Here’s how US credit card debt has changed in 5 years

When convenience comes first, credit cards are king. The 2 x 3-inch plastic rectangle transformed the way American consumers shopped: in one fell swoop, people could buy dinner, cover unexpected or urgent expenses at the last minute, or finance a major purchase for Household chores. Credit cards can also be an effective way to build your credit by establishing a history of on-time debt payments.

However, with convenience comes responsibility. This same small card can also cause financial problems if not handled wisely. Credit cards have higher interest rates than many other forms of borrowing money, which can add up if balances aren’t paid off immediately. In the world of lending, convenience doesn’t come cheap.

The average American carries thousands of dollars in credit card debt, averaging $5,589 in the fourth quarter (Q4) of 2021, according to data from Experian. To see how consumer credit habits have changed over time, Experian looked at the average credit card balance at the national and state level since 2017.

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How credit card debt accumulates and is paid off

A credit card is considered revolving credit and cardholders owe interest on any debt incurred on the card. Unlike installment loans, however, credit card issuers calculate interest based on the average daily account balance, not the original amount of debt. This means that your balance may increase over time as interest accrues on your balance and compounds.

Each credit card comes with an interest rate, also known as the annual percentage rate (APR), which varies depending on several factors, including the applicant’s credit rating and central bank interest rates. In 2021, credit cards had an average interest rate of 16.45%, according to Federal Reserve Data. But with the Fed raising interest rates this year, credit card interest rates are likely to rise as well.

Paying off your credit card balance at the end of each billing period is a good habit. Although interest is compounded daily, the cardholder pays no interest if the full balance of the card is paid off by the monthly due date.

Line graph showing the national average credit card balance from 2017 to 2021.

Experian

How the National Average Credit Card Debt Has Changed Over Time

At the end of the fourth quarter of 2021, the national average credit card balance decreased by 10.7% since the fourth quarter (Q4) of 2017, and 14% since the last peak in the fourth quarter of 2019.

The steepest decline occurred in the first half of 2020. At the start of the COVID-19 pandemic, the Federal Reserve Bank lowered interest rates to near zero in order to stimulate the economy in the context of the global health crisis.

In the fourth quarter of 2021, the annual inflation rate began to rise, and Americans suddenly felt the financial pressure. From buying new and used vehicles to prices for homes and even rental cars, American consumers have had to pay more for many products and services.

Range chart showing the states with the greatest change in credit card balances from 2017 to 2021.

Experian

States where the average credit card balance has fallen the most

Collectively, Americans have made significant progress in paying off their credit card debt over the past five years. Sales fell the most in Alaska, New Jersey and Virginia. The states that have paid off credit card balances the most since 2017 are also among the states with the highest average balances.

Map of the average credit card balance by state.

Experian

Average credit card balance varies by state

In the fourth quarter of 2021, Americans had an average credit card balance of $5,589, according to data from Experian.

Alaska leads all other states with an average credit card balance of $6,787. New Jersey, Texas and Virginia had the highest balances on average. The lowest average credit card balances are found in Minnesota, Wisconsin, Iowa, Kentucky, and Mississippi.

This story originally appeared on Experian and was produced and distributed in partnership with Stacker Studio.

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