Do you prefer the glass half full or half empty? You don’t have to look far to find an alarming statistic about Americans’ credit card balances, but you can also make a case that the news isn’t all bad.

About half of cardholders avoid interest each month

While it’s true that, according to the New York Fed’s most recent Quarterly Report on Household Debt and Credit, Americans owe a staggering $1.13 trillion on their credit cards — and that figure is up 47 percent since early 2021 — it’s also worth noting that just over half of cardholders typically pay in full each month.

Because the report doesn’t distinguish between balances that are paid in full and those that are not, it is not necessarily indicative of Americans’ full financial picture — and an increase in total debt does not mean all consumers are struggling.

For example, although the average credit card rate is a record-high 20.74 percent, this rate doesn’t really matter to cardholders that pay in full each month. As long as you pay your entire statement balance before the due date, you don’t owe interest, and you typically get an interest-free grace period of at least 21 days between when the statement is generated and when it’s due.

This is one of the ways that credit cards can work for you, along with generous rewards programs and buyer protections — everything from fraud protection to dispute resolution, extended warranties, purchase protection and more.

My favorite saying about credit cards is that they can be like power tools: either really useful or really dangerous, depending on how you use them. On the plus side, some people get tremendous benefits from their credit cards. I earned $2,336 in cash back rewards last year, all from money I would have spent anyway. And I didn’t pay a dime in interest.

Consumer spending fuels the economy

It’s also important to keep in mind that the economy is powered mostly by consumer spending. As a result, seeing an increase in this spending — as evidenced by increasing credit card balances — could suggest that consumers still feel confident enough in their financial situations to make discretionary purchases, rather than rein in their spending.

Additionally, with each passing year, less of this spending is done with old-fashioned bills and coins, and more of it is facilitated by digital payment methods such as credit cards. That’s especially true online, and especially relevant as e-commerce continues to surge.

In other words, we should expect credit card balances to grow over time due to economic growth, population growth and the ongoing shift away from cash. From year to year, credit card balances only tend to fall significantly during extraordinary events (the COVID-19 pandemic and the Great Recession are the two most recent examples).

The perils of carrying a balance

Where the rubber really meets the road, at least at the household level, is whether or not you carry a credit card balance. That’s the massive fork in the road between someone who uses credit cards to their advantage (benefiting from convenience, rewards and so forth) and someone who can become trapped in an expensive debt cycle.

I don’t mean to sugarcoat it: The minimum payment math is ugly. If you have the average credit card balance ($6,088, according to TransUnion) and you only make minimum payments at the average credit card rate (20.74 percent), you’ll be in debt for 214 months (that’s more than 17 years!), and you’ll end up paying $9,072 in interest. But if you can pay in full, as 51 percent of cardholders typically do, then credit cards can really work for you.

The big picture is surprisingly positive

Despite gloomy consumer sentiment figures, the household debt-to-income ratio has held up remarkably well. It was actually lower than usual in 2020 and 2021, as many Americans spent less during the pandemic and used their stimulus payments to pay down debt. Since then, it has plateaued at basically the same level as from 2012 to 2019, which is lower than at any point from 1980 (when the dataset began) until 2012.

The strong job market is helping consumers keep up with their bills, even if things don’t feel great because of higher prices and higher interest rates. Economic growth has been surprisingly robust as well, fueled by pent-up demand for services such as travel and dining, as well as physical goods such as clothing, home improvements and electronics. The past two quarters clocked in with annualized gross domestic product growth figures of 4.9 percent and 3.3 percent, respectively. That’s above the Federal Reserve’s long-term expectation of around 2 percent.

The bottom line

The U.S. avoided a recession in 2023, defying many experts’ predictions, yet it’s important to emphasize that all news is local. And not strictly geographically, but rather, where do you fall on the economic spectrum? It reminds me of that saying about a recession being when your neighbor loses their job and a depression being when you lose yours.

Record-high credit card debt loads and record-high credit card rates aren’t problems if you’re among the roughly half of credit cardholders who pay in full every month. But if you’re among those who carry a balance, then credit card debt payoff should be near the top of your household’s list of financial priorities.

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