According to survey, almost 2 in 5 cardholders have maxed out a credit card or at least came close to it!
With higher prices and high interest rates, many Americans are finding it difficult to keep up financially. According to a recent report from Bankrate, nearly 2 in 5 cardholders – 37% – have maxed out or come close to maxing out a credit card since the Federal Reserve began raising interest rates in March 2022.
The report reveals that many borrowers are feeling the strain of rising living costs. While high prices are a significant factor, other reasons people are reaching their credit limits include job or income loss, emergency expenses, medical bills, and overspending on non-essential items.
“Many households had no choice but to take on credit card debt – at a time when the cost of carrying a balance surged to the highest levels ever recorded”, said Sarah Foster, an analyst at Bankrate.
Credit card interest rates have risen to more than 20% on average, close to an all-time high. Another report by Bankrate has also reported that half of all cardholders are carrying debt from month to month.
Generation X Struggles The Most With Credit Card Debt
Generation X – those in their 40s and 50s – is most likely to max out or nearly max out their credit cards, according to the report. About 27% of Gen Xers have maxed out a card, compared to 23% of millennials and 17% of Baby Boomers. Gen Z, the youngest adults, are the least likely to have done so.
Gen X faces unique financial pressures. They tend to support both their aging parents and their children while also dealing with skyrocketing costs in areas like education and healthcare.
Potential Risks Ahead
Those who have maxed out or nearly maxed out their credit cards are at a higher risk of falling behind on payments. And credit card delinquency rates are already on the rise, according to reports from both the Federal Reserve Bank of New York and TransUnion.
A debt becomes delinquent when a borrower misses a full billing cycle without making a payment, typically when it is 30 days overdue. This can damage your credit score and affect the interest rates you receive for credit cards, car loans, and mortgages – or even whether you qualify for loans at all.
To prevent that and improve your credit standing, experts recommend paying your bills on time and in full whenever possible. Otherwise, you’ll end up paying more than you normally would.