Rosalind Evans
With rising prices and soaring interest rates, many Americans are struggling to stay on top of their finances. As a result, credit card usage has increased, with nearly 37% of cardholders either maxing out or coming close to their credit limit since the Federal Reserve began raising rates in March 2022, according to a report by Bankrate. The financial squeeze has forced borrowers to rely on credit to cover essential costs, leading to challenges with debt management and repayment.
Credit Card Balances on the Rise
Bankrate’s report highlights that higher living costs are the primary reason many people are hitting their credit limits. Sarah Foster, an analyst at Bankrate, explains, “With limited options to absorb those higher costs, many low-income Americans have had no choice but to take on debt to afford costlier essentials — at a time when credit card rates are near record highs.”
In addition to daily expenses, unexpected events such as job losses, medical emergencies, and discretionary spending have added to the financial strain. TransUnion data shows that the average consumer credit card balance has climbed to $6,329, reflecting a 4.8% increase from the previous year.
High Interest Rates and Debt Utilization
As cardholders carry larger balances, interest rates above 20% compound the problem, making it harder to pay down debt. “People are living a life that they can’t afford right now, and they are putting the balance on credit cards,” said Howard Dvorkin, chairman of Debt.com.
Carrying high balances affects a cardholder’s credit utilization rate, a key factor in determining credit scores. Experts recommend keeping credit usage below 30% of the available limit, but Bankrate reports that the average utilization rate reached 21% in August.
Gen X: The Most Impacted Generation
According to the report, Generation X — individuals in their 40s and 50s — is most affected, with 27% of Gen Xers maxing out their cards or coming close. This generation, often called the “sandwich generation,” faces financial pressure from supporting aging parents while raising children in a time of high education and healthcare costs.
In comparison, 23% of millennials and 17% of Baby Boomers reported similar credit struggles, while Gen Z showed the least tendency to max out cards. These findings reflect the unique financial burdens Gen X carries, placing them at the forefront of credit card debt challenges.
The Risk of Delinquency
As debt levels rise, so do the risks of delinquency. The Federal Reserve Bank of New York and TransUnion have both reported an increase in missed credit card payments. Tom McGee, CEO of the International Council of Shopping Centers, noted, “Consumers have been measured in taking on additional revolving debt despite the inflationary environment over the past few years, although there has been an uptick in delinquencies in recent months.”
When cardholders miss payments for an entire billing cycle, their debt becomes delinquent, which negatively impacts their credit score. This can lead to higher interest rates on loans or the inability to secure financing. Howard Dvorkin advises, “Some of the best ways to improve your credit standing come down to paying your bills on time every month, and in full, if possible. Understand that if you don’t, then whatever you buy, over time, will end up costing you double.”
With inflation and high interest rates driving many Americans into deeper debt, managing credit responsibly has never been more important. As more cardholders struggle to keep up with monthly payments, the risks of delinquency and damaged credit grow. Staying on top of payments and limiting credit usage are essential steps to prevent financial trouble from spiraling.
