Despite the dangers of high-interest loans, more consumers are testing the limits of plastic.
To that point, more than 1 in 3 people —or 86 million Americans — said they’re afraid they’ll max out their credit card when making a large purchase, according to a new WalletHub credit cards survey. (Most of those polled considered a large purchase as anything over $100.)
“Maxing out your card essentially means you are over-utilizing your credit,” said Jill Gonzalez, an analyst with WalletHub.
“You are not going to be able to pay that off in a timely fashion,” she added, resulting in higher interest payments and damaging your credit score in the long run.
Still, most Americans continue to take on ever-increasing amounts of debt. According to data from the Federal Reserve, the U.S. surpassed $1 trillion in credit card debt — the highest level since the Great Recession.
The average household is carrying a $6,929 balance month to month and coughing up about $1,140 a year in interest, according to a separate report by NerdWallet.
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Certain groups are more prone to maxing out their cards than others, WalletHub found.
For example, men were 15 percent more likely than women to have maxed out a card, as were Millennials when compared to older generations, particularly boomers. And, not surprisingly, lower income card holders had a greater chance of maxing out a card on a big-ticket item than their higher-earning counterparts.
At the same time, credit card interest rates have never been higher, setting the stage for potential problems for those at-risk consumers.
The average card interest rate is currently at a record 17.41 percent, according to CreditCards.com’s latest report. That’s up from 16.15 percent one year earlier and 15.22 percent two years ago.
WalletHub polled more than 500 people in January.