Here’s the good news: Americans repaid $40.3 billion in credit card debt during the first quarter of 2018 and it’s the second-largest quarterly payoff ever, according to Wallethub’s latest data.
The bad news: U.S. consumers began the year owing more than $1 trillion in credit card debt for the first time ever. They added a post-Great Recession record of $91.6 billion to outstanding credit card balances in 2017.
“Only four times in the past three decades have we overspent so much in a year,” writes WalletHub senior researcher Alina Comoreanu. “And in each case, the charge-off rate – currently near historical lows – rose the following year. That’s true so far, as charge-offs jumped nearly 5% from Q4 2017 to Q1 2018.”
At 3.80 percent for the first quarter of 2018, the charge-off rate is up nearly 6 percent year-over-year and at the highest point since mid-2012.
WalletHub and other debt experts recommend this method for paying down credit card debt: The “avalanche method” means putting the majority of your monthly debt payment toward the balance with the highest interest rate and making the minimum payment required on the rest. Once your most expensive debt is paid off, repeat the process until you’re debt-free.