Roughly 91 million Americans are afraid of maxing out their credit cards, according to a new survey.
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And while that fear may prevent some from going into debt, 37 percent of American consumers surveyed by WalletHub said they have pushed their plastic to the limit from big purchases. Roughly 14 percent of those surveyed by the personal finance website said they have maxed out their credit card more than once.
Those “big purchases” are defined as anything over $100, one in three people surveyed said.
“That’s certainly a legitimate concern, considering Americans’ tendency to rack up credit card debt," said WalletHub Managing Editor John Kiernan. "After all, we started 2019 with over $1 trillion in total credit card debt.”
The average American consumer will have spent more than $1,000 on gifts this season, according to the National Retail Federation. However, six out of 10 Americans don't have at least $1,000 in savings.
Credit card balances typically shoot up in December, followed by a noticeable tick-up in credit card delinquencies in January and February, as many Americans borrow too much to pay for gifts and then struggle to pay off the debt. While delinquencies remain far below what they were in the Great Recession, there are still millions of Americans who live paycheck to paycheck and additional debt can become a big problem quickly.
Consumers are projected to spend record amounts this Valentine's Day, according to an annual survey released by the National Retail Federation and Prosper Insights & Analytics. The trade group estimates consumers will spend an average of $196.31 on Feb. 14, up 21 percent from last year’s record of $161.96. Total cash outlay this Valentine’s Day is expected to top $27.4 billion.
In the past 12 months, the number of people who have maxed out their credit cards increased by nearly 30 percent, according to the survey. While over half of consumers said they prefer to use a credit card for big purchases, 31 percent said they turn to their debit card. Meanwhile, only 11 percent will use cash and 3 percent use checks, a method of payment that has declined over the years.
When it comes to non-essential large purchases, experts say consumers are better paying with cash.
“If they don’t pay bills monthly and carry a balance with a high interest rate, relying on cash is a good discipline,” said David Laibson, a professor of economics at Harvard University.
The Associated Press contributed to this report.