How to pay down credit card debt amid rising inflation, according to experts
A surge of inflation is squeezing household budgets as American shoppers weather mounting credit card debt.
Total U.S. credit card debt registered at $1.25 trillion in the first quarter of this year, marking a jump from $1.18 trillion over the final three months of 2025, a recent New York Federal Reserve study found.
The latest figure amounts to the highest first-quarter credit card debt since the New York Fed began tracking the data nearly three decades ago. The average debt holder carries about $7,800 in total credit card balance, according to LendingTree data released last year.
Elevated prices for everything from gasoline to tomatoes pose a challenge for consumers eager to pay down their debt, some analysts told ABC News. They offered some tips to ease the burden.
Here’s what to know about how to pay down your credit card debt, according to experts:
Negotiate a lower interest rate
A lower credit card rate may be a phone call away, Matt Schulz, chief credit analyst at LendingTree, told ABC News.
More than four of every five credit card holders receive a lower rate after requesting one, a LendingTree survey last year found.
“People who ask for it can get a reduction of five, six or seven percentage points – that’s really significant,” Schulz said.
For reference, the average rate for a new credit card is 23.7%, LendingTree data showed.
“Too few people ever ask,” Schulz said.
Consolidate your credit card debt
Consumers who hold debt in multiple accounts may benefit from putting all of their debt on a single card at a favorable interest rate, Schulz said.
Cardholders, Schulz added, can take advantage of a 0% balance transfer credit card, which offers an initial interest-free phase before payments take hold.
“A 0% balance transfer credit card is about the best weapon people have against credit card debt,” Schulz said.
If debt holders find they cannot qualify for the minimum credit score necessary to access a 0% balance transfer credit card, they may be able to secure a personal loan with a favorable interest rate.
Understand what drives credit card rates
When debt holders understand the underlying forces behind credit card rates, they can better anticipate whether rates are likely to rise further, Tomas Philipson, a professor of public policy studies at the University of Chicago, told ABC News.
Credit card rates are determined in large part by the yield on 10-year Treasury bonds, Philipson said.
The yield on a 10-year Treasury bond, or the amount paid to a bondholder annually, stands at about 4.47%, marking a nearly half-percentage point jump from three months earlier.
The rise in bond yields owes to the recent surge of inflation. Since bonds pay a given investor a fixed amount each year, the specter of inflation risks higher consumer prices that would eat away at those annual payouts. In turn, bonds often become less attractive in response to economic turmoil. When demand falls, bond yields rise.
If the U.S. and Iran were to strike a peace agreement, the resolution could ease inflation risks and bring down credit card rates, Philipson said. If the war persists, however, rates could rise further.
“If the war ends, we’ll have interest rates come down,” Philipson added. “That’s uncertain.”
Snowball versus avalanche
Analysts offered up two methods for paying down credit card debt: Snowball and avalanche.
Under the avalanche method, a debt holder ponies up the minimum payment for all of his or her credit cards, with the exception of the card with the highest interest rate, focusing as much as possible on paying down the costliest debt.
“This strategy leads you to pay off all the debt faster and save money,” Mary Clare Peate, a data strategist at the Federal Reserve Bank of St. Louis, said in a blog post. “By tackling the card with the highest interest rate first, you'll pay off that card as quickly as possible and therefore pay less interest overall.”
By contrast, a cardholder may opt for the snowball method. Under this approach, an individual focuses on paying down the credit card with the smallest balance, generating a sense of momentum that allows the debt holder to keep making payments until the task is completed.
Schulz, of Lending Tree, said the best approach is the one that works for each individual.
“The best method for paying off credit card debt is the one you're most likely to stick with,” Schulz said.
