Lack of alternatives, not discipline
Credit cards are one of the most ubiquitous financial products in the country. According to recent data from the Federal Reserve, 82% of U.S. adults had at least one credit card in 2023.
Although the debt burden is expanding, consumers seem to have a better handle on it than Ramsey thinks.
The Fed says more than half of all credit card holders have been paying off their balances every month in recent years. Only 47% of credit card holders carried over a balance for at least one month in the 12 months leading up to the fourth quarter of 2023. In fact, this ratio has been at or below 50% since 2020, according to LendingTree’s analysis of Federal Reserve data.
Granted, Ramsey is right to be talking about debt. Households are swiping their credit cards more in recent years. Total household credit card debt has jumped from $680 billion in the third quarter of 2014 to $1.17 trillion in the same quarter of 2024, according to the Federal Reserve.
Consumerism is certainly part of the reason for this surging debt burden. However, the rising cost of living is also reflected in this growing debt pile.
Civic Science found that 25% of the Americans they surveyed in 2024 said they had to take on credit card debt to purchase gas, groceries or other essentials at least once. Of this group, 16% said they had to do so every month.
Based on this data, consumer discipline may not be as “theoretical” as Ramsey claims. Instead, many consumers might be borrowing because they have few alternatives to afford basic necessities during an inflation crisis. But the majority of credit card holders are following the golden rule of paying off the balance every month.
Nevertheless, nearly half of all cardholders are still struggling to pay off their balances every month. If you’re part of this cohort, here’s how you can stay on track in 2025.
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To stay disciplined with credit card debt this year, it may be a good idea to automate your monthly payments to avoid missed deadlines and late fees. According to LendingClub, the majority (68.4%) of Americans manually pay their balance off every month, which makes it easier to forget.
You can also get a better idea of your net worth and create a detailed budget, allocating a portion of your income specifically to credit card payments — prioritizing high-interest balances first.
Or, you could consider the debt snowball method for quick wins. On his website, Dave Ramsey recommends paying off smaller balances first because it’s more psychologically rewarding and therefore easier to sustain.
You can also try to negotiate lower interest rates with issuers if you have good credit or limiting new charges by using cash or a debit card for discretionary spending. Remember to regularly review statements for accuracy and reward yourself for hitting milestones to maintain your motivation.
A few new habits can help you manage debt more efficiently, while still owning a credit card.
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