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Higher-income Americans relying on credit cards now more than ever

Credit card usage has been escalating amid high inflation.

In fact, according to the New York Fed, credit card balances topped $1 trillion in the second quarter of 2023.

With some Americans waiting for their next payday to afford everyday expenses, credit cards may be the only tool left at their disposal. But relying on them too heavily comes at a cost.

The Quicken survey found that 46% of higher-income groups are more dependent on their credit cards than they’ve ever been — compared to just 40% of middle- and 39% of lower-income groups. About a third of folks earning $150,000 a year or more also admitted they won’t be able to pay off their balances before the end of the year.

If you’re unable to pay off your credit card bill in full and on time each month, you risk accumulating a massive pile of interest that becomes more difficult to pay off over time. Plus, you’re hurting your credit score, which lenders and other companies look at when you apply for things like loans or insurance.

More: States with the most credit card debt

Here’s how to fix up your finances and get out of this cycle ASAP.

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Build a budget

It may be time to revisit your budget — or make one, if you haven’t already.

Make a list of your income and all your fixed expenses and figure out how much you can set aside for things like groceries, dining out and recreational activities, as well as your savings for retirement and emergencies.

Keep track of how much you’re spending each month. Consider using the cash-stuffing technique to allocate funds to each of your spending categories — and put whatever’s leftover after each month into your savings.

Pay down your debts

While you’re making a budget, make sure you’re factoring in all of your monthly bills, including your credit cards.

Consider setting up automatic payments on your cards to make sure you’re never missing any deadlines. Or, if you’re struggling to afford payments in the first place, figure out a strategy to pay off a few of your balances at a time.

For example, you could use the avalanche method to start with your highest-interest debt and work your way down (so that you’re paying less interest over time).

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Create an emergency fund

The best way to avoid getting caught up in the paycheck-to-paycheck lifestyle is to always prepare for the unexpected.

Whether you’ve just lost your job, are dealing with some pricey car repairs or grappling with a big medical bill, it’s important to have savings set aside to provide some cushioning so you’re not waiting on your next paycheck to cover the expense.

It’s generally recommended to put three to six months’ worth of expenses into an emergency fund.

You can sock the cash away into a high-interest savings account, which can help to build your fund, but keep in mind any penalties for early withdrawals.

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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.

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