The hidden cost of 'managing' credit card debt (and what to do instead)

The hidden cost of ‘managing’ credit card debt (and what to do instead)

For many Americans, the state of household debt looks relatively stable. Recent Consumer Financial Protection Bureau data shows that credit card delinquencies and charge-offs, which rose sharply in early 2024, have since returned to more typical levels.

But stability doesn’t necessarily mean progress.

Now, there is a different pattern emerging—one where people are staying on top of their debt, but doing so in ways that quietly increase the total cost over time.

The most recent CFPB data reinforces this tension: More borrowers are relying on minimum payments at a time when interest rates are at historic highs. In effect, many consumers are defaulting to the most expensive way to carry debt.

Earnest examines how common debt management habits can increase the total cost of carrying credit card debt over time.

The illusion of control

Credit cards are designed for flexibility. They allow borrowers to manage cash flow, cover short-term expenses, and earn rewards. When balances are paid off in full each month, they can be a useful financial tool.

But when balances carry over, that flexibility comes at a price.

Minimum payments, while helpful in avoiding delinquency, can dramatically extend repayment timelines. With interest compounding at today’s elevated rates—often exceeding 25% for general-purpose cards—borrowers may spend years paying down balances that could have been resolved much sooner under a different structure.

This helps explain why many consumers may feel financially stable while actually making little progress toward becoming debt-free.

For borrowers carrying balances month to month, the structure of that debt matters as much as the rate itself—yet it’s often the least examined part of the equation.

Why short-term solutions can fall short

In response to rising interest rates, borrowers may turn to balance transfer credit cards, which offer introductory periods with 0 percent APR. These promotions can provide temporary relief, particularly for those looking to reduce interest costs in the short term.

But they are not a universal solution.

According to the CFPB, promotional-rate credit cards account for a significant share of today’s market—representing hundreds of billions of dollars in both purchase volume and outstanding balances in the most recent reporting period. About one-third of all credit card balances are tied to these offers.

Yet these same accounts tend to carry higher balances over time compared to cards without promotional rates.

There are a few reasons for this. Balance transfer fees—often around 3% to 5%—can offset some of the initial savings. And when the promotional period ends, any remaining balance is subject to standard variable APRs, which remain elevated. For borrowers who are unable to pay off the full amount within the introductory window, the long-term cost can end up being higher than expected.

What appears to be a low-cost strategy at the start may ultimately extend the life of the debt.

Paying for flexibility

Today’s credit environment presents borrowers with a tradeoff: flexibility versus efficiency.

Credit cards offer adaptability. Minimum payments provide breathing room. Promotional rates create short-term opportunities. But these features can also make it easier to delay repayment, increasing the total interest paid over time.

Recent CFPB data also shows that growth in credit card spending has been driven primarily by borrowers with higher credit scores, while spending among lower-score borrowers has remained relatively flat. This suggests that while access to credit remains, the cost of using it has become more significant—particularly for those already carrying balances.

In this environment, many consumers are doing what they can to stay current on payments. But staying current is not the same as minimizing cost.

A more efficient path to repayment

For borrowers carrying high-interest balances, a more efficient structure already exists—but it’s often overlooked.

Unlike revolving credit, installment products such as personal loans are designed around a clear endpoint. They offer a fixed interest rate, a predictable monthly payment, and a defined repayment timeline—typically between two and five years.

For borrowers juggling multiple credit card balances, they can also simplify repayment by consolidating those balances into a single loan—with one monthly payment, one due date, and one interest rate to track. Instead of managing several accounts with different terms, everything is streamlined into a single plan.

This structure provides clarity on both the cost and duration of repayment.

More importantly, it can change borrower behavior. Instead of managing a moving target, borrowers are working toward a known finish line. And in a high-rate environment, that difference may reduce total interest costs, depending on the borrower’s rate, fees, and repayment timeline.

In practice, this often becomes clear when borrowers compare total cost—not just introductory rates. A borrower evaluating a balance transfer offer alongside a personal loan may find that, after factoring in transfer fees and repayment timelines, the loan could provide a faster and less expensive path to becoming debt-free.

That distinction—between short-term relief and long-term efficiency—is increasingly important in today’s rate environment.

Choosing the right tool

None of this is to suggest that one financial product is universally better than another. Different tools work better in different situations.

Credit cards are incredibly useful for day-to-day spending—especially if you’re able to pay the balance off in full each month. They offer flexibility, convenience, and rewards that can add up over time.

But if you’re carrying a balance month after month—especially at double-digit interest rates—that same flexibility can start to work against you. What feels manageable in the short term can become expensive over time.

In those cases, a more structured approach can make a real difference. Moving from a revolving balance to a fixed payment with a clear end date can help you make faster progress and potentially reduce how much you pay in interest overall.

Ultimately, it’s not just about keeping up with payments. It’s about making sure your debt is set up in a way that actually helps you move forward.

Looking beyond the minimum

Many borrowers are doing what they’re “supposed” to do: staying current, avoiding missed payments, and keeping their accounts in good standing.

But that doesn’t always mean they’re getting ahead.

When interest rates are high, minimum payments can keep you treading water for longer than you expect. You might feel in control, but the balance doesn’t move as quickly—and the total cost keeps growing in the background.

That’s why it’s worth taking a step back and looking not just at your monthly payment, but at the bigger picture: how long it will take to pay off your debt, and how much it will cost you over time.

Because the goal isn’t just to manage debt. It’s to get out of it in a way that lets you keep more of what you earn.

This story was produced by Earnest and reviewed and distributed by Stacker.