Credit Card Debt Is Actually Down Despite Breaking Records

Newsweek

09-07-2025

Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources.
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Credit card debt in the United States reached a new nominal record in May, with balances totaling $1.31 trillion.
However, when adjusted for inflation, the current total remains below the all-time high recorded in 2008, according to analysis of the latest data from WalletHub.
Why It Matters
Although the $1.31 trillion headline figure appears alarming, the context provided by inflation-adjusted analysis reveals that today's burden is $113 billion below the 2008 peak.
This distinction comes at a time when millions of Americans are struggling to manage day-to-day expenses and keep up with steep credit card interest rates, which averaged 28.6 percent in early 2025 compared to banks' sub-4.5 percent borrowing rates from the Federal Reserve.
U.S. households have steadily increased their reliance on credit cards since 2021, driven by a combination of inflation, stagnant wages and, for some, inadequate social safety nets. The share of cardholders making only minimum payments reached a historic high of 10.75 percent in the third quarter of 2024, reflecting elevated financial pressures for many families.
In this photo illustration, the Visa, Mastercard and American Express logos on various credit and debit cards are seen atop a U.S. $1 bill on February 4 in Somerset, England.
In this photo illustration, the Visa, Mastercard and American Express logos on various credit and debit cards are seen atop a U.S. $1 bill on February 4 in Somerset, England.What To Know
While credit card debt for May 2025 technically set a record, topping May 2024 by 3 percent, it actually marks an 8 percent decline from the record for that month and is only 0.3 percent higher than last year when adjusted for inflation.
"Sure, the headlines scream 'RECORD DEBT!' but that's like saying people are taller than ever without mentioning we're also eating better and living longer," Michael Ryan, finance expert and founder of MichaelRyanMoney.com, told Newsweek. "The US job market remains solid and wage growth is beating inflation, which means people are managing their debt while their paychecks are actually keeping up with rising costs."
Still, the reported increase in credit card balances has prompted renewed debate among lawmakers and economic experts over Americans' financial health and the impact of rising interest rates amid persistent inflation.
"It's still a wealth killer, no question," Ryan said. "The long-term impact isn't as scary when you consider that people are more savvy about balance transfers, debt consolidation, and actually reading those credit card terms. We're not the same financially naive country we were seventeen years ago."
The growing burden has led lawmakers to propose new restrictions on lending rates. A bipartisan bill introduced by independent Senator Bernie Sanders of Vermont and Republican Senator Josh Hawley of Missouri in early 2025 seeks to cap credit card interest rates at 10 percent over the next five years.
"We cannot continue to allow big banks to make huge profits ripping off the American people," Sanders said. "This legislation will provide working families struggling to pay their bills with desperately needed financial relief."
With Americans using credit cards to cover medical costs, everyday living expenses, and even funeral bills, experts and lawmakers alike have highlighted the link between debt, mental health challenges and diminished well-being.
What People Are Saying
Ryan also told Newsweek: "Everyone's freaking out about hitting $1.3 trillion in credit card debt, but it's like being scared of a shadow that's actually smaller than it used to be. Americans' total credit card balance is $1.2 trillion as of the first quarter of 2025, and when you adjust for inflation, we're actually carrying less debt burden than we were back in 2008. It's kinda like how your grandpa's dollar used to buy way more candy. Today's trillion isn't yesterday's trillion."
Alex Beene, financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "During the pandemic era, we saw Americans pay off more of their debt and enhance their savings. In the years following it, though, inflationary pressures have caused more spending on credit cards, and levels now are close to the all-time highs in 2008."
What Happens Next
Lawmakers are set to debate the bipartisan proposal to cap credit card interest rates in 2025.
For Americans who accumulate more debt and delay paying it off, there's likely to be long-term financial hardship, Beene said.
"Thankfully, the job market is still robust and strong enough to support the incomes of most Americans, but it does create an ominous picture if we do finally start to see a higher unemployment rate as to all that debt going unpaid and more being acquired," Beene said.