Inflation Trends, Debt and Cardholders: What to Expect in 2025–26
As we start the second half of this decade the U.S. economy is constantly changing in response to inflation, interest rates and consumer habits. Indeed, for credit card users and those in debt, knowledge of these economic realities is particularly important right now.
This column deconstructs what one variety of inflationary scenarios could look like for 2025–26 and how it is likely to impact your wallet, credit cards and debt strategies.
What’s Going On With Inflation in 2025?
Inflation in the U.S. reached record levels in 2022 and has been gradually receding through 2023-24, but it still isn’t back at the Federal Reserve’s target of 2%. I’ve the updated charts and recent projections, where inflation is now expected to stay in “the range of 2.5-3 percent through year-end 2025,” steadily dropping into 2026.”
That is, it’s not that there will be particularly large jumps in food and gas and housing prices one month to the next; instead they’ll just keep being more expensive than before, though at a slower pace than the stratospheric rates of inflation in those areas we saw in recent years.
So why does this matter to credit card users?
So that’s because inflation diminishes the value of your dollar. And if your income isn’t rising along with them, you may turn to credit more often to meet the bills of the present — resulting in larger balances and interest payments now, as well as greater risk of long-term debt.
What’s Happened to Credit Card Debt
United States credit card debt began its rise in 2021, surpassing $1.3 trillion in early 2025. With the rising cost of living, many consumers bridged the gap by turning to their credit cards. But the APR on credit cards also edged higher, meaning it was more expensive to borrow that way.
Key Trends:
Average APRs stay elevated: With the federal funds rate remaining high, average credit card APRs are between 20 and 24%.
Delinquencies are picking up: More people, in particular lower-income people, are missing payments.
Credit restrictions: Lenders are getting more stingy and reining in the availability of credit.
If you have a balance from month to month, the combination of inflation and high APRs can feed off itself — it’s harder to pay down debt when interest is piling up.
Interest Rates: What to Expect
While perhaps a handful of rate cuts may arrive by the end of 2025 or early 2026, they will be gradual and careful. The Federal Reserve is playing it safe, waiting for inflation to show clear signs of moving down over time before making any big moves.
That means credit card APRs are likely to stay up for a good portion of 2025.
What does this mean for you?
Low intro rates may not apply to new card offers
Balance transfers may seem more appealing — but with higher approval standards.
The most effective way to hedge against volatile rates: Paying down debt as soon as possible is still your best method for hedging against rate fluctuation.
What to Do About Money
If you’re a cardholder feeling the squeeze of inflation and debt, here are practical steps to get ahead in 2025 and beyond — no matter what direction rates go.
Review Your Spending Habits
Monitor where your money is going each month. Put that on pause and cut back where inflation has bitten hardest — in food delivery, subscription services, or impulse buys.
Leverage Cash Back and Rewards Programs Strategically
Choose credit cards that reward you in categories you’re already spending money on, whether it’s gas or groceries. But don’t stretch it just to get the points.
Pay More Than the Minimum
Minimum payments are a trap in a high-interest economy. And tossing in an extra $50–$100 a month also will help lower your long-term interest charges.
Consider a Balance Transfer
Seek out 0% APR balance transfer cards for debt consolidation. These deals are competitive, but will generally require good to excellent credit (FICO 700 and up). Be sure you can pay off the balance before the promotional period expires.
Build an Emergency Fund
Due to economic uncertainty and inflation, there are now even more reasons for you to have 3–6 months of expenses saved. This might be useful to avoid credit card usage during a financial emergency.
It’s Mostly a Problem for Young Borrowers
Rising debt and inflation is felt the hardest by millennials and Gen Z – who generally have lower average earnings, student loan debts to pay off and are weighed down by cost-of-living expenses in city centres.
Many younger cardholders:
Utilize more credit (closer to their limits)
May be more apt to pay late or carry a balance
Feel anxiety around money management
Financial literacy and forward planning are critical in turning this around.
What Card Issuers Could Do in Response
Credit card companies are closely tracking inflation and debt trends. Here’s how they could react in the months ahead:
Targeted offers: You’ll see more personalized offers based on your spending history and FICO score.
Tighter underwriting: That premium card approval could grow harder to come by.
More attention to digital tools: Companies are building AI-powered budgeting features to help users better manage debt.
If you stay informed and use these tools, you can take advantage of them as a consumer.
But what about credit cards?
The next 18 months will test the financial resilience of many Americans. Although inflation might not stay as hot, high interest rates and still-elevated living costs will continue to be a challenge — particularly for people with credit card debt.
To stay ahead:
Budget intentionally
Pay down high-interest debt
Monitor your credit score
Leverage cards you get real value from
Financial discipline and smart credit management will help you not just survive but thrive in this inflationary period.
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