How does inflation impact credit card debt? Experts weigh in

Inflation has been steadily rising for the past few months, jumping from 2.4% last September to the 3% rate seen in January. Unfortunately, that inflation leads to rising prices — and, often, more money spent on credit cards. It can also lead to higher interest rates, too.

“It can further push borrowers into a continued cycle of ongoing debt,” explains Kim Chambers, credit card product manager at Georgia’s Own Credit Union.

If inflation keeps rising, it will undoubtedly impact credit card debt across the country. Below, we’ll explain how you might see that play out (and what to do about it).

Start tackling your credit card debt here today.

How does inflation impact credit card debt? 

Rising inflation trickles down to consumers by forcing more into using credit cards and other borrowing products on everyday expenses. In fact, in the fourth quarter of 2024, when inflation started reversing course, credit card balances grew by $45 billion. 

“While some discretionary spending may be delayed, essential expenses like gas, groceries, and utilities can’t be avoided,” says Jennifer Oliver, president/CEO of Rize Credit Union. “When inflation outpaces income growth, many people turn to credit cards to cover the gap, resulting in balances creeping up month after month.”

The problem compounds when inflation remains high and you have to put necessary items on credit cards for an extended period of time. “It can quickly spiral out of control, creating more debt,” says Cynthia Campos Delgado, a financial advisor and founder of Campos Wealth Management. “It becomes a never-ending cycle.”

Get help with your rising credit card debt now.

Credit card rates could increase

What makes inflation even worse — at least when it comes to credit cards — is that it often leads to higher interest rates as well. 

“Inflation doesn’t just raise prices; it hikes interest rates, too,” says Howard Dvorkin, chairman of Debt.com. “That credit card that once charged 18% interest might now be up to 22%. That’s because inflation eats into the profits of credit card issuers just like it eats into your household budget.”

David Johnston, managing partner of Amwell Ridge Wealth Management, calls it a “perfect storm” — one where you’re forced to charge more to credit cards, but also pay more in interest on top of that.

“It leaves more consumers struggling to pay off their balances each month,” Johnston says. “Carrying a balance accrues steep interest charges, driving up minimum payments and making it even harder to break free from the cycle of debt.”

Alternatives and solutions

Fortunately, if inflation is hitting your household hard, you have options. For one, you can switch cards before charging that next purchase.

“Research lower-interest rate credit cards,” Chambers advises, “Or transfer balances to 0% offers.” 

You can also look to alternative card issuers — like credit unions or online banks, which may offer lower rates, or explore other borrowing options.

“There are better alternatives than relying on high-interest credit cards,” Oliver says. “A lower-rate credit union credit card, a fixed-term signature loan, or a home equity line of credit can provide more affordable borrowing options.”

The best option is to use cash, though, so if you don’t have a solid emergency fund saved up, start stowing away cash now just in case inflation keeps rising.

Use debt relief if needed

And if you do find yourself in a vicious cycle of credit card debt due to high inflation, there are ways to get out. Consulting a financial advisor or credit counselor is a good place to start, or you can seek debt relief. This includes things like debt consolidation, debt settlement, debt negotiation, and even debt forgiveness in certain circumstances. 

“If your personal debt starts soaring because of inflation, you need a debt professional to help you,” Dvorkin says. “This isn’t something you can DIY. It’s akin to your physical health. If you’re keeping your blood pressure in check with diet and exercise, then no need to worry. But if it jumps 50 points, you probably need a prescription to bring that back down.”