Credit Card Debt: A Beginner’s Guide

By Matt Frankel | Updated November 14, 2023
reading time 4 min read
Man looking up credit card information

Credit card debt can be quite a financial burden. However, it’s important to realize that credit cards aren’t inherently a bad financial product in all cases. In fact, there are some good reasons to carry a credit card in your wallet, and to use it. 


Having said that, credit card debt can certainly be dangerous if it gets out of control. In this article, we’ll explore some of the pros and cons of using credit cards to pay for purchases, as well as a couple of ways you might be able to get out of credit card debt faster. 

An overview of credit card debt


Credit card debt can be both a valuable financial tool and a dangerous financial trap – it all depends on how well you understand credit cards and how responsibly you use them. So, here’s a rundown of some of the pros and cons of using credit card debt you need to know. 

Benefits and advantages of using credit cards

Credit cards generally have a bad reputation among financial planners, but it’s important to realize that there are some redeeming qualities. In fact, when used properly, credit cards can be an excellent financial tool. Here are some of the biggest advantages of using credit cards to make purchases:


  • Bonuses and introductory offers – Many credit cards offer welcome bonuses for new account holders, and some offer 0% introductory APRs on purchases and/or balance transfers for a certain amount of time. 
  • Earn rewards – Many credit cards offer cash back rewards, miles, or other types of rewards for purchases. Generally speaking, these are worth 1% to 2% of your purchases, although higher reward rates exist. So, if you charge $10,000 in purchases throughout the year, you could end up with hundreds of dollars in rewards. 
  • A financial safety net – To be perfectly clear, a credit card is not a substitute for having an emergency fund to use when unforeseen expenses arise. But a credit card does provide financial flexibility for use in a scenario where you are unable to pay for something in any other way. 
  • Fraud protection – This is a big one. Debit card fraud protections are generally nowhere near as good as what you’ll find with credit cards. If someone steals your credit card or uses it fraudulently, you’ll most likely have no liability
  • Build your credit – Using credit cards responsibly, by keeping your balance low and paying your bill on time every month, can help you build your credit over time. A history of responsible credit card usage could pay off when you need to borrow money to buy a home or vehicle.

Potential drawbacks of using credit card debt

Although there are some good reasons to open and use a credit card account, they have a generally bad reputation among financial planners and other experts, and for good reason. If you aren’t careful, the downsides to credit card debt can easily outweigh any benefits you get from carrying a credit card. 


  • High interest rates – This is the number one reason why financial planners generally suggest staying away from credit cards. If you carry a balance on a credit card and it isn’t in a promotional 0% intro APR period, credit card debt can be a very expensive way to pay for things. As of September 2023, the average credit card APR in the United States is about 24%. In other words, if you have a $5,000 credit card balance at the average rate, it will cost you $1,200 per year in interest annually. 
  • Low minimum payment requirements – If you have a personal loan or home equity loan, your monthly payments are designed to pay off the debt in a predetermined amount of time. This is known as an installment loan. On the other hand, credit card debt typically has a minimum payment requirement that does little more than cover the interest that accrues on the account. If you just make the minimum payments, you could be paying your credit card debt off for the next decade or more, and end up paying several times the amount you borrowed. 
  • Rewards and bonuses can be a trap – Playing the credit card reward game only makes sense if you don’t carry a balance. Think of it this way. The best cash back credit cards give you 2% back on purchases, and some offer up to 5% in rotating spending categories. If you run up credit card debt to get these rewards, and you’re paying an APR of 20% or more, it doesn’t take long before the value of the rewards you get disappears. To be perfectly clear, credit card rewards, as well as introductory APRs and welcome bonuses, are designed to get you to spend more money. 

How to get out of credit card debt

The average American carries about $5,733 in credit card debt according to a March 2023 report by TransUnion. If your credit card debt has become too much of a burden hanging over your head, there are a few methods you can use to tackle it. 

A personal loan could put you on the right path

Using a personal loan can eliminate two of the biggest negatives about carrying credit card debt. First, personal loans have fixed interest rates that can be significantly lower than what you’ll find with a credit card. And second, a personal loan is an installment loan, not an open-ended line of credit. After you make a certain number of equal monthly payments, the debt will be gone. 

Consider a balance transfer

If you’re confident that you can pay off your credit card debt quickly, it could make sense to get a 0% intro APR balance transfer credit card. You can find these with 0% APRs for as long as 21 months, and while you’ll still have credit card debt, every penny you pay towards the debt will be applied to the principal. 

The bottom line on credit card debt

To sum it up, credit cards can be a valuable financial tool that can help you budget for expenses, earn rewards, and maintain a safety net for emergencies. However, if credit cards aren’t used responsibly, the negatives can start to outweigh the positives very quickly. If you’re in too deep when it comes to credit card debt, it’s a smart idea to take steps to get it under control as quickly as possible. 

This content is general in nature and is provided for informational purposes only. Upstart is not a financial advisor and does not offer financial planning services. This content may contain references to products and services offered through Upstart’s credit marketplace.

About the Author

Matt Frankel

Matt Frankel is a Certified Financial Planner® whose mission is to create a more financially informed world. Matt has had more than 10,000 published articles throughout his career, and won a 2017 SABEW Best in Business award for his coverage of the tax reform legislation. His work has been featured in The Motley Fool, CNBC, MSNBC, Nasdaq, USA Today, and many other outlets. He can regularly be seen on Motley Fool Live, and he has made guest appearances on NPR, BBC, Cheddar News, just to name a few. Matt is based in the Columbia, South Carolina, area where he lives with his wife Kathy, two amazing kids, and two high-maintenance dogs.

More resources you may be interested in

7 of the Fastest Ways to Pay Off Credit Card Debt
7 Ways to Manage Credit Card Debt
What is a Balance Transfer Credit Card, Exactly?

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