Americans are earning more and spending more, but they're also charging a lot of what they buy to their credit cards. What's more, many are also paying high interest rates on their outstanding credit card balances.

WalletHub, a consumer-finance website, says that national credit card debt hit $912 billion in the second quarter of this year, just below the all-time high of $984 billion at the end of 2008. The average unpaid amount for cards that have a balance is around $7,800, and the average interest rate paid on those balances is 15 percent. The organization expects the national credit card balance to surpass $1 trillion by year-end.

“You can get into credit card debt quickly, and then it can take years to get out,” says Jennifer Landon, the president of Journey Financial Services in Ammon, Idaho. “You need to remind yourself that you are promising away your future earnings.”

To be sure, banks are trying hard to get consumers to sign up for new credit cards. Experian reports that in the second quarter of 2016, the total credit limit on new cards issued reached $100 billion, a 30 percent increase over the same period two years ago. 

“One of the most common mistakes consumers make is to see a new credit limit as an asset,” says certified financial planner David Schneider, the founder of Schneider Wealth Strategies in New York City.  “A new $5,000 credit limit is not an asset, it’s a potential $5,000 liability.”


Use our Credit Card Adviser Comparison Tool to find out which cash-back credit cards are right for you.
 

Paying Off the Debt

One of the smartest investments you can make today is to pay off credit card debt. “Being charged interest at a double-digit rate is a killer,” says Schneider. “Paying it off is the same as earning a double-digit rate of return.” 

Here are some strategies for tackling an unpaid balance:

Use your good credit. If you have a credit score of at least 700, try to wrangle a better deal, says Greg McBride, chief financial analyst at Bankrate.com. Some cards currently offer balance transfers that charge no interest for 18 to 21 months. That’s a long “free” stretch to tackle paying off your debt. Most transfer deals hit you with a 3 to 4 percent transfer fee, so McBride suggests contacting your credit card issuer to say you will transfer unless it reduces the rate it charges. Then compare the cost of the transfer with the cost of paying off your current card at the new lower rate.

Trim your expenses. If staring at a statement that shows you owe thousands of dollars is paralyzing, Landon recommends focusing instead on trimming your spending. “Add up your expenses and you may have $50, $100, or even more that you can cut a month, and that is going to be a big help in paying down your balance,” he says.

Tap your savings. It never makes sense to empty your emergency savings, but if you have more than you need (usually three to six months of living expenses), use some of that extra money to pay down your credit card balances. It is probably earning just 1 percent or less in a bank account, and if you can use it to pay off debt at an interest rate of 15 percent or more, that's a big payoff. Schneider says money sitting in cash in a brokerage account might also be earmarked for paying off the credit card balance.

Work it off. “Nobody wants to hear this, but bringing in more income is a great way to tackle your credit card debt,” says Bankrate’s McBride. Size up how quickly you could be out of debt if you earmarked 100 percent of overtime pay, income from extra projects, or income from a second (temporary) job to paying off your balance.

Refinance to a lower fixed rate. If you have a strong credit score, you might be able to lock in a fixed interest rate well below 10 percent with a personal loan from an online lender such as Prosper, SoFi, and Discover.