CHARLOTTE — Two out of five credit card holders in America are either completely maxed out or close to it, according to a recent Bankrate survey.
A third of maxed-out borrowers have gone delinquent in the last year.
Channel 9 delved into why this is the case and what credit card holders can do about it.
When it comes to your credit score, it goes lower as the amount of credit you’re using goes higher.
“A utilization rate is calculated by looking at the total amount of credit that one has and then seeing how much of a balance they have on their credit card,” said Sarah Foster, an analyst for Bankrate.com.
Foster said most issuers want to see your credit usage below 30% of your available credit. Otherwise, borrowing becomes a problem.
“That means it’s going to be harder for you to really, you know, qualify for a mortgage, maybe qualify for a rental application because you’ve likely taken a hit on your credit score,” Foster said.
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According to the survey, 54% of those at or near their limit blame inflation or higher prices, 38% say an emergency was the cause, and 32% point to existing credit card debt.
“It’s been a little bit hard for some Americans, particularly lower-income Americans,” Foster continued.
Foster said if you can’t qualify for a low-interest balance transfer card, nonprofits like Green Path and Money Management International can help.
They’ll work with your credit card company to lower your interest rates and payments.
Consumers were coming to them with interest rates, you know, pretty close to 25% because a lot of them were paying a penalty. And then when they enrolled in the program, Green Path was able to help them, on average, get that interest rate down to about 7%.
Experts said the most important thing is to pay more than the minimum due each month.
Otherwise, most of your payment goes towards interest and will take years to pay off.
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