RESOLVING THE LEDGER
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0 Share Newsweek is a Trust Project member See more of our trusted coverage when you search. Prefer Newsweek on Google to see more of our trusted coverage when you search. Americans are carrying nearly as much credit card debt as they did at the peak of last year's record-breaking borrowing spree, according to the Federal Reserve Bank of New York.
Millions of households are struggling with high prices and elevated interest rates, bringing the outstanding U.S. credit card balance to $1.26 trillion in the second quarter of 2026. That’s just shy of the all-time high of $1.28 trillion recorded late last year.
“Prices are still rising faster than paychecks for many workers, so the credit card increasingly becomes the bridge between what comes in and what has to go out,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek .
Credit card debt is one of the most expensive forms of borrowing, and many cards charge interest rates above 20 percent. As balances grow, households can end up paying hundreds or even thousands of dollars annually in interest alone.
The current rise in debt also comes as many families face higher costs for essentials like groceries, housing and now back-to-school shopping.
Financial experts say the increasing debt likely comes down to persistent inflation and rising costs for everyday necessities.
“Inflation, rising prices, and access to other payment schemes such as Buy Now, Pay Later have all played a role. A lot of this is psychological,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek .
“People often don't realize how quickly these monthly payments and subscriptions add up. By the time you receive your paycheck, portions of that future dollar have already been spent. In essence, you are using tomorrow's income to pay for yesterday's consumption, and eventually those obligations begin to stack on top of one another.”
Back-to-school expenses are also putting additional pressure on many families this summer. A recent Credit Karma survey found that 57 percent of parents are entering the school year with existing credit card debt, while nearly half expect to take on new credit to cover education-related expenses.
The same report found that a typical school supply list now costs nearly $175, roughly 8 percent more than last year, with some items up 20 percent or more.
“The record amount of credit card debt in the United States shouldn't come as a shock to most Americans, as inflationary pressures in virtually all monthly expenses continue to weigh on consumers,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek .
“The problem is twofold in that many Americans are using credit to fill the gaps between income and expenses, and others who find themselves either unemployed or underemployed are leaning more heavily on them for the majority of spending.”
One of the most effective approaches is the debt avalanche method, which prioritizes paying off debts with the highest interest rates first while continuing to make minimum payments on all other accounts.
“Credit card debt is often the worst kind of debt you can accrue, as interest rates now often exceed 20 percent,” Beene said. “In the short term, try to reduce your interest bill as much as you can, either by shifting the debt to a 0 percent interest credit card or a personal loan that is at a lower rate.”
Another popular strategy is the debt snowball method, which focuses on paying off the smallest balances first. While it may not save as much in interest, the psychological boost of eliminating accounts can help borrowers stay motivated
“For borrowers, you must first know what you are actually paying. That means understanding the true cost of the item you purchased,” Thompson said.
“Economic psychology has gotten very good at reducing the immediate pain of a purchase, either by extending the length of the loan or enticing you with smaller monthly payments.”
Above all else, experts say you should try to create and stick to a realistic household budget and pay more than the minimum amount due whenever possible.
Debt consolidation loans are also potentially available to qualify for lower rates, as are hardship programs if you are struggling to make payments
“Someone with enough cash flow and a much lower personal loan rate may benefit from consolidation,” Ryan said. “Someone genuinely underwater may be better served by a nonprofit debt-management plan, which can lower rates and usually closes the cards while the debt is repaid.”
Whether credit card balances continue climbing will likely depend on inflation and the direction of interest rates in the months ahead. For now, many Americans remain heavily reliant on revolving credit as they navigate higher living costs.
“The reality is the majority of Americans are going to encounter rising costs and unemployment or underemployment at some point in their lives,” Beene said. “Preparing in advance can go a long way in softening the blow.”
Contact Newsweek editors on this story: Jason Lemon and Sam Wilson.
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