US credit card debt surges to new all-time high of $1.33 trillion

The total debt Americans owe on their credit cards has just hit an eye-watering $1.33 trillion, a new record high that shows how deep household borrowing has gone in 2025.

The data, which came from CardRatings.com, reflects how average families are leaning on credit cards to cover everyday costs with the Federal Reserve’s rate cut doing nothing to ease the pain, and the numbers reveal that relief is still far out of reach for millions.

Nearly half of U.S. households now carry credit card debt, paying over 20% interest on average, as it becomes one of the most expensive ways to borrow, for financing survival.

“For millions of American households, credit card debt represents their highest-cost debt by a wide margin,” said Ted Rossman, senior industry analyst at Bankrate, describing how widespread and costly revolving balances have become.

Fed rate cuts bring almost no real help

Most credit cards have variable interest rates, which means their rates usually follow the Fed’s benchmark. When the Fed lowers its rates, the prime rate drops too, and that should bring down interest rates on credit cards within a billing cycle or two.

But that isn’t happening. When the Fed cut rates by a full point in late 2024, the average credit card rate only slipped by 0.23% during that same period. And when the central bank trimmed another quarter point last month, the average rate fell by just 0.09%, landing at 24.22% for the third quarter.

“Consumers hoping for an automatic, proportional drop in their credit card interest rates may be disappointed,” said Jennifer Doss, executive editor at CardRatings.com. She explained that the link between Fed policy and card APRs is often weaker than people assume, adding that “credit card rates are heavily influenced by credit conditions and individual credit scores.”

Jeff Sigmund, spokesman for the American Bankers Association, said the industry sets rates in “a highly competitive market.” He added that if the Fed keeps cutting rates, some consumers will see lower APRs eventually, though how much and how soon depends on the type of card and the issuer.

Banks protect themselves, not borrowers

Issuers, meanwhile, are finding ways to keep profits safe. Rossman said that card companies often trim the lower end of their APR range, which affects borrowers with excellent credit, but keep the higher end untouched. Basically, the best customers get small cuts while those struggling with debt stay trapped in high-cost balances, according to CNBC.

For some retail credit cards, APRs are even rising, despite the Fed’s moves, according to a Bankrate survey. Banks that issue store-branded credit cards have said maintaining higher APRs was necessary following a Consumer Financial Protection Bureau rule limiting what the industry can charge in late fees.

Even after bank trade groups succeeded in overturning that rule earlier this year, major issuers like Synchrony and Bread Financial said they wouldn’t roll back those increases.

Here is what that means for the average American: even if your card rate dropped by a quarter point, say, from 20.12% to 19.87%, you’d save about $1 a month if you’re only making minimum payments.

The only people escaping the pain are those who pay off their balances every month or take advantage of 0% balance transfer cards that offer 12 to 21 months interest-free.

“The real consumer benefit lies in making your personal credit card rate 0%, either by paying in full – if you can – or signing up for a 0% balance transfer card,” Rossman said.