Americans are getting better at paying off their $1.25 trillion credit-card debt burden

Andrew Keshner

Despite some encouraging signs, millions of Americans are still struggling with credit-card debt - sometimes to pay for the most basic needs

Americans' credit-card debts have climbed in recent years. Are they turning a corner?

There's a glimmer of good news in the story of Americans' whopping credit-card bill.

A record percentage of credit-card accounts were fully paying off their balances each month during the first quarter of 2026, according to the Federal Reserve Bank of Philadelphia's latest look at how households are using their credit cards.

Almost 37% of accounts (36.93%) were fully paying balances month to month, Philadelphia Fed researchers said Monday.

The share of accounts paying in full has been slowly increasing since the second half of 2024. The new high narrowly tops the previous record, set in early 2021.

Americans' credit-card balances have grown in recent years and more people have fallen behind on their bills. Inflation has pushed up prices, leading the Federal Reserve to raise interest rates in recent years in an effort to tame that inflation.

That, in turn, has seen credit-card interest rates climb higher, making it more expensive to carry a balance each month.

Annual percentage rates on credit cards from major banks averaged almost 24% in the first quarter, Philadelphia Fed researchers noted. That was up from 19% at the start of 2022, when the Fed began raising its benchmark interest rate.

With the Fed now under the leadership of new Chair Kevin Warsh, investors and lawmakers are still trying to understand the central bank's next rate move.

With higher interest rates, it's likely that people who can pay their credit-card bills in full are making it a priority to avoid incurring interest charges on balances, Philadelphia Fed researchers wrote.

Monday's report had another glimmer of good news: Delinquency rates appear to be stabilizing, and fewer accounts are paying just the bare minimum.

The data showed the share of accounts paying only the minimum balance declined to 10.24%. That continues a slow retreat from a more concerning trend: At the end of 2024, more than 11% of accounts were only paying the minimum balance - a record high in data stretching back to 2012.

Paying the minimum means taking on more interest in the long run.

The report captures a major part of the credit-card market, but it's not the entire picture. Philadelphia Fed researchers looked at credit-card data from big banks with at least $100 billion in total assets.

The New York Fed's quarterly report on household debt showed Americans had $1.25 trillion in credit-card debt in the first quarter, a $25 billion decrease from the end of 2025. The share of delinquencies on credit cards and car loans has also stabilized, albeit at elevated levels.

Larger tax refunds from the new Republican tax law could be helping push the trend, but they aren't the driving force, said Grace Zwemmer, U.S. economist at Oxford Economics. The share of paid-in-full accounts was increasing before last year's tax law, she noted.

It's possible banks are tightening their standards, which means more creditworthy accounts are getting counted while nonpaying accounts are charged off or slip into delinquency.

The Philadelphia Fed's data appear to fit the theme of U.S. consumers splitting between those who are thriving and those are struggling, Zwemmer said. In recent years, fully paid balances have increased, as well as those only paying the minimum.

"That leaves the accounts in between - paying more than the minimum but not the full balance - as a shrinking share of the total, which could suggest the middle is thinning out rather than the typical cardholder simply doing better," Zwemmer said.

Some credit-card users pay in full, while others struggle

The latest Philadelphia Fed report may have some encouraging signs for Americans' finances. But it also means millions of Americans are carrying a credit-card balance - with many of them wracking up credit-card debt to buy food, according to a new Urban Institute report.

Almost 35% of working-age adults ages 18 to 64 said they pay for groceries with their credit card and pay the balance in full, Urban Institute researchers said Monday. Nearly 20% of people said they pay less than the whole balance, but at least pay the minimum.

Another 8.7% said they didn't always pay the minimum amount, the researchers noted. That's a 1.6 percentage point increase from 2023.

Nearly 10% of people in the survey said they used buy-now-pay-later options to pay for groceries, and more than one-third of that segment reported missing a payment on a BNPL loan.

It's important for families to have access to credit, said Kassandra Martinchek, senior research associate at the Urban Institute and the report's lead researcher.

"The challenge is, are folks able to effectively repay their credit card or buy-now-pay-later debt without experiencing hardship or putting their future financial stability at risk?" said Martinchek.

-Andrew Keshner

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07-14-26 0815ET