You Might Not Guess How Many Credit Card Users Carry a Balance From Month to Month

A golden rule of using credit cards is that you should always do your best to pay the full balance. You're only charged interest on your purchases if you carry a balance from month to month. By paying in full, you can use your credit card interest-free while taking advantage of any benefits it offers, such as rewards and purchase protections.

Not everyone follows that golden rule. In fact, a large portion of credit card users carry a balance from month to month, and the average debt is a considerable amount.

Nearly half of credit card users carry a balance

Among Americans with a credit card, 47% have revolving debt, meaning they carry a balance. That's according to data from the Consumer Financial Protection Bureau (CFPB) gathered in The Ascent's audit of America's financial health.

Another troubling sign is the amount of debt that many people have. Among that 47% who carry a balance, the average credit card debt is $4,773.

Because of how high most credit card interest rates are, it's expensive to carry a balance on them. As rates have gone up, the average credit card interest rate is nearing 21%. To give you an example of how much this can cost you, let's say you have a card with a rate of 21% and a $4,773 balance. In one year, you'd pay just over $1,000 in credit card interest.

What to do if you have credit card debt

If you have credit card debt, prioritize paying it off as quickly as possible. The faster you can do this, the less interest you'll pay. There are a few steps you can take to get out of credit card debt:

• Cut back on expenses. Separate your needs from your wants, and reduce how much you're spending on nonessentials. If you have a large amount of debt, your best bet may be to stop spending on nonessentials entirely for the time being.
• Put as much money as you can toward your credit cards. If you only make minimum payments, that significantly extends how long it takes to pay off your credit cards. Figure out how much you can afford to pay per month and commit to it. Setting up autopay is a good way to save time and ensure you always follow through on paying that amount.
• Look into debt consolidation if you have good credit. Debt consolidation is when you use a new loan or line of credit to pay off all your existing debt, allowing you to reduce your monthly payments and get a lower interest rate. Balance transfer credit cards are a popular option for this, because they offer a 0% intro APR on balance transfers. Debt consolidation loans are another option.

How to avoid carrying a balance on your credit cards

There are a couple of typical reasons why people carry a balance on their credit cards. Some don't realize how much they're paying in interest. That's why it's important to be aware of your credit card's interest rate.

For others, it's because of poor spending habits. They fall into the trap of spending more than they can afford under the assumption that they'll pay it back later. The best way to avoid doing this is by setting up a budget and tracking your spending. Budgeting apps can help you do this.

One more common cause of credit card debt is needing to borrow money for financial emergencies. Unfortunately, a recent report by SecureSave found that 2 in 3 Americans can't cover a $400 surprise expense. If you have an unexpected bill to pay, and you don't have enough money for it in your bank account, putting it on your credit card may be the easiest option.

Those surprise expenses are why you need an emergency fund. The standard recommendation is to have enough in your emergency savings to cover at least three months of living expenses. If you don't have an emergency fund yet, make that a goal of yours and start setting aside money every month in a savings account for it.

Even though carrying a credit card balance is common, it's something you should try to avoid whenever possible. Paying in full every month is a good habit that will keep you out of debt and keep you from incurring costly interest charges.