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What Is Credit Card Debt?

5 min read

Last Updated: May 29, 2025

Table of contents

Key Takeaways

Credit card debt consists of outstanding balances across a person’s credit card accounts.
Credit card debt can lower your credit score because it affects your credit utilization ratio.
Credit counseling or balance transfer offers can help you avoid bankruptcy.

When used strategically, a credit card can make shopping more convenient. It can even help you build a strong credit history so you can get other types of credit and loans. However, you may end up with credit card debt that’s hard to manage if you overuse your card and can’t pay your balance in full each month (or at least the minimum monthly payment).

The Federal Reserve Bank of New York reported that “credit card balances increased by $45 billion from the previous quarter to reach $1.21 trillion at the end of December.” That’s a 7.3% increase from 2023.

If you have debt you’re not alone; credit card debt is a reality for many Americans. To avoid or recover from debt, it’s important to understand how it works and what to do if debt becomes difficult to manage.

Credit card debt definition

As you spend using your credit card, your growing balance technically becomes credit card debt. If you don’t repay your balance in full each month, your credit card debt grows.

Your credit card debt includes the principal cost of any credit card purchases you haven’t repaid, the interest those costs accumulate, and any fees your creditor charges over time.

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Credit card debt is considered revolving credit. This means you can keep borrowing against your credit as long as you pay at least the minimum amount due and remain within your credit limit.

When you take out a loan for a fixed amount (like a mortgage, personal loan, or student loan), that balance appears on your credit report. However, loans don’t count toward credit card debt.

How credit card debt can impact your credit score

Your credit card debt plays an important role on your credit score. The amount of money you owe can account for up to 30% of a credit score calculation, depending on the credit scoring model used.

Note that your credit score assesses more than just what you owe. Lenders want to know how much of your credit you’re using. This is known as your credit utilization ratio. It’s best to keep your balances significantly lower than your available credit. Experts like the Office of Financial Readiness suggest a credit utilization ratio of 1-10%.

If you have a high credit limit on multiple credit cards, having a small balance on one card may have little effect on your credit score. However, if you have high balances on all your credit cards, it could raise your credit utilization ratio and lower your credit score.

In addition to your credit utilization ratio, credit card debt may affect your credit score in other ways. If you carry a reasonable balance and pay at least your monthly minimum payment on time each month, that may demonstrate responsible credit usage. However, missed or late payments could harm your credit score.

How much credit card debt is too much?

There’s no magic number that represents “too much credit card debt.” It depends on your financial circumstances. Paying off your credit card balance in full each month is a good idea. However, when that’s not possible, ensuring your debt remains manageable is essential for your financial well-being.

Using your credit card to make purchases you can’t afford may cause your debt to grow quickly and become difficult to control. This is especially true if you’re adding interest on top of purchases. If you struggle to make your minimum monthly payment for your credit card bill, you have too much debt and may want to cut back on spending.

If you realize you won’t be able to afford an upcoming payment, you should contact your credit card company as soon as possible. They may offer you relief for a temporary hardship or work with you to change your repayment plan.

A credit counselor may be able to help you develop a debt management plan. One strategy is the debt snowball method. You’ll pay off smaller debts first (while making minimum payments on more significant debts) and work your way up to the larger ones.

Are there other ways to lower your monthly payments or interest? Debt consolidation loans and balance transfer cards could help. It’s important to understand the terms and conditions of these products so you don’t end up paying more in the end.

In extreme cases, credit card debt can become so overwhelming that bankruptcy becomes the only option. Developing good spending habits and changing harmful ones could help you avoid reaching that point.

Did you know?

If you’re carrying a high balance on your credit card, the interest rate could be costing more than you’d like. You may be able to save on interest charges and help reduce your credit card debt with a balance transfer credit card offer from Discover.

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The bottom line

Credit card debt is common. If you find yourself with high debt, it may pose a risk to your credit score. Staying on top of payments and sticking to your budget can help you avoid unnecessary debt and interest. If your credit card debt becomes difficult to manage, you have access to resources to help you tackle it, like credit counseling and balance transfer credit card offers.

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