86 Million Americans Fear Maxing Out Plastic on Large Purchases
The holiday shopping season is over now, and many Americans are seeing the impact on their credit card bills and bank statements. During the holidays, people often make a lot of large purchases, and sometimes max out their cards in order to do so. In a nationally representative survey conducted by WalletHub, 34 percent of respondents say they worry about maxing out their card with a large purchase.
That’s certainly a legitimate concern, considering Americans’ tendency to rack up credit card debt. After all, we hit over $1 trillion in total credit card debt for the first time ever in 2018. And while people with high incomes and stable employment may have no trouble putting large purchases on a credit card, reaping rewards, and paying them off quickly, it’s a different story for Americans with less stable incomes. When it comes to non-essential large purchases, they may be better off saving up and paying in cash. “If they don’t pay bills monthly and carry a balance with a high interest rate, relying on cash is a good discipline,” says David Laibson, a professor of economics at Harvard University.
Below are some more of highlights of WalletHub’s survey, along with additional insight from a panel of experts.
- Men max out more. Women are 15 percent less likely than men to have maxed out a card once. On top of that, they're 9 percent less likely to have done so more than once.
- Age shapes our definition of “large.” People aged 18 to 29 are more than twice as likely as people aged 59+ to choose “over $100” as the benchmark for a large purchase. The older people get, the higher their definition of "large" seems to become.
- Rewards motivate the rich. High-earners are almost four times more likely than low-earners to to choose their payment method based on which provides the most rewards. Low income consumers are more motivated by avoiding debt.
- Politics come into play when paying. Republicans are 70 percent more likely to use cash than Democrats. Despite this, Democrats are also less likely to have maxed out a credit card for a large purchase.
- No max-out worries for retirees. Retirees are 21 percent more likely than full-time workers to use credit cards for large purchases. Retirees are also 75 percent less likely to worry about maxing out their cards.
Ask The Experts
Different people have different preferences on how to pay for large purchases. But how much of an impact do these preferences actually have on consumers, and are some payment methods objectively better? To gain further insight, we posed the following questions to a panel of experts. Click on the experts’ profiles to read their bios and responses.
- Roughly 1 in 10 people say they use cash for "large" purchases - does that surprise you?
- Are people who pay for large purchases with cash instead of a credit card missing out?
- How would things be different if 50% of people paid for large purchases with cash? How about if only 5%?
- What do you make of WalletHub's finding that low income individuals are almost five times more likely to use cash for a large purchase than high income individuals?
WalletHub conducted this nationally representative survey with over 500 respondents from 1/7/19 to 1/14/19. We weighted the statistical results to correct for demographic discrepancies. The margin of error for the total respondents is plus or minus 4.38 percent at a confidence level of 95%.
Full Details Overall
|What is your preferred payment method for large purchases?|
|What’s your main motivation for using your preferred payment method for large purchases?|
|Avoiding credit card debt||27%|
|Can pay off over time||11%|
|What do you consider a large purchase?|
|Do you worry about maxing out your card or overdrafting your account when making a large purchase?|
|Have you ever maxed out a credit card in order to make a large purchase?|
|Yes, more than once||12%|
|Do you spend more time planning for a large purchase or paying it off?|
|Paying it off||35%|
|Why would you most likely miss a credit card payment?|
|Don't have enough money||29%|
|No late fees||9%|
|Do you think you will miss at least 1 credit card due date in 2019?|
|What do you worry about missing the most?|
|Credit card payment||29%|
|Auto loan payment||10%|
|How would being charged a late fee on your credit card make you feel?|
|Have you ever tried to get a credit card late fee waived?|
|Were you successful?|
Note: Percentages may not total 100% due to rounding.
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