NEW YORK—While a new report reveals consumers are concerned about mounting credit card debt (see related story), new data also show more people are maxing out their plastic.
According to Bankrate’s new Credit Utilization Survey, almost two in five cardholders (37%) have maxed out a credit card or come close since the Federal Reserve began raising interest rates in March 2022. That includes 20% who have maxed out a card and another 17% who came close.
“A maxed-out card can create a cascading set of problems for consumers. Their available credit dries up, limiting their options if they need to cover a necessary expense in a pinch, such as unexpected medical or household expenses. Credit reporting agencies also will notice that they’re using too much of their available credit—a situation the industry calls ‘high credit utilization.’ This can hurt their credit scores, damaging their ability to qualify for additional credit limit increases and balance transfer cards that make the cycle of debt even worse,” Bankrate said.
Running Credit Taps Dry
Also, Americans who’ve run their credit taps dry could rob the U.S. economy from its crucial consumer-driven engine of growth on the precipice of a crucial holiday shopping season, Bankrate added.
The report notes that credit cards are becoming Americans’ lifelines against high inflation. Over half of cardholders who’ve maxed out a credit card or come close (54%) blame inflation or high prices. Other top reasons include emergency expenses (38%) and carrying a balance or having credit card debt (32%).
Of those who have maxed out their credit card or come close, 88% say it negatively impacted their personal finances in some way. This includes 41% who said their credit score declined and 31% who say they could not afford a necessary expense, Bankrate said.