Americans started 2021 with markedly better credit and lower credit card debt, on average than a year before. Despite the economic uncertainty brought on by the pandemic, the average credit score increased by 1 percent (7 points) in 2020, according to Experian. Credit scores have been steadily inching up since the Great Recession—a total increase of 21 points over the decade—with 2020’s increase accounting for a full third of the rise.
“We’ve seen consumers during the pandemic that saved a whole lot and started paying [debt] down,” said Beverly Harzog, credit card expert and consumer finance analyst at U.S. News & World Report.
While credit scores rose, credit card debt plunged, dropping 14 percent in 2020. As the coronavirus vaccines began to roll out, and the economy started to open up, Americans continued to pay down their debts, wiping out $49 billion in credit card balances in the first quarter of 2021.
And according to Experian’s 12th annual State of Credit Report, the trend held strong throughout the year.
Key credit card debt statistics
Here’s a look at a few key credit debt statistics for 2021, according to Experian:
- Average credit card balance: $5,525
- Average revolving utilization rate: 25 percent
- Average number of credit cards: 3
- Average retail credit card balance: $1,887
- Average 60-89 days past due delinquency rates: 1 percent
Average credit card debt by state
Despite the financial challenges brought on by the pandemic, many American households have continued to prioritize saving and paying down debt. Here’s a look at the states with the highest and lowest average credit card debt. Alaska had the highest credit card debt at $7,089 and Mississippi had the lowest with an average credit card balance of $4,819.
States with the highest average credit card debt:
|State||Credit Card Debt|
|District of Columbia||$6,367|
States with the lowest average credit card debt:
|State||Credit Card Debt|
Average credit card debt by age group
Consumers across all generations, with the exception of Gen Z, saw decreased utilization rates and decreased credit card balances year over year, according to Experian. And while cardholders in older generations, like baby boomers and Gen X, trended upward in terms of their credit card balances, millennials continued to keep their balances relatively low.
|Generation||Average credit card debt|
Average credit card debt by race
Another key factor that plays a role in average credit card debt is a cardholder’s race and ethnicity. Despite carrying lower credit card balances, Black and Hispanic people are less likely to be approved for credit than white and Asian Americans, according to the Federal Reserve’s May 2021 Report on the Economic Well-Being of U.S. Households in 2020.
|Race/Ethnicity||Average credit card debt|
Average credit card debt by educational level
Higher levels of credit card debt can also occur as a result of having more access to credit, according to the same Federal Reserve household survey. Cardholders who have completed higher levels of education likely earn more and qualify for higher credit limits than those who have fewer or no degrees.
|Education level||Average credit card debt|
|High school diploma||$4,940|
|No high school diploma||$3,390|
Average credit card debt by income level
Statistics show that credit card debt tends to increase with income. The greater your household income, the more likely you are to have a higher credit card balance stemming from your increased access to credit. Here’s a look at the Federal Reserve’s data on average credit card debt balance relative to income.
|Income level by percentile||Average credit card debt|
Average credit card debt during the pandemic
The COVID-19 pandemic changed the way many Americans managed their finances, including their credit cards. While many who did not suffer any economic fallout during this time used their economic stimulus money to pay down debts, others found themselves unable to cover their everyday expenses.
A September 2021 online survey of 2,400 U.S. adults by Bankrate found 42 percent of consumers with credit card debt have added to the amount they owe since the pandemic began in March 2020, with 47 percent saying the pandemic caused them to get deeper in debt. Credit experts cite a few possible triggers for this shift in spending habits. These include job loss, quitting a job or cutting back hours to manage kids’ virtual learning, having to pay for daycare or needing to buy equipment and technology for virtual school or work.
How do Americans get into credit card debt?
There are various reasons why one might fall into a credit debt spiral. It could happen as a result of poor budgeting, not keeping your credit utilization low, or only making the minimum payments on your balance each month. Surprise expenses or unforeseen circumstances like a divorce, illness, or sudden job loss can also lead to an increase in credit debt if you don’t have an emergency fund to help you cushion the financial blow.
Ways to eliminate credit card debt
Rome wasn’t built in a day—it’ll take some time for your credit card debt repayment strategy to pay off, too. With a clear budgeting plan and safeguards in place to keep you from spiraling into even more debt, you can start chipping away at your balance in no time.
- Step 1: Take stock of your current debt situation. You can’t make a plan to tackle your debt if you’re unclear on how much you actually owe. Check in on all of your credit card accounts and note your balances, interest rates and payment due dates. If your interest rate is steep, try calling your credit card issuer and asking for a lower rate.
- Step 2: Crunch some numbers to figure out your ideal payment. You should always aim to make at least the minimum payment on your card each month. But carrying a hefty balance over from month to month can also end up costing you in the long run. Once you’ve figured out how your minimum payment fits into your budget, see if you can allocate a bit more toward your payment so that you’ll pay less in interest over time and shave a few months off of your repayment timeline.
- Step 3: Set yourself up for success by automating where you can. If part of the reason your debt has grown is because you’re forgetting a payment here and there, set up auto-pay so that you never miss a payment. If that’s not your style, set alerts or reminders on your phone or calendar app so that you’re notified when it’s almost time for you to go in and make your payment manually.
- Step 4: Set up regular financial check-ins with yourself. Set up a monthly 30-minute block to review each of your accounts, track your progress and make any adjustments to your repayment plan. Maybe you received a bonus during the month and feel comfortable paying a little extra, or you had an unexpected emergency and can only make the minimum payment this month. Whatever it is, just make sure your budget gives you the green light and then adjust accordingly.
The bottom line
There are so many factors that play a role in how much credit card debt you carry and your ability to quickly pay it off. But it’s important to try to make it a top priority because the way that you manage your credit could determine how much access you have to it in the future. If you’re deep in debt, don’t let it continue to grow. Sit down and make a plan to pay it off as soon as possible.