Credit card debt

Quarterly credit card debt in the United States since 1986 (in billions):^[3]

Declines in credit card debt are often misinterpreted because they omit information about charge-offs.^{[citation needed]} Declines in credit card debt may be caused by consumers paying off their debt, credit card companies writing off charged-off debt, or a combination of both.^{[citation needed]} The inclusion of charged-off debt can significantly affect debt trends and the characterization of a nation's financial health.^{[citation needed]}

Consumers commonly pay off a large portion of their credit card debt in the first fiscal quarter of the year because this tends to be when people receive holiday bonuses and tax refunds.^[9] Credit card debt tends to increase throughout the rest of the year.^[3]

Credit card debt is said^{[clarification needed]} to be higher in industrialized countries.^[10] The average U.S. college graduate begins his or her post-college days with more than $2,000 in credit card debt.^[11] The median credit card debt in the U.S. is $3,000 and number of cards held is two.^[12]

According to the Federal Reserve Bank of New York, "the amount owed by all Americans on their credit cards increased to a record $1.13 trillion at the end of 2023".^[13] Wilbert van der Klaauw, a Fed economic research adviser, said growth in credit card debt shows "increased financial stress in younger and lower income families".^[13]

Bankrate advises people with credit card debt to look for options and use what they find to try to negotiate a reduced rate from their current credit card provider(s). On May 25, 2023, Bankrate reported some companies offer "a 0 percent intro APR for 21 months from account opening on purchases and qualifying balance transfers, (18.24%, 24.74%, or 29.99% variable APR thereafter)".^[14]

After the start of the Great Recession in December 2007, multiple-credit-card debt-relief options became widely popular for U.S. residents with unsecured debt of over $5,000.

Debt-relief options available in the U.S. include:

• Debt settlement
• Debt consolidation
• Credit counseling
• Chapter 7 bankruptcy and Chapter 13 bankruptcy

Although each of these debt-relief options deals with credit card debt, they are also able to deal with other types of debt. including personal loans, medical debt, accounts in collections and more, epending on the program type. These programs have not been enough to help enough Americans get out of debt, resulting in economists calling for action and a massive debt bailout by government.^[15]

As of 2024^[update], credit card issuers are required to disclose to the customer how much money a balance will take to pay off if only the minimum payment is made on their billing statement.^{[citation needed]}

A debtor who pays their debts on time and most of the balance each month tends to positively affect their credit score. People who tend to carry a balance which is near their credit limit from month to month and does not pay down their balance can negatively affect their credit scores. Credit use, the number of on-time payments and the length of time one has had one's credit card can effect the credit score of the credit-card debtor.^[16]

The overall score of a debtor varies between scoring agencies and services that report to the bureaus.^[17][18]

In the U.S., a consumer has the right to dismiss certain types of debt under U.S. Chapter 7 and Chapter 13 bankruptcy laws but to do so, they must fulfill certain obligations. A bankruptcy expert reviews the debt with the debtor prior to proceeding with these actions. Certain kinds of debt reviewed may be considered fraud if it is discovered a line of credit was used to make unusually large purchases or cash advances 60 days before the bankruptcy case was filed.^[19][20][21]

Some credit card companies have attempted to lobby at the U.S. federal level to tighten U.S. bankruptcy laws to make the cancellation of credit card debts more difficult.^[22]

Once a debt is handed to a collection agency, the agency will attempt to recover the customer's unsecured debt. If a debt-collection agency is unable to collect a debt despite attempting to do so, it may use legal action in court to attempt recovery of the debt.^[23] A successful judgement against the debtor can include seizure and garnishment of assets including bank accounts and wages in order to pay off outstanding debts.

Customers have rights under the U.S. Fair Debt Collection Practice Act, which specifies they can ask in writing a debt-collection agency to stop calling them about a debt.^[24] This does not stop the collection process but may lead to a legal challenge if a no-contact request is made.^{[citation needed]}

If the statute of limitations has passed in certain U.S. states and legal actions have not been issued against the debtor, a collection agency must remove the outstanding debt from their credit report. The process in the U.S. varies between states.^[25]

A collection agency or credit card issuer may choose to forgive the entire debt, relieving the debtor of the need to repay the debt. In the U.S., this results in the sending of a 1099 C tax form to the debtor, which the debtor is required to file. In the U.S., the reportable amount varies between states.^[26]

• Maxed Out – 2006 documentary about credit card debt and the national deficit.
• Debt collection – A detailed process outlining the recovery of personal debt.

• "Federal Reserve Board: G.19 Release-- Consumer Credit".