From 2003 through 2022, credit card balances fell from the fourth quarter of each year to the first quarter of the following year every single time. As sure as the sun rising in the east, Americans successfully fulfilled their New Year’s resolutions to pay down their credit card debt — which normally balloons in the fourth quarter as shoppers splurge on holiday purchases. Nineteen straight years, this was the case (maybe even more, truthfully, as this New York Fed dataset only goes back to 2003). But the streak was broken this week.

To be fair, it’s not like credit card balances were off to the races in early 2023. They were precisely flat from the fourth quarter of 2022 to the first quarter of 2023 — a record-high $986 billion. But in this context, an unchanged reading is actually quite notable. From 2003 through 2022, the average decline from Q4 to Q1 was 2.6 percent. That’s substantial when you consider the large sums of money that are involved.

Typically, credit card balances fall in the first quarter, drift a bit higher in the second and third quarters and spike in the fourth quarter. From year to year, they almost always go up, unless a major crisis (such as the Great Recession or the COVID-19 pandemic) breaks the streak.

Where we’ve been

Credit card balances increased 17 percent from the first quarter of 2022 to the first quarter of 2023, according to the New York Fed’s most recent Quarterly Report on Household Debt and Credit. That’s the largest year-over-year jump in the history of these reports (which, again, dates back to 2003). In fact, record year-over-year increases have now been observed in four straight quarters.

It feels like ancient history, but credit card balances actually fell 17 percent from the fourth quarter of 2019 to the first quarter of 2021. The main explanation was the COVID-19 pandemic, which led most people to spend less. Plus, many Americans used their government stimulus payments to make substantial progress paying down their debt. In the past two years, however, credit card balances have grown an incredible 28 percent and currently represent an all-time record.

It’s not just balances that have grown, either. Credit card rates are at record levels, too (the national average is 20.35 percent, the highest since we started tracking in 1985). And more cardholders are carrying balances: 46 percent, up from 39 percent a year earlier.

Where we’re going

In one sense, rising credit card balances can potentially be seen as a good thing for the economy because these reflect higher consumer spending, which powers the majority of economic growth. You would also expect credit card balances to grow over time due to population growth and increasing card usage (especially in lieu of cash). The New York Fed report doesn’t distinguish between balances that are assessed interest and those that are not. The big fork in the road, at the household level, is how long it takes you to pay off these balances.

If you’re among the slight majority (54 percent) who pay your credit card bills in full each month, thereby avoiding interest, then life is great. Credit cards offer better rewards programs than other payment methods, plus better buyer protections ranging from fraud and dispute resolution to extended warranties, purchase protection and more. As long as you’re not overspending or paying interest, credit cards can provide you with a ton of valuable benefits.

The one big drawback of using a credit card is that you’ll be charged a hefty interest rate if you carry a balance. Paying in full is obviously desirable, if you can. Or, if you need more time to knock out your credit card debt, signing up for a balance transfer card with a lengthy 0 percent APR promotion can save you a ton of money in interest. The best balance transfer credit cards feature zero-interest offers of up to 21 months.

It is concerning that we’re starting to see cracks in the foundation, such as rising debt and delinquencies, even though the unemployment rate is tied for a 54-year low. With recession worries looming and credit card rates at record highs, it’s arguably more important than ever to pay down this debt as quickly as possible. It’s concerning, too, that 36 percent of U.S. adults have more credit card debt than emergency savings, the highest figure since polling began in 2011.

The bottom line

The credit card market is an excellent example of the proverbial tale of two cities. Roughly half of cardholders use credit cards for rewards and convenience without paying interest, while the other half finance purchases at expensive interest rates — sometimes for many years.

In fact, 60 percent of Americans with credit card debt have had it for at least a year. And if you only make minimum payments toward the average credit card balance ($5,733, according to TransUnion) at the average interest rate of 20.35 percent, you’ll be in debt for 207 months (more than 17 years) and will owe a grand total of $14,004 (that includes $8,271 in interest).

This illustrates why it’s so important to pay more than the minimum. Pay it all if you can. But if you can’t, follow strategies like signing up for a 0 percent balance transfer card, taking on a side hustle or seeking nonprofit credit counseling. If you have credit card debt, it’s probably your highest-rate debt by a wide margin. Prioritize your interest rate and forget about rewards until you’re debt-free.

Have a question about credit cards? E-mail me at and I’d be happy to help.