When convenience is the priority, credit cards are king. The 2-by-3-inch plastic rectangle transformed the way American consumers shopped: With a single touch, people could buy dinner, cover last-minute unexpected or urgent expenses, or finance a large household purchase. Credit cards can also be an effective way to build your credit by establishing a history of paying debt on time.

However, comfort comes with responsibility. That same little card can also cause financial problems if not handled wisely. Credit cards have higher interest rates than many other ways to borrow money, which can add up if balances aren’t paid off right away. In the world of lending, convenience doesn’t come cheap.

The average American has thousands of dollars in credit card debt, an average of $5,589 as of the fourth quarter (Q4) of 2021, according to data from Experian. To see how consumer credit habits have changed over time, experience analyzed the average credit card balance at the national and state levels since 2017.

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How credit card debt accumulates and how it is paid off

A credit card is considered revolving credit and cardholders owe interest on any debt they incur on the card. Unlike installment loans, however, credit card issuers calculate interest based on the average daily account balance, not the original debt amount. This means your balance can grow over time as interest accumulates on your balance and compounds.

Every credit card comes with an interest rate, also called an annual percentage rate (APR), which varies based on several factors, including an applicant’s credit score and central bank interest rates. In 2021, credit cards had an average interest rate of 16.45%, according to Federal Reserve data. But with the Fed raising interest rates this year, credit card interest rates are likely to go up also.

Paying off your credit card balance at the end of each billing period is a good habit. Although the interest is compounded daily, the cardholder pays none of that interest if the entire card balance is paid off by the monthly due date.

Line chart showing the national average credit card balance from 2017 to 2021.

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How the average national credit card debt has changed over time

At the end of the fourth quarter of 2021, the national average credit card balance decreased 10.7% from the fourth quarter (Q4) of 2017, and 14% from the most recent peak in the fourth quarter of 2019.

The steepest drop occurred in the first half of 2020. At the start of the COVID-19 pandemic, the Federal Reserve Bank gone down interest rates to near zero to stimulate the economy amid the global health crisis.

In the fourth quarter of 2021, the annual rate of inflation began to rise, and Americans suddenly felt the financial pressure. Whether it’s buying new and used vehicles or prices for homes and even rental cars, American consumers had to pay more for many products and services.

Range chart showing the states with the largest change in credit card balances from 2017 to 2021.

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States where the average credit card balance fell the most

Collectively, Americans have made significant progress in paying off their credit card debt in the last five years. Balances have fallen most sharply in Alaska, New Jersey and Virginia. The states that paid off the most credit card balances since 2017 are also some of the states with the highest average balances.

Map of average credit card balance by state.

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Average credit card balance varies by state

As of the fourth quarter of 2021, Americans had an average credit card balance of $5,589, according to data from Experian.

Alaska led all other states with an average credit card balance of $6,787. New Jersey, Texas and Virginia had the next highest balances on average. The lowest average credit card balances are found in Minnesota, Wisconsin, Iowa, Kentucky and Mississippi.

This story originally appeared on Experian and was produced and distributed in partnership with Stacker Studio.

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