You’ve likely heard that the only certainties in life are death and taxes. Or that April showers bring May flowers. Here’s another truism to add to that list: Credit card balances don’t rise in the first quarter of the year. That was once again true in 2025, as balances fell to $1.18 trillion in Q1, down $29 billion (2.4 percent) from Q4 2024, according to the New York Fed. Over the past 22 years, credit card balances fell from Q4 to Q1 on 21 occasions, and they were flat once (in 2023).
Have a question about credit cards? E-mail me at ted.rossman@bankrate.com and I’d be happy to help.
Why credit card balances tend to drop in Q1
There are two major explanations for credit card balances tending to fall in the first three months of the year: tax refunds and a post-holiday spending detox.
A 2024 Bankrate survey revealed that 19 percent of Americans expecting a tax refund planned to put most or all of the money toward debt payoff, second only to boosting their savings (28 percent). This year, the Internal Revenue Service says it has processed about 142 million tax returns and approximately two-thirds of them received a refund. The average amount is $2,947. That would put a nice dent in the average credit card balance ($6,580, according to TransUnion).
It also makes sense that many Americans spend less in January, February and March, which keeps a lid on credit card balances. In Q1, many attempt to recover from their holiday splurges with New Year’s resolutions to save more and spend less. The fourth quarter tends to bring the largest spike in credit card balances, following more modest increases that typically occur in the second and third quarters. And cold weather across much of the country also suppresses some economic activity in the first three months of the year. These phenomena played out again in Q1 2025.
Still, credit card debt remains a significant strain for millions of American households. The average credit card rate (20.12 percent) remains stubbornly high, within earshot of the all-time record (20.79 percent) set last summer. If you make minimum payments toward the average balance at the average rate, you’ll be in debt for more than 18 years and will end up paying about $9,600 in interest. In other words, don’t jump for joy because Americans’ total credit card debt load fell a couple of percentage points over the past few months.
Learn more: How is credit card interest calculated?
How to pay off credit card debt
The best course of action is to make your personal credit card rate zero if at all possible. It’s important to note that the aforementioned New York Fed and TransUnion figures don’t distinguish between credit card bills that are paid in full each month and those that are not. That is to say, they focus on balances at a moment in time (usually the cardholder’s statement date), rather than true debt that is carried from month to month.
If you pay in full and avoid interest (something that just over half of cardholders typically do, according to Bankrate’s 2025 Credit Card Debt Report), then life is great. You’re able to take full advantage of rewards, convenience and buyer protections without owing a cent in interest charges. For these reasons, rising credit card balances can be seen (at least in part) as a proxy for economic activity. Consumer spending powers the economy. Credit card balances are expected to grow over time as the population and the economy grow and also as the payment mix continues to shift toward cards and away from cash.
But if you’re in the other half of cardholders (the indebted half), then it’s critical to pay off your balances as quickly and cost-effectively as possible. First off, don’t be ashamed — you have plenty of company. And credit card debt usually has practical causes (medical bills, car repairs, home repairs and day-to-day expenses). But it’s probably your highest-cost debt, so it’s one to prioritize. Here’s how to do it.
Balance transfer cards
Consider moving your high-cost credit card debt over to a new card with a generous 0 percent balance transfer promotion. The longest offer on the market right now is the U.S. Bank Shield™ Visa® Card’s* 24 months with 0 percent interest on balance transfers and new purchases. After that, the variable APR ranges from 17.74 percent to 28.74 percent, depending on the cardholder’s creditworthiness. Also note the transfer fee (5 percent or $5, whichever is greater).
Remember that minimum payment scenario involving the average credit card balance and the average interest rate? Well, instead of lugging around your debt for more than 18 years at a total expense of more than $16,000 (including principal and interest), you could pay about $288 per month to knock out the average balance ($6,580) within two years — including the transfer fee and avoiding all interest, thanks to a 24-month 0 percent balance transfer promotion.
Nonprofit credit counseling
A solid backup plan, especially if you have a lower credit score (below, say, 680) or a lot of credit card debt (more than $6,000 or so), is nonprofit credit counseling. Reputable agencies such as Money Management International and GreenPath offer debt management plans along the lines of a 6 percent interest rate over five years. They charge nominal fees (for example, a $50 set-up fee and a $25 monthly fee) and can help you pay off your debt much more cost-effectively than that minimum payment scenario.
Up your income and cut your expenses
It’s certainly not an option for everyone, but any additional levers you can pull to increase your income and reduce your expenses can accelerate your debt payoff strategy. For example, more than a third of U.S. adults have a side hustle, according to Bankrate’s 2024 Side Hustle Survey. Among them, they’re bringing in an average of $891 extra per month. If you were to put all of those funds toward the average credit card balance, you could pay it off in just over seven months.
I also suggest taking a hard look at your spending to find places to cut back. You don’t have to do this forever, but living more frugally for six months or a year could make a big difference to your financial situation. Cancel little-used subscriptions, eat out less often, discover cheaper entertainment options and so on.
The bottom line
While Americans’ credit card balances dipped slightly in Q1 2025, these balances are still up a staggering 54 percent from four years ago. Credit card debt represents the highest-cost debt for millions of U.S. households. Employ strategies such as balance transfer cards, 0 percent intro APR cards, nonprofit credit counseling and side hustles to tackle your credit card debt and get your credit cards working for you, rather than the other way around.
The information about the U.S. Bank Shield™ Visa® Card has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.
