Federal Reserve says consumer distress is at a 12-year high and credit cards are the canary in the coal mine
Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below.
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.
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.
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.
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.
Read more: Rich, young Americans are ditching the stormy stock market — here are the alternative assets they’re banking on instead
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.
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.
If you’re unsure which path to take amid today’s market uncertainty, it might be a good time to connect with a financial advisor through Advisor.com.
This online platform connects you with vetted financial advisors best suited to help you develop a plan for your new wealth.
Just answer a few quick questions about yourself and your finances and the platform will match you with an experienced financial professional. You can view their profile, read past client reviews, and schedule an initial consultation for free with no obligation to hire.
You can view advisor profiles, read past client reviews, and schedule an initial consultation for free with no obligation to hire.
Once your credit card debt is paid off, you might consider switching to one that better suits your needs.The challenge, however, is that searching for the right credit card can be overwhelming.
With CardRatings.com, the process is quick, easy and personalized. Whether you’re looking for cash back, travel rewards, a low APR or zero annual fees, their CardFinder tool matches you with the best offers from top providers.
The process is simple: First, share a few details about your preferences and credit profile. Next, a soft credit check is performed, which won’t affect your credit score. Finally, you can instantly compare and choose from a curated list of cards, complete with overviews of rewards, fees, and benefits.
CardRatings.com will help you find the perfect match and recommend a card that maximizes savings and benefits — all tailored to you.
Money doesn’t have to be complicated — sign up for the free Moneywise newsletter for actionable finance tips and news you can use. Join now.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.