3 Habits to Adopt in the Wake of $1 Trillion National Credit Card Debt

During the summer of 2023, American credit card debt reached a massive milestone: $1 trillion. And that balance has only grown as of the fourth quarter of 2023, reaching $1.13 trillion, according to the Federal Reserve Bank of New York.

Whether you already have credit card debt, or you're looking to avoid taking it on, here are three new habits you should adopt ASAP.

1. Track your APRs

Most credit cards have a variable APR, so the amount that you pay in interest on each account will change over time. That's why it's so important to track your credit card APRs. After all, if you, like so many Americans, have credit card debt, you may prefer to prioritize your highest APR card first to save the most money.

For example, if you have a $3,000 balance on a card with an 18% APR, that would cost you $250 in interest over the course of the year, assuming you don't charge anything else to that card. But a $2,500 balance at a 22% APR would cost $255 in interest over that same time period. While this payoff option (known as the debt avalanche method) isn't necessarily the best path for everyone, knowing your APRs will still help you figure out the best option for getting out of debt.

2. Pay off your balance more than once per month

Avoiding credit card debt requires you to pay off your balance each month. As a general rule, credit card companies start charging interest if there's a delay from your billing date to the date the company gets your payment. So, if it's at all possible, you may want to consider implementing a practice of paying off your balance multiple times each month to avoid interest charges altogether.

This can also help if you already have credit card debt to pay off, since it would guarantee that you're at least not adding to your existing debt. This is especially true because it can help shift your mindset away from credit cards as a method of instant gratification, and toward the reality that you're spending your hard-earned money.

3. Re-evaluate the rewards cards you use every quarter

Rewards credit cards can boost your finances by giving you access to discounts on your usual purchases, or sometimes even travel. But not every rewards card is going to provide the same level of rewards, and depending on the cards you have, they can change over time. So it's important to make sure you know what rewards you have access to in a given month so that you can get the most out of the cards you have.

For example, some cards will offer higher quarterly rewards that you have to opt into. And if one card is offering 5% cash back on groceries, that's the card you probably want to use to save the most on your weekly grocery purchase. But the next quarter, you may get the best rewards rate from a card that offers a flat 2% cash back offer. You need to be aware of your rewards to maximize their effectiveness for your budget.

How to avoid falling into credit card debt

Avoiding debt isn't just about paying off your balances -- it also means guarding against the need to take on debt in the future. That means building a robust savings account balance. The easiest way to ensure that you're sticking to that goal is to set up auto-transfers to a separate account that you can access in emergencies, but that isn't so easily accessible that you're tempted to dip into it for nonemergencies.

Tracking your credit is another key component here since it can help you secure better interest rates on loans in the future. That way, if you do end up taking out a car or personal loan, for example, you'll be better positioned to qualify for lower interest rates and thereby save more money.

Credit card debt can be hard to avoid, and harder still to pay off. But if you adopt habits that are designed to ensure you keep up with the payments, minimize interest charges, and maximize the rewards you already qualify for, you'll be much better off in the long term.