Navigating Credit Conundrums with Denny: Escaping the Endless Cycle of Credit Card Debts
Credit card debt reaches an astounding $1.2 trillion, according to the New York Federal Reserve, with a worrying 64% of monthly credit card balance carriers delaying or avoiding other financial decisions due to it. Despite this alarming reality, Americans continue to rely on credit cards for emergencies and even travel rewards. However, when used incorrectly, credit cards can become a financial anchor.
The credit card debt trap: Wishful thinking keeps consumers in debt
Many consumers find themselves with maxed-out credit cards due to optimistic hopes of paying down the debt. Americans, facing rising costs and economic challenges, are relying on credit cards to delay payment. Unfortunately, this behavior leads to an out-of-control credit card balance.
According to our website’s 2025 Dealing with Debt survey, 48% of credit cardholders have an outstanding balance, 71% think they'll pay it off in five years, and 53% have been in debt for over a year. My advice for these consumers is straightforward: Consolidate your credit cards and stop using them completely.
The appeal of credit card rewards can be strong, but for the majority, these benefits aren't worth the cost. If you carry a balance, the interest rates can be high, negating the rewards' value. Moreover, the "free money" earned from purchases isn't truly free if you have to spend money to get it.
Breaking free from the credit card merry-go-round
Ideally, you would pay off credit card balances using a debt payoff strategy like the snowball or avalanche method, but if your budget is tight, consider the following alternatives:
Don’t use a balance transfer credit card
Balance transfer cards may seem like the solution, but they keep you in credit card debt. While they can be valuable, particularly with 0% introductory APR offers, they're not the answer for consumers struggling with credit card debt.
Pay off the balances with a personal loan instead
Personal loans, with fixed interest rates, are more manageable than revolving credit card debt. To minimize costs, choose the shortest debt consolidation loan term you can afford. A personal loan calculator can help you compare various loan options.
Consider using buy now, pay later (BNPL) apps
BNPL apps can be a good alternative to credit cards, as they require a set payment schedule and have no revolving credit consequences for your credit utilization ratio. However, they should only be used when truly needed to avoid accumulating unnecessary debt.
credit cards caused heartache in my mortgage days
In the past, I've seen credit card debt impact customers' mortgage applications, leading to higher interest rates and even the inability to purchase a home. To avoid this issue, it's essential to minimize credit card usage, especially if a mortgage or refinance is in your future.
Final thoughts from Denny, your BFF (best financial friend)
The key to avoiding the credit card merry-go-round is not to jump on in the first place. However, if you're already in the debt cycle, a personal loan can provide a way out. Personal loans have fixed payments, lower interest rates, and predictable payoff dates. While some credit card users can charge and pay off the balance monthly, those with larger balances should consider consolidating their debt. It may be tough initially, but the result is a healthier financial future.
Do you have a question for Denny? Email the writer at dceizyk@our website.
- Engaging in personal-finance practices like consolidating credit cards and avoiding balance transfers can help break the cycle of mounting credit card debt.
- For consumers struggling with debt, managing it effectively could potentially lead to a healthier financial future, as opposed to relying on credit cards for emergencies or personal-finance rewards, which may incur high debt-management costs.
