How Will Tariffs Affect Credit Card Debt?

With the economy on many Americans’ minds, you may have questions about two hot topics and how they’re related — tariffs and credit card debt.

Recently, President Donald Trump announced tariffs ranging from 10 to 41 percent on imports from dozens of countries, the latest in a flurry of tariff activity that began earlier this year.

Experts say everyday goods might end up costing Americans more, although the time lag may vary. For example, we might see immediate price hikes on groceries but not notice higher car prices until three to six months from now.

But if the cost of living rises, credit card debt — which is already often a result of necessary spending — may take a hit.

Bankrate’s recent Consumer Sentiment Survey reports about 2 in 3 Americans (65 percent) believe tariffs will worsen their personal finances. And that holds somewhat true across party lines — more than 9 in 10 Democrats (91 percent), 3 in 5 Independents (62 percent) and 2 in 5 Republicans (46 percent) agree with the sentiment.

I spoke with Charlie Wise, senior vice president and head of global research and consulting at TransUnion, a major credit bureau, about what we might expect when tariffs hit home — and the possible effects on credit card debt.

One millennial is struggling more now to pay off her credit card debt

Jamie Feldman, 36-year-old co-creator of the Debt Heads podcast in Brooklyn, New York, currently carries thousands of dollars in credit card debt. And she’s one of the nearly half of Americans in debt, according to Bankrate’s 2025 Credit Card Debt Report.

I followed up with her after our conversation about debt last year.

Feldman was making progress on her $20,000 debt bill, in part because of steady income from a well-paying freelance gig. But the contract ended, and so did her income stability.

Even with her podcast’s initial success, she’s struggled to find additional full-time or freelance work. This year, Feldman has added to her debt and begun making only the minimum payments on her cards.

“I’ve definitely accumulated more debt over the past year,” she says. “I was on a pretty steady trajectory of getting it completely paid off. That is no longer the case.”

She explains that recent tariff news — and possible price hikes — are discouraging.

Feldman has cut out most discretionary expenses, like shopping, dining out and travel. But even basic groceries cost her $100 a week. Her goal is to earn more income and get back to a more aggressive debt repayment plan.

Still, “I perhaps don’t have as much anxiety about paying it off,” she says. “Everything feels so uncertain that it sort of starts to sometimes feel like nothing matters.”

Tariffs may hike up prices for small businesses, while big businesses can absorb some costs

When a small auto repair shop pays extra for the part needed to repair your bumper or your local grocer pays more for imported fruit, the customer often eats the cost. But larger businesses with high profit margins have room to absorb some tariff impact — for now.

If prices do rise, it could lead to more credit card debt. More than a quarter of credit card debtors (28 percent) blame their debt on day-to-day expenses like groceries, childcare and utilities. Another 11 percent mention car repairs, 10 percent medical bills, 8 percent home repairs, 11 percent retail purchases like clothing and electronics and 9 percent vacation/entertainment.

Many of these costs are already being impacted by tariffs, most notably car repairs, groceries, clothing and electronics.

“No matter what, being in a debt payoff journey is tough,” Feldman says. “Especially with tariffs and especially with the economy, it’s hard to keep up.”

Wise points out you have some options when it comes to who you buy from. For example, fashion brands are highly competitive. If customers stop buying from a certain brand because of their prices, the brand may respond by absorbing more of the cost. But there may be fewer alternatives when it comes to groceries or dining out, especially depending on where you live.

Americans brace for tariffs by increasing credit

TransUnion’s Consumer Pulse Study reports that, among people who are very concerned about tariffs, nearly 2 in 5 (37 percent) plan to apply for new credit or refinance existing credit in the next year.

And among the very concerned who plan to apply for new credit, close to 1 in 3 (29 percent) plan to increase the available credit on their existing credit cards. Others may apply for personal loans or use buy now, pay later options.

What’s behind this new craving for credit?

“I think that really speaks to a potential proactive move on the part of consumers that are concerned if… prices go up,” Wise says. He explains what they might be thinking: “‘It will be a good thing for me to have a financial cushion so that I don’t find myself short.’”

Having more credit can actually help your credit score if used responsibly. It might lower your credit utilization ratio, which measures how much of your available credit you’re using. Experts recommend keeping credit utilization below 30 percent.

“We encourage people all the time to not just open credit cards for the sake of that, but to think about their spending,” Wise says. If you have a $30,000 credit limit, he suggests carrying a balance no higher than $8,000 to $10,000.

“When it’s time to go buy a car or buy a home, [your] credit score is going to be in pretty good shape as a result,” he says.

Inflation already has Americans on edge

While we wait for the dust to settle on Trump’s tariffs, let’s take a look at today’s prices and how they may already be contributing to credit card debt.

Bankrate reports inflation is currently at 2.7 percent, which is an average of how much more consumer goods and services cost now compared to this time last year.

The inflation rate has been rising over the last two months and is the highest annual inflation rate since February, when rates were 2.8 percent. It’s worth noting that Trump signed the first executive order placing tariffs on imports from Canada, China and Mexico in early February. Now, we might be starting to see the effects on our wallets.

And Americans are paying attention. TransUnion also reports nearly 9 in 10 Americans (87 percent) are concerned about tariffs’ impact on their household finances.

“They just lived through one of the worst inflationary periods we’ve had in decades, and they know they didn’t like it,” Wise explains. “They know that their budgets got squeezed as a result of that.”

But he reminds us that inflation measures the rate of change in prices. If tariffs cause prices to rise today but not a year from now, inflation may appear relatively level.

“If there is that inflationary period, it may be very temporary, and then we just adjust to that higher cost period,” Wise says.

In other words, those elevated price tags might already be the new normal. But that could be detrimental to credit card debtors, whose expenses may already be outpacing their incomes.

3 things to do with your credit card debt while tariffs shake out

When the economy feels uncertain, it helps to focus on what you can control. Make a plan to pay off credit card debt as quickly as you can before the interest monster catches up.

Carrying credit card debt has always been, for a long time, and continues to be, one of the most expensive ways to borrow.

— Charlie Wise
SVP and head of global research and consulting, TransUnion

Avoiding your debt or waiting it out won’t make it go away — in fact, time allows it to get bigger. Here are three steps to take your unpaid card balance by the reins:

1. Increase your income. I know you already work hard, but a side gig or form of passive income adds extra padding to your monthly budget to help cover costs. How could you put your extra time or skills to good use? Even a couple extra hundred dollars a month makes a difference. “My hope is that I can get to a place where I have an amount of money coming in,” Feldman says, “so I can get back to a more steady and consistent debt payoff process.”
2. Double-check your household budget. You may feel like you’re already struggling to make ends meet. But if you’re consistently short on cash every month, Wise suggests “doing a thorough overview of your spending levels relative to your income and determining if there’s some areas where you might need to cut back.” Some expenses can be sneaky, like monthly subscriptions or unplanned grocery items. You might also set aside a few hours to shop for a better price on car insurance or utilities. Feldman says she’s skipping non-essential purchases until her debt repayment is back on track. Your budget cuts don’t have to last forever, but could help you repay debt faster to save on interest charges later.
3. Consolidate your credit card debt. Credit card interest rates average around 20 percent today, which is much higher than the average personal loan rate of around 12 percent and average home equity line of credit (HELOC) rate of around 8 percent. “If you don’t have the excess cash flow to pay down your credit cards, think about refinancing those on a lower-interest product,” Wise says. A balance transfer card could also buy you time to pay off debt without accruing more interest. Or, you can work with a credit counseling agency to create a debt management plan with a lower interest rate.

The bottom line

No matter where you stand on the political spectrum or how you feel about the economy today, paying off credit card debt should be top of mind. Interest rates will likely remain high, no matter what happens with the Fed. And prices may continue to ebb and flow as we watch the new tariffs unfold.

You can use the tools available to you — like a budget and debt consolidation — to take control of your debt today.

Still have questions about credit card debt? E-mail me at kkelton@redventures.com and I’d be happy to help.