How Much Credit Card Debt is Too Much?

Written by Banks Editorial Team
6 min. read
Written by Banks Editorial Team
6 min. read

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If you are wondering how much credit card debt is too much, you aren’t alone. Average Americans carry $5,221 in credit card debt, according to the credit bureau Experian. Whether you’re in that category or have more credit card debt than average consumers, you can reduce the stress and worry you have about credit card debt. Read on for practical solutions you can use.

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Consequences of Too Much Credit Card Debt

The financial consequences of too much credit card debt are numerous. If you can’t pay your bills, you might start getting calls from bill collectors. Interest rates on the balance of your credit cards could climb. Late fees can add up fast and hurt your credit score. What’s more, you could be denied future applications for credit by banks, credit unions and other financial institutions. Of course, not all the consequences of having too much credit card debt are financial. You may be anxious about looking at your credit card accounts to see how much you owe. The worry can affect your relationships and make it hard to concentrate at work. Eventually, having too much credit card debt can affect your physical and mental health.

How Much Credit Card Debt is Too Much?

Is $2,000 too much credit card debt? Is $5,000 credit card debt a lot? Questions like those could be keeping you up at night. If that is the case, you might have too much credit card debt. Of course, it’s different for everyone but if you’re thinking about your debt, ask yourself:

  • Can you make your payments?
  • Do you know how many credit cards you have or how much you owe?
  • Is the minimum amount due each month stressing you out?
  • Have you ever gotten a cash advance to pay your bills?
  • Have you used one credit card to pay what’s due on another?
  • Do you hide bills and bank statements from your significant other?
  • Have you been contacted by collection agencies for overdue bills?

The truth is, any amount of credit card debt that leaves you feeling overwhelmed and anxious is too much credit card debt. Among your options is seeking professional assistance from trained counselors who can help you dig out from having too much credit card debt.

How to Know If You Have Too Much Credit Card Debt

Aside from the emotional aspects of feeling like your debts are too big, there are ways to determine whether you truly do have more debt than you can feasibly repay in a timely manner.

Credit Utilization

Your credit utilization rate is the percentage of the total credit you are approved to use. For example, if your credit card has a $5,000 credit limit and you spend $2,500 on it, the credit utilization rate is 50%. The rule of thumb is to keep your utilization rate under 30%. The lower that percentage, the better where your credit score is concerned. If your credit utilization is more than 30%, credit card companies and other lenders may consider it too much risk that you won’t be able to pay back your debt. In addition, carrying high balances on your credit cards could also lower your credit score.

To determine your credit utilization, find out your credit limit for each credit card you use. Then, add up your credit limit for all your cards and divide the current balances owed by that number. For instance, if your credit limit totals $8,000 and the current balances you owe are $2,000, divide 2000 by 8000 and get a credit utilization of 25%.

Debt-to-Income Ratio

Debt-to-income ratio is how lenders measure if they should approve you for a loan. Banks and credit card companies won’t usually offer more credit to you if they think you already have too much debt. You can use your debt-to-income ratio to get a sense of whether you owe too much in credit card debt. You want a number that’s less than 36% since that’s the high end of what banks consider too much debt compared to your income.

To calculate your debt-to-income ratio, use this equation:

Total monthly debt payments (credit cards, rent/mortgage/auto loans, etc.) / Total gross monthly income = Debt-to-income ratio

For income, use the full amount you earn listed on your pay stub before taxes and other deductions are subtracted. Be sure to include other income you receive, such as Social Security or child support.

Credit Card Debt Ratio

Another equation that may be more helpful than the debt-to-income ratio is your credit card debt ratio. It looks at your take-home pay, which is a more practical number to consider when discussing and dealing with too much credit card debt. Take a look at this equation:

Total monthly credit card payments / Total net monthly income = Credit card debt ratio

In general, you don’t want your minimum credit card payments to be more than 10% of your take-home pay. If your credit card bill takes up too much of your income every month, you might not be able to afford other essential expenses like rent, food and transportation.

Unsustainable Debt Threshold

Unsustainable debt threshold is a complicated term that means you have too much debt and will be unable to pay it off if all variables stay the same. Those factors include the amount of debt you have and your current income. Some experts suggest that an unsustainable debt threshold is about $8,400 for the average American household. But your circumstances are unique, and it could be possible for you to manage more debt or less debt than the average. If you consult with professional debt counselors, they can help you calculate what your unsustainable debt threshold is.

5-year Debt Elimination Plan

The five-year debt elimination plan is just what the name implies. Create a strategy for paying off your credit card bills in five years. The theory behind this plan is that if it takes longer than five years to pay off your debt, you aren’t handling your debt efficiently. However, it’s usually not practical to carry out such a plan since it will take too long and cost too much in interest payments over those 60 months.

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How to Resolve Your Credit Card Debt

You do have several options when it comes to resolving your credit card debt. Here are just a handful for you to consider.

Negotiate with Your Credit Card Company

One approach for resolving your credit card debt is to contact the credit card company and negotiate a settlement agreement. The bank or credit card company wants to recover as much of the money you owe as possible. But if they determine that you are unable to pay the full amount you owe, they may be motivated to negotiate a settlement amount and close your account. Among your options is a lump-sum settlement, which will only work if you happen to have money on hand to pay. Alternatively, the credit card company may be willing to reduce the interest rate on your account or change the minimum payment amount. If your inability to pay your credit card bill stems from health issues, job loss or other crises, you can try to negotiate a hardship settlement. Before you contact the credit card company, study their website for information that may be helpful. Also, be sure to write down everything you discuss during the negotiations, so you have a record of dates and conversations.

Come Up with a Payment Strategy

You might come up with a payment strategy that works for you. For example, some people list all their debts and tackle the biggest debt first. That involves paying just the minimum on all other debts and putting more emphasis on the biggest debt. On the other hand, you might do the opposite and pay the smallest debt first in order to feel progress sooner. No matter which strategy you choose, do what you can to reduce spending. Remove your credit cards from your wallet. Consider getting a second job or finding another source of income.

Consider a Debt Consolidation Loan

Another approach is getting a personal loan to consolidate your credit card debt. It can be stressful to juggle multiple payments and due dates. With this strategy, you work with a lender to combine all the debt you owe into one lump sum to manage your payments more efficiently. With a debt consolidation loan, you should be aware that you will have added fees for the convenience of having just one bill to pay each month and you will have interest charged on the loan. A debt consolidation loan can help you boost your credit score sooner than if you continue to manage all your debts individually. However, if you miss a payment, you risk losing any progress you have made with your credit score. You should also avoid going back and using your credit cards again until the loan is paid off. You may run into trouble again and now you have your credit card payments and the loan payments to contend with.

Enroll in a Debt Management Plan through a Credit Counseling Agency

Credit counseling is a professional service that assists people in getting out of credit card debt. This consultation is free to anyone. The process starts with a financial consultation. The counselor reviews your finances and helps you understand the options you have for getting out of debt as quickly as possible.

Once they have a good picture of your finances, the counselor makes recommendations for debt relief. This can include:

  • Balance transfers
  • Consolidation loans
  • Debt management programs
  • Debt settlement
  • Bankruptcy

If you can’t pay off your balances on your own, they can also help you enroll in a debt management program (DMP). In this case, the credit counseling agency acts as a go-between for you and your creditors. They set up a repayment plan that you can afford and that everyone can agree on to reduce or eliminate interest charges, and stop all penalties and late fees.


If your debts are insurmountable, you may have reached the last resort of bankruptcy. Before you make the decision to declare bankruptcy, be sure you fully understand the consequences. Bankruptcy will damage your credit score, and it could take years to restore it to a status that will allow you to borrow money or use credit cards. But if your situation is such that you are considering bankruptcy, you probably already have a bad credit score. You can file for bankruptcy without hiring an attorney, but it is wise to seek legal counsel in a serious matter like this which will have a long-term financial impact. For example, there are big differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy. A lawyer can help you decide which is the right choice for your situation.

Consult a Credit Counseling Expert First

If you have concluded that you have too much credit card debt and are wondering where to turn for a solution, you should start with speaking to a credit counseling expert, such as Consolidated Credit. Since 1993 their professional counselors have been helping consumers with a wide range of debt solutions tailored to a person’s individual needs. Debt management programs at Consolidated Credit can help you reduce or eliminate your debt faster and cheaper. Get the resources you need to understand your options and then choose the path that’s right for you – all while benefiting from the expertise of credit counselors at Consolidated Credit.

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