How much credit card debt is too much?

how much credit card debt is too much

You’ll know you have too much credit card debt if you are struggling to pay your essential expenses because of it, your credit card balances are not going down, you are unable to reach financial goals, or are facing other financial setbacks.

Have you been looking at your credit card statements piled up at the end of each month and begun to wonder if you might have too much debt? It can be challenging to determine precisely how much credit card debt is too much as debt, on the whole, has become so commonplace. As of 2021, American consumers had an average of three credit cards with an average balance of $5,525.1

While there is nothing wrong with having multiple credit cards, how can you tell when your debt is getting out of control? There are several telling signs that you can look for to prevent yourself from falling into a debt spiral.

The goal is to catch any destructive patterns early, so it is easier to backpedal and get on the right track if you find that your credit card debt is too much. 

How To Tell if Your Credit Card Debt Is Too High

If your credit card debt is becoming excessive, you will likely be able to spot the strain that it puts on your finances quickly. These are a few of the indications that you have perhaps bitten off more than you can chew:

  • You are only paying the minimum monthly payment on your credit cards.
  • Even the minimum payments across your balances are too pricey for your monthly budget.
  • You are hitting the limit on your credit cards.
  • The money you are putting towards the minimum payment on your credit cards is higher than your other standard monthly bills.
  • The interest rate charges on your credit card balances are substantial and practically make your minimum payments useless.
  • Your debt-to-income ratio is too high.
  • Your credit utilization ratio has become far higher than the recommended 30 percent.

If several or all of these signs sound familiar, it may be time to consider significantly reducing your credit card debt.

We will further explore the debt-to-income ratio and credit utilization ratio as they can be tremendously effective in maintaining responsible credit use.

Debt-to-Income Ratio

One of the surest indications that your debt is too much is a high debt-to-income ratio. When you have more debt than you can afford, you will see it reflected in how much that debt costs you in monthly debt payments. Your debt-to-income ratio gets calculated through your overall monthly debt payments compared to your monthly income.

When your credit card bills take up a substantial percentage of your budget every month, it risks other aspects of your finances. It will likely only worsen over time, considering the accumulation of interest charges on your balances.

Many experts advise that you keep your debt-to-income ratio somewhere between 30 and 40 percent of your total net monthly income, ideally even lower.

Credit Utilization Ratio

Your credit utilization ratio is vitally important to determining problem debt and calculating your credit score. Your credit utilization ratio is defined by how much debt you owe compared to the available credit you have. 

Credit utilization plays a significant role in your credit report and makes up 30 percent of your FICO score calculation. Having a high credit utilization could damage your credit score, diminishing the financial opportunities available to you, as well as indicate that you have more debt than you can reasonably manage.

Most financial experts suggest a credit utilization ratio under 30 percent to keep your debt manageable and an optimal FICO credit score.

The Importance of Credit Diversity

Having a majority of your debt concentrated within one type of credit or loan gives your overall credit a lack of diversity, reflecting poorly on your credit score. Plus, this concentration being credit card debt rather than other types, means you likely won’t have a healthy balance of good and bad debt.

Good Versus Bad Debt

Loans with low-interest rates or a fixed payment with a specific purpose or to purchase something that grows in value are known as good debt. Some examples of good debt include mortgage loans, business loans, and student loans.

Some loans, auto loans, or lines of credit with variable or high-interest rates used for purchases that lose value over time are commonly referred to as bad debt. 

The perfect example of bad debt is credit cards with high-interest rates and constantly increasing balances. Nobody should have an overwhelming amount of bad debt as it quickly multiplies.

It is best practice to aim to have more good debt than bad and keep bad debt in check by paying off balances altogether.

Signs That Credit Card Debt Is Becoming a Problem

Some warning signs that your debt is not only too much but in danger of becoming a problematic debt spiral:

Warning Signs of Problematic Debt SpiralDescription
1. Living paycheck to paycheck– Little money left at the end of the month.
– Making only minimum payments on credit cards.
2. Balances not decreasing– Credit card balances persist despite monthly payments.
– Interest charges prevent a decrease in outstanding balances.
3. No emergency fund, relying on credit cards– Unable to build an emergency fund.
– Dependence on credit cards for unexpected expenses.
4. Using credit cards for cash advances– Resorting to credit cards for cash advances rather than using available funds.
5. Seeking new credit instead of paying down balances– Considering applying for new lines of credit when existing credit card limits are reached.
– Neglecting to prioritize paying down existing balances.
6. Lack of financial planning and saving for the future– Inability to plan or save for the future.
– Financial constraints prevent setting money aside for future goals and expenses.

If you recognize any of these issues in your financial situation, it is time to develop a legitimate action plan to minimize your credit card debt significantly! Put a pause in your spending immediately and strategize a way to reduce your debt and create new habits of responsible credit usage.

How To Minimize Your Credit Card Debt

Once you have decided to tackle your credit card debt and stopped adding to your overall balance, you have already taken the hardest step. But we understand it can be challenging to know where to start chipping away at the balances on your various accounts, especially when you have an intimidating amount of debt.

We’ve compiled some helpful tips to equip you as you begin your debt payoff journey:

Cut Down Unnecessary Expenses

A great way to get started paying down your credit cards is to cut down on your spending. Put a pause on subscriptions and unnecessary expenses to redirect that money towards payments on your credit card balances.

Make minor lifestyle changes to free up your budget for significantly higher monthly payments than your regular minimum payments. Watching your balances finally decrease should give you further motivation to find more ways to rearrange your budget toward repayments.

Here are a few ideas to get you started:

  • Cut back on eating out or getting takeout and cook more often. Take that money you used to spend on restaurants and put it all towards a credit card balance.
  • Cancel a few of the streaming services that you subscribe to, keeping only one or two of your favorites, and add that extra cash to your monthly payments.
  • Do a detox from online shopping. Start asking yourself twice before purchasing anything, “Do I really need this? Or do I just want this?” If it is just a want, write down how much that thing cost and make a payment on your card of that sum instead of buying it.

Earn Some Extra Income on the Side

If you want to knock out a portion of your debt quickly, you could pick up a side hustle with the express purpose of putting that extra income towards credit card payments. 

This would be temporary and could even be a more passive source of income like renting out a guest room or selling items you no longer need online.

Look Into Debt Consolidation

Depending on your situation, something like a balance transfer credit card or a debt consolidation loan could be right for you. Consolidation allows you to roll several debts into one where you can pay all of them off at once with a lower interest rate.

This option could not be the best fit for individuals with a bad credit score as the consolidation interest rate could be even higher than your credit cards. However, it is worth looking into both a balance transfer credit card and a debt consolidation loan if you have a decent credit score, as it could greatly alleviate the stress of juggling multiple balances and payments.

Utilize a Debt Repayment Strategy

Using a tried-and-true debt payoff method could give you the tools you need to stay organized and single-minded in your goals. The most commonly used strategies recommended by financial experts are the debt snowball method and the debt avalanche method.

Debt Snowball

The debt snowball method is perfect for individuals who need an extra dose of motivation. With the debt snowball, you start with your lowest balance regardless of interest rate and put all your focus on paying that one off while maintaining each minimum payment on your other credit cards. 

Once you pay off your lowest balance, you move to the second lowest and so on until your debt is paid off.

Debt Avalanche

The debt avalanche is the method you will want to go with if you are most concerned with saving money on interest charges. For this strategy, you will begin with the balance with the highest interest rate first while maintaining the minimum payments on the rest. 

After paying off your highest interest debt, you will move on to the second-highest and so on until all balances are paid down.

Using Credit Cards Wisely To Avoid Too Much Debt

Getting back to a point where your credit card debt is no longer too much to be easily manageable is a feat to be incredibly proud of. However, it is just as essential to continue with responsible credit card use so that you never find yourself in the same position once again.

Keep your credit utilization ratio low, make your payments on time, pay off balances in full as often as you can, keep your debt-to-income ratio low, diversify your debt, and don’t have too many credit card accounts open at one time. These are the best ways to manage credit card debt.

At the end of the day, you are the author of your financial future, and you have the capability to take control of your debt before it takes control of you!

FAQS: How Much Credit Card Debt is Too Much Debt

Here are some answers to frequently asked questions about how much credit card debt is too much:

How does having too much debt affect my ability to get a mortgage or other loans?

Having too much debt, especially from credit cards, can lower your credit score and increase your debt-to-income ratio. This can make mortgage lenders and other loan providers wary, as it suggests you might struggle with additional loan repayments.

Can excessive credit card debt impact my employment opportunities?

Yes, especially if the job requires financial responsibility. Employers may view excessive card debt as a sign of poor financial management, which could affect your credit history and, in turn, employment opportunities.

What are the psychological effects of carrying much credit card debt?

Carrying much credit card debt can lead to significant stress and anxiety, as the burden of constant credit card payments and the fear of reaching your credit limit can be overwhelming.

How does using a balance transfer card for credit card debt consolidation work, and what are its pros and cons?

A balance transfer card allows you to consolidate much credit card debt onto a single card, often with a lower interest rate. This can simplify payments and reduce interest costs, but if not managed well, you might reach your credit limit quickly, leading to more debt.

Are there specific credit card features that can help avoid accumulating too much credit card debt?

Yes, features like low interest rates, alerts for nearing your credit limit, and balance transfer card options can help manage and prevent accumulating excessive credit card debt.

How does much credit card debt affect my retirement planning?

Much credit card debt can significantly impact retirement planning. The funds needed for total monthly debt payments could otherwise be saved or invested for retirement, delaying financial independence.

What are the differences between settling much credit card debt and enrolling in debt management programs?

Settling much credit card debt typically involves negotiating with credit card companies to pay less than what’s owed, which can hurt your credit score. Debt management programs help you pay off the total debt through structured payments, often with better terms.

What should I expect when seeking help from a credit counseling service for managing much credit card debt, and how do I choose the right one?

Expect to discuss strategies for managing much credit card debt, like using a personal loan for consolidation or a balance transfer card. Choose a service with certified counselors, transparent fees, and a focus on reducing your total credit card debt.

How does long-term, excessive credit card debt impact my financial stability and future financial planning?

Long-term, excessive credit card debt can severely affect financial stability. The ongoing struggle to stay below your credit limit and manage high credit card payments can hinder your ability to save for future goals and negatively impact your credit history.

Key Takeaways With CreditNinja

Ideally, most people want to be debt-free especially when it comes to credit cards. However, having some debt is pretty normal. A few signs that your credit card debt has become too much include living paycheck to paycheck, the balances on your credit cards are not going down, and you are having trouble saving. When this happens, there are lots of strategies that can help you cut down on the debt. To learn more about credit cards, personal loan options, bad credit loans, installment loans, or other financing options check out CreditNinja’s dojo!


  1. How many credit cards should you have? | Yahoo Finance
  2. How Much Do You Owe? | Forbes
  3. How Much Credit Card Debt Is Too Much? | U.S. News 
  4. 5 Tips to Use Your Credit Card Wise? | U.S. Bank 

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