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between higher price and high interest ratesome Americans have a hard time keeping up.
As a result, many people are using more of their available credit cards, with nearly two in five credit card holders (37%) now maxed out or close to maxing out credit card According to a new report, since the Fed began raising interest rates in March 2022 bank interest rate.
Bankrate found that the reason most borrowers over-defer is due to rising prices and the cost of living.
Other reasons cardholders blame maxed-out or near-maxed credit cards include job or income loss, emergency expenses, medical bills and excessive discretionary spending.
“With limited options to absorb higher costs, many low-income Americans have no choice but to take on debt to pay for more expensive necessities — at a time when credit card interest rates have Near record highs.
As prices rise, so do credit card balances.
According to the latest credit industry data, the average balance per consumer is now $6,329, up 4.8% annually Insight report From TransUnion.
At the same time, credit cards charge an average of more than 20 percent interest—nearly record high — and half of all cardholders Carrying debt every monthaccording to another report bank interest rate.
Carrying a higher balance directly affects your utilization ratio, your debt-to-total credit ratio, and is one of the factors that affects your credit score. Borrowers with higher credit scores typically have higher limits and lower utilization ratios.
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Credit experts often advise borrowers Maintain revolving debt below 30% of available credit to limit the possible impact of high balances.
A Bankrate analysis of Equifax data shows total credit card usage exceeded 21% as of August.
Still, “if you have five credit cards with a utilization rate of about 20 percent, you have a lot of debt,” said Howard Dvorkin, CPA and chairman of Debt.com. “People are now living unaffordable lives and they’re putting balances on credit cards.”
Generation X at risk
Bankrate’s report shows that Gen
Among Gen Xers, 27% have maxed out their credit cards, compared with 23% of Millennials and 17% of Baby Boomers. The survey of more than 3,500 adults, including 3,015 credit card holders and 1,104 people who have maxed out or are close to maxing out their credit cards, shows how likely Gen Z youth are to max out their credit cards. lowest.
Generation X, the so-called “sandwich generation,” must work to support the generations before them and their children at a time when higher education and health care Higher than ever, Research also shows.
potential problems in the future
Cardholders who have maxed out or are close to maxing out their credit cards are also more likely to default on their credit cards.
credit card delinquency rate The New York Fed and TransUnion both reported that the numbers were higher across the board.
Tom McGee, chief executive of ICSC (formerly the International Shopping Council), said: “Despite the poor inflationary environment of the past few years, consumers have taken on additional revolving debt, despite delinquency rates in recent months. There has been an increase.
Debt is considered illegal When a borrower misses a full billing cycle without making a payment or is considered past due for 30 days. This can hurt your credit score and affect the interest rates you pay on credit cards, car loans and mortgages, or whether you can get a loan.
some of the best methods Improve your credit profile Dworkin said it comes down to paying your bills on time each month and, if possible, in full. “Understand that if you don’t do this, whatever you buy is going to end up costing you double the money over time.”
