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

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 (11.1%) paid the bare minimum monthly on their credit-card debt in the fourth quarter of 2024.

That’s a sign of consumer distress, and it’s at a 12-year high.

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Another distress signal? Credit-card accounts that are three months or more past due, which also hit a record high in the fourth quarter of 2024.

Read on to learn why so many Americans owe so much, what to do if you’re one of them and how to get out and stay out of debt.

Why are so many Americans in credit card debt?

It’s no surprise Americans are struggling with debt, given pandemic and post-pandemic inflation.

The Federal Reserve aims to hold inflation at around 2% annually, but it hit 4.7% in 2021, soared to 8% in 2022; then dipped down to 4.1% in 2023, still double the target.

Last year, it settled at 2.9% and in March 2025 it fell to 2.4%.

Unfortunately, Americans’ wallets have not caught up. They’ve been using their credit cards to get by throughout this inflationary era.

In fact, Debt.com’s 2025 credit card survey reveals that one in three Americans relies on credit cards to make ends meet. Nearly the same number have maxed out their cards in light of rising costs.

President Trump’s tariffs will likely drive prices up further, which could exacerbate this troubling trend of people turning to cards to cover the basics.

How to pay off credit-card debt

If you have consumer debt, don’t skip payments on any of your credit-card balances. That could damage your credit score.

Mark payment due dates on your calendar and set up reminders to double- or triple-check that the payments go through.

With the average credit card interest rate coming in at 21.37% as of February 2025, credit card debt is really expensive. Minimum payments barely cover the interest.

That’s why paying off your credit card balance every month is best, but if you can’t afford that, try to pay more than the minimum.

To make headway on your debt:

• Monitor your spending and create a detailed budget that prioritizes paying off debt.

• Stop charging anything on your credit cards that you can’t pay off immediately.

• Automate credit-card payments on payday so money goes directly to your creditors.

• Each month, choose a creditor you want to send additional payments to based on how much you can afford.

• Once you pay off that creditor’s debt, start sending additional payments to the next debt you want to pay off.

• Keep going until you are completely debt-free.

One option — the Snowball Method – is to focus on the debt with the lowest balance first. Finance expert Dave Ramsey recommends this approach. The idea is that you’ll stay more motivated if you score quick wins.

You could also use the Debt Avalanche system, making additional payments on debt with the highest interest rates first. That means you’d prioritize credit cards over a line of credit, for example. The Debt Avalanche system ensures you’ll stop paying excessive interest sooner.

You might also consider a debt consolidation loan to pay off your credit-card debt and then pay off the loan (at a lower interest rate) monthly.

Once you’re debt-free, stay that way by applying the techniques you learned to pay down debt in a new way — building your financial security.

Keep living on the careful budget you created when you were working on debt payoff — but channel the money you used to pay down debt monthly to build up an emergency fund instead.

The fund should cover up to six months of living expenses. That will ensure you avoid using credit cards in the event of a layoff or other crisis. If you already have an emergency fund, direct the money toward investing.

By budgeting, avoiding excessive use of credit cards and being careful about what you spend, you can invest in your future, not your creditors.

Read more: Car insurance premiums could spike 8% by the end of 2025 — thanks to tariffs on car imports and auto parts from Canada and Mexico. But here’s how 2 minutes can save you hundreds of dollars right now

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