Is Your Credit Card Debt Too High? Here’s How to Know (and What to Do)

In an ideal world, we’d pay off our credit card balances each month to avoid paying sky-high interest charges. However, for many of us, the reality is that carrying a credit card balance – and losing money to interest – is a necessity. 

In fact, 46% of credit card users carried a balance for at least one month out of the year in 2024, according to a Federal Reserve analysis released this year. And a LendingTree study found that the average unpaid balance in the beginning of 2025 was $7,321 — a 5.8% increase from a year earlier.

Carrying a credit card balance can potentially cause serious financial damage. The average interest rate on credit cards in the U.S. is over 20%, so interest charges could accrue quickly and your balance could balloon. And carrying a balance could potentially damage your credit score, making it harder to buy a house or get a car loan. 
If you’re carrying a balance on your credit card, you certainly aren’t the only one, but how much credit card debt is too much? The answer won’t be the same for everyone. Here are a few ways to know based on your situation.

Why ‘Too Much’ Credit Card Debt Depends on Your Situation

You pretty much know you have too much credit card debt once you’re struggling to make payments and keep up with other bills. Because everyone has a different income level and financial responsibilities, that threshold isn’t going to be the same for everyone. However, even if you technically can make the payments, carrying a balance is still going to do damage to your finances. 

That’s because paying the minimum payment and not the full balance will result in interest charges. The longer you continue to only pay the minimum payment, the more interest charges you rack up. The national average for credit cards that charge interest is just over 22%, so your balance can balloon quickly, especially if you keep using the card while you carry the balance.

Credit card debt is one of the priciest debts, and experts advise avoiding it when possible. However, everyone’s circumstances are different. For instance, if you’re taking advantage of a 0% APR card, you may not be accruing interest on your balance. Those are cards that have no interest for a certain period of time, usually 12 to 21 months. So long as you have a plan to pay off the balance before the introductory period ends, your threshold for “too much debt” could look different than someone paying hundreds of dollars in interest charges on their debt every month. However, regardless of your interest rate, if your balance grows, you’ll use more of your available credit. If you have less available credit, your credit utilization will go up, which can end up hurting your credit score. We’ll explain further in a bit.

Credit Utilization: A Key Metric Lenders Watch

If you can make payments and you think you can repay it eventually, it’s all good, right? You also have to watch out for your credit utilization ratio, calculated by dividing how much credit you use vs. how much you have available. Most experts agree you should keep it under 30%. However, people with the highest credit scores tend to keep it below 10%.

How to Calculate Your Utilization Ratio

Your credit utilization ratio is how much of you’re borrowing in relation to how much you are able to borrow. Say you have two credit cards and one has a credit limit of $4,000 and the other $6,000. That makes your total available credit $10,000. To keep your utilization below 30%, you wouldn’t want to have more than a $3,000 balance between the two cards before paying it down. It’s very important to note that it wouldn’t be $3,000 for each card, but total.

Why the 30% Benchmark Matters 

Your credit utilization makes up a big chunk of your credit score — 30% to be exact. So even though a line of credit may be available to you, you shouldn’t use all of it before paying it down. If you have to use all of the credit that’s available to you (for example, maxing out your credit cards), lenders may see you as less likely to be able to repay what you owe. As a result, your credit score could drop. A lower credit score can make it harder for you to get approved for a loan — like a mortgage or auto loan — and at a higher interest rate, which means you pay more over the life of the loan.

How to Set a Personal “Safe” Debt Threshold

As Penny Hoarders, we love the idea of no credit card debt. However, the reality is many Americans need to lean on credit to stay afloat. Here’s how to figure out how much debt would take things to place that’s harder to manage. 

Use Your Income and Budget as a Guide

Figure out your monthly take home pay, and if you haven’t made a household budget, put one together. Then figure out how much available credit you have. That helps you calculate what would put you above a 30% utilization ratio. When you do need to carry a balance, keeping it under that percentage can minimize the damage. Your income and budget will tell you how much money you have left over at the end of the month to go toward payments. 

Factoring in Interest Rates and Other Debts

There are two things that make a huge difference in how credit card debt affects you — interest rate and debt-to-income ratio. Use a credit card interest calculator to see how much interest you’d accrue on the debt you need to take on. Remember that most credit cards have a pretty high interest rate.

Your debt-to-income ratio is another metric that can affect your financial situation. You calculate it by dividing your total monthly debt payments by your gross income. Lenders will look at this ratio when you apply for a loan or mortgage. This will help you factor in other debt before taking on too much credit card debt. 

Strategies to Reduce Credit Card Debt

If you do, in fact, have too much credit card debt, you have options. If you need to reduce your credit card debt, you can use the debt snowball method, debt avalanche method, debt consolidation loans or balance transfer cards.  

Consider Snowball vs. Avalanche Method

These are two debt payoff strategies that have a similar concept but different priorities. For debt snowball, you pay off your smallest debt first then work your way toward your largest. This works well for people who like quick wins and don’t have as much high-interest debt. For debt avalanche, you prioritize your highest interest debt first then your next highest and so on. This method is better for people who don’t need to pay off debt quickly, but want to save on interest. 

Use a Debt Settlement Company

Debt settlement is a process where you negotiate down what you owe to a creditor. You can either do this yourself or you can use debt settlement companies. We like companies like National Debt Relief and Freedom Debt Relief. Both work with unsecured debt like credit card debt and get you on a program that could potentially reduce what you owe. However, there are potential downsides, including a drop in your credit score and taxes on forgiven debt, so it’s important to understand the details and terms of any debt settlement option.

Consolidate Your Debt

Debt consolidation loans, which you can find through online lending marketplaces like AmOne, can save you money on interest and simplify your debt repayment journey. That’s because you take out one loan with a lower interest rate to pay off your cards, then make monthly payments on the loan. 

Use a Balance Transfer Credit Card

Balance transfer cards work well for those who could catch up if they got a break on interest. You move your existing debt to the new card and enjoy a 0% APR period — usually 12 to 21 months — where you don’t accrue interest. Then use that time to pay off your debt faster and for less money.

How Much Credit Card Debt is Too Much? Signs Your Debt May Be Too High

These are some signs you might be inching past a healthy credit card debt limit. 

Struggling to Make Minimum Payments

Your minimum payment is usually less than the full balance. Most credit card issuers calculate minimum payment based on a percentage of your balance – typically 1% to 2%. Paying at least the minimum amount by the due date also helps you avoid getting dinged for a late payment. That is a big deal, and not only because late payments typically come with hefty fees. Your payment history makes up 35% of your credit score, and missed payments stay in your credit report for up to seven years. So your credit score could be damaged by a missed payment long after you paid it. 

Relying on Balance Transfers Without a Plan 

Balance transfer cards are a valuable tool in managing credit card debt. You can transfer existing debt to a card that has a 0% APR period, so you can focus on paying down the debt without paying interest. However, if you don’t have a plan to pay off your debt before the intro period expires — or worse, you pile on more debt and grow your balance — it’s likely a sign your debt is becoming unmanageable.

Rising Interest and Late Charges and Stress Levels

Racking up interest and late charges and constantly worrying about your debt creeping up is enough to say it’s too much. There’s no benchmark or percentage that works for everyone. Once you’re stressed about your debt and paying even more than you owe because of interest, that’s a valid time to try to stop the debt spiral.

FAQs About How Much Credit Card Debt is Too Much