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Credit card debt is a common problem that many people struggle with today. But how much credit card debt is too much? Well, that can be challenging to answer, as it varies from person to person depending on how they use their cards and how disciplined they are when it comes to paying credit cards off each month. But there are a few general guidelines that you can follow to help determine how much credit card debt is too much.

Keeping Credit Card Debt in Check

It’s essential to make sure that you are not spending money you do not have. So, for this reason it’s a great idea to create a budget and track expenses. If your credit card balance is too high and the monthly minimum payment seems insurmountable, then it is essential to spend some time reviewing how you are using your credit card. New to budgeting? Don’t worry, here are a few articles that can help:

Signs You Have Too Much Debt

If you find yourself asking if you have too much credit card debt, then chances are good that you do have too much. Here are a few other ways to tell if you have too much credit card debt:

You can’t afford to pay your credit card bill

Are you spending more on your credit card each month than you can afford to pay in full? Are you beginning to incur penalties and interest charges? If yes: You may have too much debt.

When you have too much credit card debt, it can be tempting to start only making the minimum monthly payments instead of paying it in full. Don’t do this! This will only result in more interest charges that will cost you even more money over time. One of the best things that you can do in this situation is to call your provider and try to renegotiate your payment plan. You can also work with a debt settlement company that will work through these negotiations for you, saving you even more time, money, and stress.

You have to borrow money to pay back debts

If you have to borrow money from a bank or loved ones to pay off your debts, you may have too much credit card debt. By taking out a new loan to cover outstanding credit card debt (also called “debt consolidation”), you aren’t reducing what you’re required to pay back—you could actually be increasing it due to fees associated with taking out the new loan. If, on the other hand, you can use your income from savings or other sources to pay off your debts, congratulations!

You can’t afford basic necessities

Are you struggling to afford necessities, like groceries or utilities, for your family because of your current debt payments? If this is the case, you may need to look at your budget and identify ways to cut back on your credit card spending. If this isn’t possible, you might benefit from debt relief.

You’re getting calls from debt collectors

Do you constantly get calls from debt collectors and find yourself sending any unknown caller to voicemail? If this is the case, then it may be time for a more aggressive plan. Debt relief could help you resolve credit card debt for less than you owe.

Your credit card debt is causing stress 

If you’re having trouble sleeping at night and feel like you are constantly on edge because of your financial situation, then you may be experiencing something called “financial stress.” To release this pressure, you must acknowledge how serious your situation has become and then take steps to get back on track as soon as possible. A great next step would be to speak with a certified debt consultant.

How to calculate if you have too much debt

When evaluating how much debt is too much for your situation, it’s essential to look at two different ratios to help determine if you are on a sound financial path or in need of assistance.

Credit utilization ratio

A credit utilization ratio is the amount of credit you’re currently using divided by how much credit you have available. The higher your ratio is, the riskier it becomes to potential lenders for giving out a loan or extending additional lines of credit. Typically anything below 30% is considered a reasonable credit utilization rate.

Debt-to-income ratio

Your debt-to-income (DTI) ratio looks at your monthly expenses and how much income you have. To calculate this, you take all of your monthly bills and expenses and divide that number by your income before taxes. Typically lenders want you to have a DTI ratio lower than 36%.

If your credit utilization or debt-to-income ratio are higher than the guidelines above, debt relief could be a great tool to help improve your situation. Read more about the best debt relief options in this article. 

How can I reduce my debt?

If you’ve decided that you have too much debt and want to find ways to reduce it, there are a few steps that you can take.

Make a plan for monthly credit card payments

If you find yourself dealing with credit card debt, it is essential to manage your monthly payments. This can be done by first focusing on how much you can pay toward your credit card balance each month and then deciding how long it will take for you to get out of debt. The more you can pay toward your credit card balance each month, the faster you can pay off your debt, and the sooner you will be able to stop paying interest fees on that card.

To do this, it is important to know: how much credit card debt you have and how many cards are open, how often your paychecks come in each month, how much money they include, and what other debts need to be paid off as well. One popular approach is to also prioritize paying off the credit cards that carry the highest interest rates. It’s called the “debt avalanche method” and you can read more about it in this article.

Create a budget (and stick to it)

Creating and sticking to a budget can help you better see how much money is coming in each month and how much needs to go out.

Keep your budget as simple as possible, with a few key categories like income, expenses, savings/investments. This can help you quickly review how well the household finances are doing and whether there could be ways to save more money or spend less on certain items.

You should also keep track of how many credit cards you have open at one time, along with their balances, so that if any problems arise, it becomes easier to decide which card may need to get paid off first.

Review your bills and credit report regularly

While it’s easy to set all of your bills to autopay, you must review every bill you pay to make sure you are being charged accurately. You would be surprised at the number of people who get charged for things they don’t need or that are not correct on their bill.

It’s also a good idea to review your credit report regularly so you’re able to dispute any inaccuracies before they’re permanent. Read more about disputing errors on your credit report in this article.

Consider debt settlement

If you find that the amount of debt that you have is overwhelming and you need help overcoming it, then  debt settlement might be an excellent option to help you. These companies use their expertise and leverage to negotiate with your creditors for better interest rates, lower monthly payments, and reduced balances on what is owed.

How can CreditAssociates Help Reduce My Credit Card Debt?

If you’re looking to reduce the amount of credit card debt you have, CreditAssociates can help! Our certified debt consultants can walk you through how to get your credit card debt down, for less. Fill out our online form or call 1-800-983-6693 to start your free, no-risk consultation today.

Credit Card Debt FAQs

How much credit card debt does the average person have?

According to the 2020 Experian Consumer Credit Review , Americans carry an average of $5,313 in credit card debt, which is a 14% decrease compared to 2019.

How much credit card debt is healthy?

While credit card debt can be something to be wary of, there are situations where it can be healthy and manageable. If you can afford to pay off your credit card debts, that might be a sign that you have a healthy amount of debt. However, if you’re not making any progress on how much of the balance is still owed compared to how long the card has been open, then you may have too much debt. 

How do I get out of $50K credit card debt?

If you have a large amount of credit card debt and are beginning to feel overwhelmed by keeping up with your payments, it may be time to seek professional help. CreditAssociates offers free consultations with our debt relief experts, who can review your situation and provide the guidance needed to get back on track financially.

How much credit card debt is too much for a mortgage loan?

When you’re looking at getting a mortgage loan, credit card debt can be one factor that banks will consider. Typically banks want applicants to have a debt-to-income ratio of 36% or less.

How much credit card debt should I pay off?

The amount of credit card debt you should pay off every month depends on how much you can afford to pay off. The more money you have available, the higher percentage of your balance should be paid each month to avoid carrying a large amount over into the next month and incurring interest charges. We recommend that if you can pay off your credit card bill entirely that you do so. This will help prevent large sums of debt from accumulating and interest rates from adding onto your balances. However, if you’re short on funds, make sure you pay at least the minimum balance required each month and commit to a more extended repayment plan.

How do I get out of credit card debt without paying?

It’s doubtful that you will be able to get out of credit card debt without paying anything. However, there are some circumstances where you may be able to negotiate a deal with the creditors to reduce that amount that you owe them. Debt settlement companies also specialize in these types of negotiations and could use their expertise and leverage to save you even more time and money.