Federal Reserve says consumer distress is at a 12-year high and credit cards are the canary in the coal mine

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While investors worry about the markets, the Federal Reserve Bank of Philadelphia is raising the alarm about another economic indicator: credit card payments.

According to the central bank, more than one in 10 Americans paid only the monthly minimum on their credit card debt in the fourth quarter of 2024. Paying just the minimum means you shell out more in interest over time.

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Often, making minimum payments is a sign of consumer distress — and this warning sign is at 12-year high.

Worse still, the number of credit card accounts that are 90 days or more past due reached yet another record high in the fourth quarter of 2024.

This begs the question: What’s behind the growing debt burden for so many Americans? Here’s what’s causing it, and how you can get out of debt and stay that way.

Why are so many Americans in credit card debt?

It’s no surprise Americans are struggling with debt. Years of high inflation, triggered by the pandemic and its aftermath, have taken a toll on many households.

Although inflation has cooled from a peak of 8% in 2022 to 2.4% in March 2025, household budgets haven’t kept pace.

To cope, more Americans are leaning on credit cards. Debt.com’s 2025 survey found that one in three use cards to cover essentials, and many have maxed them out. With ongoing tariff negotiations expected to raise prices further, reliance on credit could continue to grow.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

How to pay off credit card debt

To protect your credit score, start by never missing a credit card payment.

Mark payment due dates on your calendar and set reminders to avoid missing them. With average credit card interest hovering around 21.37%, carrying a balance is costly as minimum payments mostly cover interest. Aim to pay in full each month, or at least more than the minimum.

To make headway on your debt:

• Track spending and create a budget prioritizing debt repayment

• Stop charging for what you can’t pay off immediately

• Automate credit-card payments on payday

• Pay extra on one debt each month until it’s gone, then tackle the next

• Keep going until you are debt-free

To fully pay off your debt, consider Dave Ramsey’s Snowball Method — start with the smallest balance to stay motivated — or the Debt Avalanche Method, which targets high-interest debt first to save more over time.

Another option is a debt consolidation loan. This can lower your interest costs and simplify your monthly payments.

If you have significant home equity, you could use a Home Equity Line of Credit (HELOC) to consolidate your high-interest debts.

A HELOC is a secured line of credit that leverages your home as collateral. Rather than juggling multiple bills with different due dates and interest rates, you can deal with one easy-to-manage payment instead. The results? Less stress, generally reduced fees and the potential for significant savings over time.

Rates on HELOCs and home equity loans are typically lower than APRs on credit cards and personal loans, making it an appealing option for homeowners with substantial equity.

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After tackling your debt, it’s important to stick to your budget and focus on building an emergency fund covering three-to-six months of expenses. This helps you avoid falling back into debt during tough times.

Building this fund quickly is perfect for your peace of mind, but can take a while with the interest rates of standard savings accounts. A high-yield alternative like a Wealthfront Cash Account can be a great place to grow your emergency savings, offering both competitive interest and easy access when you need funds.

Wealthfront’s high-yield cash account offers a 4.00% APY on deposits — nearly ten times the national average. Plus, they charge no account, monthly or overdraft fees. Your deposits are also insured by the Federal Deposit Insurance Corporation for balances up to $8 million.

Better still, if you fund your account with $500 or more, you get a $30 bonus.

After your emergency fund is in place, you could channel your extra funds into investing. One way that might help is by automatically investing your spare change with Acorns.

The app automatically rounds up your everyday purchases to the nearest dollar and invests the difference into a diversified portfolio of ETFs. This means that every transaction — from your morning coffee to grocery shopping — contributes to building your savings.

For instance, if your total grocery bill comes to $25.35, Acorns will automatically round it up to $26 and invest the 65-cent difference. These small amounts add up over time.

Acorns is also offering an extra $20 for those who sign up with a recurring deposit.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.