Minimum payments are driving Americans\u2019 ballooning credit card debt, and that\u2019s just part of the problem.<\/p>\n
More than 4 in 10 US credit cardholders typically make the minimum payment each month, jumping to nearly 6 in 10 for Gen Z adults, according to a new report from LendingTree.<\/p>\n
\u201cJob No. 1 for any credit cardholder is to pay their balance off as soon as possible,\u201d Matt Schulz, chief consumer finance analyst at LendingTree, told Yahoo Finance. \u201cIn most cases, for most people, paying just the minimum is a bad idea. When minimum payments become the norm, it\u2019s often a sign that people are stretched thin and running out of wiggle room.\u201d<\/p>\n\n
What\u2019s worse: Nearly 6 in 10 cardholders believe carrying a small balance helps their credit score.<\/p>\n
It doesn\u2019t.<\/p>\n
\u201cWhile every credit report and score is unique, generally speaking, it\u2019s not true that carrying a balance helps your score,\u201d Schulz said. \u201cIn fact, the opposite is more likely to be true. Along with being expensive, carrying a balance can do real damage to your credit picture.\u201d<\/p>\n
Read more:\u00a0<\/em>How long does it take to build credit from scratch?<\/em><\/p>\n Meanwhile, more than a quarter of cardholders say they don\u2019t need an emergency fund because they rely on credit cards \u2014 including 43% of Gen Zers.<\/p>\n And it gets worse. About half of cardholders don\u2019t know the interest rate on any of their credit cards. Shockingly, even older cardholders fall short on this one \u2014 nearly 60% of baby boomers and about half of Gen Xers don\u2019t know any of their credit cards\u2019 interest rates, versus 35% of millennial cardholders and 33% of Gen Zers.<\/p>\n The stats are especially disturbing for Gen Z, considering that more than 25% of those with a FICO score opened at least one credit card in the past year \u2014 the highest rate of any age group.<\/p>\n And many are opening cards to use as a financial cushion as the cost of living accelerates. \u201cIf your choice is between keeping the lights on and food on the table or paying above the minimum on a credit card, don\u2019t worry about the credit card,\u201d Schulz said.<\/p>\n Read more: <\/em>Find the best 0% APR credit cards for April 2026<\/em><\/p>\n For those who regularly carry a credit card balance and are in the dark about what their credit card interest rate is, that\u2019s a game changer \u2014 and not in a good way. The average credit card interest rate in the US was 23.72% last month.<\/em><\/p>\n \u201cIf you never carry a balance, your card\u2019s interest rate is largely irrelevant,\u201d he added. That\u2019s because interest typically only accrues if you don\u2019t pay your bill in full each month.<\/p>\n But nearly half of cardholders carry a balance.<\/p>\n Here\u2019s an easy first step to cut your credit card debt: Call your credit card issuer and ask for a lower interest rate, pointing out your history of on-time payments.<\/p>\n<\/p><\/div>\n If your provider won\u2019t offer a break, shop for a 0% balance transfer card. You can move your current high-cost credit card debt to a new card with a 0% promotional rate that lasts up to 21 months. There is, however, a 3%-5% transfer fee on the total amount you transfer, but that long interest-free period will give you some breathing room to begin paying down the balance.<\/p>\n Automating your monthly payments and paying more than the minimum are the keys to slashing your credit card debt.<\/p>\n Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.<\/em><\/strong><\/p>\n Alternatives include consolidating all your credit card debt into a personal loan. It\u2019s possible to land an interest rate around 12% over three years for a $5,000\u00a0loan, but you\u2019ll need a decent credit score, which may not be the case if you\u2019ve piled up too much debt.<\/p>\n A nonprofit credit counselor may be able to negotiate with your credit card issuers to give you a break on rates, but you will pay a fee for the service. The Justice Department website lists approved credit counseling agencies.<\/p>\n Other resources include AARP\u2019s credit card payoff calculator and the National Foundation for Credit Counseling.<\/p>\n Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “<\/em>Retirement Bites: A Gen X Guide to Securing Your Financial Future,<\/em>” “<\/em>In Control at 50+: How to Succeed in the New World of Work<\/em>,” and “Never Too Old to Get Rich.” Follow her on <\/em>Bluesky<\/em> and <\/em>X<\/em>.<\/em><\/p>\n![\"\"](\"https:\/\/s.yimg.com\/ny\/api\/res\/1.2\/xclc0.tMJminBMuww2KRNQ--\/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTY0MQ--\/https:\/\/media-mbst-pub-ue1.s3.amazonaws.com\/creatr-uploaded-images\/2022-11\/57b87590-6f40-11ed-adfd-d61b54e67c5c\")
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