Record-high credit card debt outpaces savings for nearly one-third of the country — here's what you can do

Americans have hit a new record for credit card debt — and that debt is surpassing how much they have in their emergency savings, according to a new Bankrate.com report.

The report reveals that more than a third (36%) of U.S. adults owe more money in credit card debt than they have saved. This is, as Bankrate indicates, a record high in its 12 years of polling Americans, and a significant jump from the last two years where that percentage was at 27% and 22% in 2021 and 2022, respectively.

This report also comes on the heels of the New York Fed's latest Quarterly Report on Household Debt and Credit released last week, which found that credit card balances rose 15% over the past year and 7% over the past quarter. According to the New York Fed, the reportedly $130 billion increase in balances from December 2021 to December 2022 is the largest annual increase they've seen.

Many of those behind on their credit card payments likely have high inflation and high interest rates to blame, New York Fed researchers conclude. Consumers are relying on their cards more to cover the higher cost of everyday essentials and are then being hit hard by expensive credit card debt when they can't afford to pay off their balances in full.

The following advice can help set you on the path toward solvency if you feel you're drowning in credit card debt.

Transfer debt to a balance transfer credit card

If you're carrying a credit card balance month to month that you just can't pay off, your first priority should be putting a halt to the interest it's accruing.

Credit cards by nature charge notoriously high double-digit interest and our current environment of rising interest rates only makes those APRs higher. By signing up for a balance transfer credit card, you can take that balance that is growing each day with interest and transfer it to a credit card specifically designed to give you more time to pay off that debt interest-free. And, once you can pause the interest accrual on your credit card, you can then also focus on growing your savings.

The below credit cards each offer an introductory 0% APR period for 21 months (and then charge an APR after that period ends) — in other words, you have almost two years to pay off your current credit card balance without any additional interest accruing. But remember to pay off your balance in full before the 0% APR period ends, otherwise you'll face the full brunt of your card's interest rate charges.

It's also smart to consider what credit card you use in your everyday life. While consumers can't control the cost of basic expenses like groceries and gas, they can control how they pay for these things they need.

Rewards credit cards like cash-back cards may be great for your wallet, but the interest rate you're accruing by carrying a balance is outpacing the cash-back rate you earn. If you can't pay off your balance, you're better off using cash or (if you must use credit) charging purchases on a card offering 0% APR on new purchases.

All the cards above offer this. Keep in mind that you're just adding to your balance which you'll need to pay off before the 0% APR ends.

Consolidate debt with a personal loan

Those with credit card debt may want to also think about taking out a personal loan to consolidate their debt into one monthly payment.

This move is a particularly smart alternative to balance transfers for large amounts of debt across multiple credit cards. With a debt consolidation loan, you use the loan to pay off your credit card debt and then repay the loan in monthly installments, typically at a lower interest rate than what you would pay on your cards.

Personal loans also usually have fixed interest rates instead of variable rates you find on credit cards — meaning you'll pay the same amount each month with a personal loan.

A few lenders to consider include LightStream, with its low interest rates and flexible terms, PenFed for those seeking smaller loans and Discover for anyone seeking fast funding. These loans also don't have origination or early payoff fees.

To get the best terms on a loan you'll want to make sure you're credit score is as high as possible. Fortunately, there are a few ways you can raise your credit score quickly quickly if need be.

If you're struggling under the burden of credit card debt, you're far from alone. The best action you can take to protect your financial future is to pay off your balance in full. Using a balance transfer card or debt consolidation loan can help you climb out of the financial hole you're in, no matter how deep it is.

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