a minimum credit requirement, which is why nearly every borrower gets the same interest rate regardless of their financial profile. However, federal PLUS loans for parents require that borrowers do not have an adverse credit history.

Credit scores are typically more of a factor with private student loans. Lenders often consider your score when determining student loan approval and interest rate. In general, the better your score, the better your rate will be.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

Which Credit Scores Do Private Lenders Use?

When considering your student loan application, most private lenders look at your FICO® score. This score, which ranges from 300 to 850, helps lenders determine whether to extend credit and at what interest rate.

Because FICO is used widely throughout the lending industry, including by mortgage lenders and credit card providers, it gives lenders an apples-to-apples comparison of potential borrowers.

The Takeaway

Student loans can help borrowers establish a solid credit history, which can ease the way for future borrowing opportunities and attractive interest rates. The key is to pay what you owe on time, every time.

Paying a loan off early or shopping around for rates could cause a small, temporary dip in credit scores. Being late with a payment — or stopping payment altogether — may lower your credit score and hurt your ability to qualify for another loan.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Do student loans help build credit?

Student loans are an opportunity for borrowers to build credit and establish a solid credit history, which can help when it’s time to get a mortgage or take out a car loan. The key is to make regular, on-time payments.

How can I improve my credit score if I have student loans?

Payment history is one factor of your overall credit score, so making regular, on-time payments on your student loans can help you build credit.

How is my credit score determined?

Your credit score is calculated using five different categories of data. These include payment history, amounts owed, length of credit history, new credit, and credit mix.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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