As Credit Card Debt Tops $1.28 Trillion, Here Are 5 Ways to Pay Off Your Balance
The economy is still dealing with elevated borrowing costs, even as the Federal Reserve’s policy-rate target range sits at 3.50% to 3.75%.
Meanwhile, Americans’ credit card balances climbed to about $1.28 trillion as of Q4 2025, according to the Federal Reserve Bank of New York’s Household Debt and Credit Report. A separate report from credit bureau TransUnion says the average bankcard balance per consumer was $6,715 in December 2025.
If you’re like most Americans, you probably noticed yourself becoming more dependent on your credit card in the last couple of years. Higher prices over the past few years have had many scrambling just to make ends meet, and borrowing money on credit is one of the most convenient ways to unshoulder some of that burden.
Beyond their use for buying the basics, credit cards have offered a way for folks to cope with high medical bills, and they may also play a larger role for households managing student loan bills now that payments and delinquency reporting have resumed.
High credit card annual percentage rates (APRs) can make balances especially expensive: The Federal Reserve’s latest G.19 report puts the average interest rate on credit card plans at 20.97% in Q4 2025. Those costs help explain why total credit card debt reached about $1.28 trillion — up roughly 5% from a year earlier.
Tips to help pay off credit card debt
If you are one of the many Americans out there struggling with your monthly balance, there are plenty of strategies to choose from for paying off credit card debt. Consider these options:
The snowball method
Best for: People who need quick “wins” to stay motivated.
For those carrying over multiple credit card balances every month, the snowball method could be your best bet. For this strategy, you should pay down your debts from smallest to largest, eliminating one at a time rather than trying to take on all of them at once.
Juggling multiple debts can be daunting, and this method helps you to stick to a consistent plan. Just make sure that while you’re focusing on paying down the smallest debt that you continue to make the minimum payments required for all of your debts.
The avalanche method
Best for: People who want to minimize interest and can stay consistent without quick milestones.
The debt avalanche method is similar to the snowball method, but focuses on APRs rather than the amount owed. When you are juggling multiple different types of loans, use the avalanche method to take on the highest APR debt you carry.
Doing this limits the amount of interest you accrue and keeps things manageable. And, ultimately, this method will get you in the black faster than the snowball method since you’re accumulating less and less interest as you pay.
Negotiate with your creditor
Negotiating directly with your credit card company can be a worthwhile effort, if you have some rapport already. This method works best for those who have been long-standing customers with their credit card companies and hold a history of on-time payments.
Keep in mind that asking your credit card company to place you in a hardship program is different than attempting to negotiate a settlement, where the creditor accepts less than the full amount owed on your balance. A hardship program will generally allow you to keep your account open, while a settlement agreement typically results in the account being closed and may carry tax and other consequences. Both are valid paths for managing debt, but you should explore hardship options first before attempting to negotiate a settlement.
You can settle a few different ways, be it through a lump sum payment or a reduction on your minimum payment or interest rate. You can read our guide on negotiating credit card debt to learn more about the process and some of the risks this method carries.
Debt consolidation
The snowball or avalanche method might not work for you if you have a daunting amount of debts and a series of high APRs. In this case, debt consolidation could be a solid plan. A debt consolidation loan is one option, in which you apply for one big loan to pay off multiple debts, leaving you with a single repayment.
Alternatively, you could opt for a balance transfer card — a credit card with a low or zero-interest introductory period (anywhere from 12 to 21 months) that you can transfer existing debt to.
Watch out for: Balance-transfer fees and what your APR resets to after the intro period ends — especially if you won’t be able to pay the balance off in time.
Credit counseling services
Asking for help is always an option. Credit counselors exist for the sole purpose of helping people reduce their debts, pairing clients with an advisor who can teach you how to tackle your debt and help you to tailor a pay-off plan to your financial situation.
While many of these services are nonprofit, some agencies charge fees for certain services (including debt management plans), and those fees can vary by agency and state — and may be waived in some cases.
More from Money:
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How to Consolidate Credit Card Debt
This story was originally published March 21, 2025 at 11:19 AM.