Lauren Schwarn, Neldwallet
Debt reductions are Americans’ top priority in 2025. This is according to the CFP Standards Committee’s debt and New Year’s resolution report.
That’s an understandable goal. Household debt is at an all-time high, delinquency is on the rise, and policy changes under the new presidential administration are increasing financial uncertainty for many consumers.
“The question is, whether or not the conditions exist in the economy make it easier or difficult for them to turn things around?” says Bruce McClary, senior vice president of membership and communications at the National Foundation for Credit Counseling.
We asked experts to share what could have the biggest impact on people’s debt load in the coming months, as well as strategies they could use to pay off their debts.
1. Customs
President Donald Trump imposed new tariffs on Mexico, Canada and China earlier this year. Since then, some countries have announced retaliatory tariffs on US goods, with certain tariffs being suspended. Updates may make you feel dizzy, but be prepared for the price increase for a variety of products and services.
These tariffs target the three largest trading partners in the United States, so Kimberly Watkins, assistant professor of financial planning, housing and consumer economics at the University of Georgia, said, “As if nothing is safe at this point.” “Some of the things that affect us every day, especially those related to agriculture: produce, fresh fruits, vegetables.”
Higher prices “disproportionately affect low- and medium-income households who may initially struggle to access produce,” Watkins says. This could lead to increased reliance on credit cards and other liabilities to cover costs.
Watkins also expects prices to rise in categories such as electronics, appliances, apparel, toys, cars and car parts.
Tariffs may raise costs, but the Trump administration says it is necessary to create a more fairer trading system.
“Access to cheap products is not the essence of American dreams. The American dream is rooted in the notion that citizens can achieve prosperity, upward mobility and economic security,” Treasury Secretary Scott Bescent said in a March 6 speech at the Economic Club in New York.
“We must reconsider international economic ties that do not work for the American people,” he added.
2. interest rate
Credit card interest rates are near historic highs, and McClary’s notes average close to 23% on accounts that rate interest. This puts pressure on people’s budgets, he says, and keeps them in a debt cycle for a long time, especially if they only make minimum payments.
The federal fund rates set by the Federal Reserve to help control the Federal Reserve affect the interest rates banks charge.
Previous Fed rate cuts have never been to cut credit card rates quickly or significantly, McClary said not only in the cards but across the lending industry.
However, there is a silver lining for a premium environment. You can earn greater benefits from savings. It will help you grow your emergency funds faster and reduce the need to undertake additional debt.
Keep an eye on changes to the Fed rate and also on legislative developments. Recently, a bipartisan House bill was introduced, aimed at raising credit card interest rates to 10%.
3. The future of the Consumer Financial Protection Bureau
The CFPB plays a key role in protecting consumers from unfair lending and debt collection practices. The agency has returned more than $21 billion to consumers in compensation, principal reductions, cancelled debts and other relief. The future is uncertain now.
A Senate bill was recently introduced that would prevent CFPB directors from asking for funds. Lawmakers cite concerns that government agencies have stepped over regulatory powers.
“Without funding, they won’t be able to do the job, which means consumers are not protected,” says Mike Litt, director of consumer campaigns at the U.S. Public Interest Research Group.
The resolution could also overturn recent CFPB rules, Litt said, which includes rules limiting overdraft fees charged by major banks and credit unions.
Overdraft fees “punite those who lose people who have almost no money,” says Litt. “Some banks have changed their overdraft practices under the closer surveillance of the CFPB, but many still charge $35, sometimes multiple times a day.”
The CFPB’s rules banning medical debt in their credit reports have also been challenged.
4. Your tax return
The tax return deadline for April 15th is approaching. If you are borrowing money when you file this year, it can make it difficult to put you in debt or pay your existing debt. If you’re struggling with tax bills, consider relief options such as the IRS payment plan.
If a refund is expected, using it to pay off debt, especially high profit credit cards, McClary says.
How to manage your debt
Closing the budget
The increased balance and cost of debt payments can be expensive.
“Find a room in your budget and add a cushion to isolate yourself from some of the price increases that may occur in the market,” says McClary. “Think about your spending patterns and where you can limit your needs in some parts of the area where you can keep them on track.”
When narrowing down your budget, try strengthening your emergency fund as well. If you still can afford essentials, consider turning to government aid, says Watkins.
Please call the creditor
Watkins suggests contacting creditors to try to negotiate interest rates or ask them to refrain from paying for a while.
Litt recently asked his credit card company if he would lower his rate. He was selected between a permanent APR reduction of a few percentage points or a 0% offer for a limited time.
“It doesn’t cost you just to call and see if you can shrink the rate,” he says.
Please talk to a credit counselor
If aggressive budgeting and customer service calls don’t release enough money to keep up with your payments, explore other debt relief options, such as consolidated loans, balance transfer cards, and bankruptcy.
Non-profit credit counseling agencies check your financial situation and provide options. In most cases, the first session is free, says McClary.
“After that, you can make a decision about whether you want to continue working with the counselor or whether you have it in your hand enough to turn things around on your own,” he says.
Lauren Schwarn writes for Nald Wallet. Email: lschwahn@nerdwallet.com. Twitter: @lauren_schwahn.
Article 4 factors that could affect your debt – and what you can do originally appeared in nerdwallet.
Original issue: March 17th, 2025, 4:10pm EDT
