Credit card debt doesn’t usually show up all at once. It builds in small amounts over time until you wake up one day and realize you’re in way over your head.

Craig understands this situation all too well. He’s 40, earns about $90,000 a year, splits $2,500 rent with his girlfriend, and has done something he’s actually proud of: built up $19,000 in savings.

Must Read

• You can now build wealth like a landlord for as little as $100 — and no, you don't have to chase down rent or take 3 A.M tenant calls

• Robert Kiyosaki says this 1 asset will surge 400% in a year and begs investors not to miss this ‘explosion’

• Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s how to fix it ASAP

But he’s also sitting on $13,000 of debt spread across six credit cards, a credit score that’s taken a hit, and a decision he keeps circling back to without much clarity — should he wipe out the debt and start fresh, or hold onto his savings in case life throws something at him?

The cost of holding cash while carrying debt

Craig is trapped in a classic financial catch-22. He feels secure because he has cash in the bank, but his debt is erasing those gains.

On paper, Craig looks like he is in a good position with $19,000 in savings. Even in a top high-yield savings account, for example, that money pulls in around 4% interest — or about $760 a year. If it is sitting in a traditional bank account, it’s earning nickels and dimes.

At roughly 20% interest, every $1,000 Craig carries on a credit card can cost about $200 a year just in interest if it’s not paid down. So instead of his savings slightly growing, his debt is pulling in the opposite direction — and often at a faster pace.

Meanwhile, he is carrying $13,000 in credit card debt spread across six different accounts. With average credit card interest rates hovering near 21%, that debt is costing him roughly $2,700 a year. It’s hard to celebrate a $760 gain with a $2,700 loss hanging over your head.

He’s far from alone. Recent data (1) shows 49% of Americans now consider credit card debt a normal part of life, with the average balance sitting just under $11,000.

However, holding six active balances also creates a secondary problem — it spikes Craig’s credit utilization ratio. Because the “amounts owed” category — primarily driven by credit utilization — accounts for 30% of a FICO score, constantly carrying a high rotation of debt drags his rating down even when he makes every minimum payment on time.

For Craig, it may make the most sense to wipe out those balances immediately to help stop the bleeding.