Credit card use in the U.S. is growing, with 14% of Americans holding more than 10 cards, a survey by one of the giant credit-reporting agencies has found. That's up from 2004, when 10% had more than 10 cards.
The study, released today by Experian, identified two groups of heavy card users: the 14% who own more than 10 cards and another, at times overlapping, 14% who use more than 50% of the credit available to them. This last group alone holds an average of nearly seven cards each, two more than in 2004.
The study was done by randomly selecting and analyzing 3.2 million of the roughly 215 million credit files in the company's gigantic database, said Pete Bolin, Experian senior analyst.
Among the findings:
- 51% of Americans who have established credit own two credit cards, up from 49% in 2004.
- The average American holds four credit cards, up from 3.2 in 2004.
- The average credit score nationally dropped to 674, from 678 in 2004.
- The average score for those who use at least 50% of their credit rose to 645 from 631 in 2004.
- Fewer Americans -- 14% -- are using 50% or more of their available credit than in 2004, when 16% did. These high users have credit scores about 30 points below the national average.
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| Credit card use by state | ||||
|---|---|---|---|---|
State | Avg. cards | 2 or more | 10 or more | Using half of credit |
United States | 4.0 | 51.3% | 14.1% | 14.3% |
Alaska | 3.7 | 50.7% | 12.3% | 17.4% |
Alabama | 3.3 | 47.3% | 10.3% | 13.9% |
Arkansas | 3.5 | 47.8% | 11.3% | 12.8% |
Arizona | 3.5 | 44.8% | 12.4% | 13.7% |
California | 3.9 | 48.5% | 13.7% | 14.4% |
Colorado | 4.1 | 49.7% | 15.0% | 14.5% |
Connecticut | 4.8 | 58.6% | 17.6% | 14.6% |
Delaware | 4.1 | 53.6% | 14.1% | 14.8% |
District of Columbia | 3.0 | 43.0% | 9.0% | 12.9% |
Florida | 4.4 | 52.7% | 16.2% | 15.5% |
Georgia | 3.4 | 47.1% | 11.2% | 14.7% |
Hawaii | 4.3 | 58.2% | 13.5% | 17.4% |
Iowa | 4.0 | 55.9% | 12.8% | 12.5% |
Idaho | 4.2 | 52.8% | 15.6% | 14.2% |
Illinois | 4.2 | 53.1% | 14.5% | 14.4% |
Indiana | 3.8 | 49.5% | 13.1% | 13.6% |
Kansas | 3.9 | 51.6% | 13.3% | 13.2% |
Kentucky | 3.5 | 49.9% | 11.1% | 13.2% |
Louisiana | 3.2 | 46.0% | 10.0% | 11.8% |
Massachusetts | 5.1 | 61.8% | 18.9% | 15.3% |
Maryland | 4.4 | 55.6% | 15.9% | 16.8% |
Maine | 4.7 | 60.6% | 15.9% | 15.6% |
Michigan | 4.5 | 55.0% | 16.6% | 15.1% |
Minnesota | 4.9 | 61.1% | 18.1% | 14.8% |
Missouri | 4.0 | 53.2% | 13.7% | 14.1% |
Mississippi | 3.0 | 45.0% | 8.3% | 12.6% |
Montana | 4.4 | 58.6% | 15.0% | 13.3% |
North Carolina | 3.5 | 46.3% | 12.0% | 13.3% |
North Dakota | 4.6 | 59.6% | 15.7% | 13.7% |
Nebraska | 4.4 | 56.8% | 15.2% | 13.7% |
New Hampshire | 5.3 | 63.4% | 20.3% | 15.5% |
New Jersey | 5.2 | 58.7% | 20.0% | 15.4% |
New Mexico | 3.4 | 46.3% | 10.9% | 13.8% |
Nevada | 4.0 | 49.0% | 14.8% | 16.2% |
New York | 4.5 | 54.3% | 16.4% | 14.8% |
Ohio | 4.4 | 55.4% | 15.8% | 15.1% |
Oklahoma | 3.3 | 46.1% | 10.3% | 12.7% |
Oregon | 3.9 | 50.9% | 13.7% | 13.7% |
Pennsylvania | 4.5 | 57.7% | 15.9% | 14.0% |
Rhode Island | 5.0 | 60.7% | 18.7% | 16.1% |
South Carolina | 3.5 | 47.5% | 11.2% | 13.8% |
South Dakota | 4.5 | 58.7% | 15.5% | 13.9% |
Tennessee | 3.5 | 48.6% | 11.0% | 13.2% |
Texas | 3.3 | 44.1% | 10.9% | 12.9% |
Utah | 4.1 | 53.6% | 14.5% | 15.6% |
Virginia | 4.3 | 54.5% | 14.9% | 15.7% |
Vermont | 4.4 | 59.9% | 14.7% | 14.0% |
Washington | 4.0 | 52.4% | 13.7% | 14.7% |
Wisconsin | 4.1 | 54.7% | 13.8% | 13.3% |
West Virginia | 3.6 | 50.8% | 11.1% | 13.3% |
Wyoming | 4.2 | 54.6% | 14.5% | 13.6% |
Experian used its own credit score calculations, producing what it calls a PLUS score, in reporting results. It is one of numerous scoring systems developed by banks, lenders, credit-tracking companies and Fair Isaac, which created FICO, the most widely used score. All gather data on borrower behavior from credit reports to produce scores that lenders use in granting loans and setting interest rates. (You're entitled to a free copy of each credit bureau's report on you each year; visit www.annualcreditreport.com. Typically you will have to pay to see a credit score, though.).
In New England, credit card use is heaviest, yet credit scores are highest. The typical New Englander holds five credit cards, compared with lows of 3.3 in the Southwest and 3.9 in the Pacific and Mountain regions. Yet, New Englanders who use more than half of their available credit maintain an average credit score of 651, higher than any other region. Nationally, the average score for such big consumers of credit is 674.
"Typically," Bolin said, "the higher the utilization, the lower the (credit) score." In New England, he could only conclude, "they are paying their bills on time, so their credit scores are not suffering."
Bolin declined to say how many credit cards constitute a problem, since an individual's credit score can include as many as 20 or 30 factors, Bolin said.
Card companies hungry for profit
To Robert D. Manning, author of "Credit Card Nation" and director of the Center for Consumer Financial Services at Rochester Institute of Technology in New York, the Experian findings are evidence of the aggressive, hugely profitable growth of the credit card industry. They somewhat reflect the growing subprime credit industry whose cards typically have extremely low credit limits, forcing many buyers with poor credit to purchase numerous high-fee cards to borrow the money they want, he said.To shake out high-risk borrowers and give investors and regulators a clearer picture of the banks' risk exposure, the federal Office of the Comptroller of the Currency is now pressuring banks to raise cardholders' minimum payments to 4% from 2% of credit card balances; debt-laden consumers will soon start feeling the pinch, said Manning.
If you've got three or four credit cards and are not in a short-term emergency after which you will pay them right off, it's time to ask yourself if you are using credit cards "to inflate your lifestyle," said Manning. As for credit limits, anything over 65% use is viewed by credit-scoring agencies as "a negative," Manning said.
Don't carry the debt month to month
"Any credit card debt carried month to month is a danger signal," warned Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School and co-author of "The Fragile Middle Class: Americans in Debt." "It means that a family isn't living on its income." Plus, card interest and fees just inflate the cost of every purchase you make."Ten credit cards?" Warren asked. "That's just plain nuts."
Bolin, from Experian, offers these tips for boosting a score:
- Before closing credit cards, calculate the effect on your balance-to-limit ratio. (Calculate your ratio by checking each account for the percentage of your credit limit you've used.)
- Vary your loans -- examples: an auto loan, mortgage loan, installment loan and equity line of credit -- so that lenders see you can handle credit well in a range of situations.
- Make payments on time.
- Limit your use of available credit.
Published Feb. 14, 2007