2 in 5 Americans Are More Reliant on Credit Cards Than Ever Before. Here’s How to Break That Cycle

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Being overly reliant on credit cards could cost you. Read on for ways to depend on your cards less. 

Carrying a balance on a credit card can be an expensive prospect. After all, credit cards are notorious for charging high amounts of interest on balances that aren’t paid in full. And given that interest rates are higher today in the wake of multiple Federal Reserve rate hikes, it’s really not the best time to be carrying a credit card balance forward.

But unfortunately, 2 in 5 Americans with credit cards now say that they’re more dependent on those cards than ever before, according to a recent Quicken survey. This sentiment especially holds true for millennials, 53% of whom say they’re more reliant on credit cards now than before.

If you have a tendency to reach for a credit card to cover unplanned expenses, you may be setting yourself up for a world of financial upheaval. Not only can credit card debt be costly, but it can also cause damage to your credit score — even if you do a good job of making your minimum monthly payments when you’re supposed to. So if you’re too reliant on credit cards, it’s time to break that cycle.

Build emergency savings

A big reason so many people become reliant on credit cards is that they don’t have money in the bank to tap when sudden bills arise. So if you want to become less dependent on your credit cards, you’ll need to build up an emergency fund.

Generally speaking, it’s a good idea to maintain an emergency fund that’s large enough to cover three months of essential bills. That way, if you were to lose your job, you’d have a way to pay your expenses for a while.

Of course, if your current emergency fund balance is $0, you’re not going to go from that to having three months’ worth of living expenses saved in a matter of weeks. It could easily take months or years. But saving some amount of money is an important step in the right direction.

Let’s say you manage to save $500 and then you’re hit with a $250 car repair bill. That’s $250 that won’t automatically have to go on your credit card.

Take a closer look at your spending

Some people end up with credit card debt, or end up heavily reliant on credit cards, because they’re hit with too many unplanned expenses to handle at once, or because they experience an event like job loss that impacts their income. It may be that you have no savings and are reliant on credit cards because you spent the first half of 2023 paying off bills from a medical issue.

That’s why it’s important to take a close look at your spending habits. Even if you’re living modestly, there may be corners you can cut that help you build up a financial cushion.

Are you forking over $60 a month for streaming services and spending $100 a month on takeout meals when you pretty much have $0 in your savings account? These are perfectly reasonable expenses if your cash reserves are in decent shape. But if you’ve become super dependent on credit cards and don’t have money in the bank, then these are expenses to look at cutting temporarily until you’ve built up more of a savings balance.

You may even want to look at bigger changes, like moving to a cheaper apartment for a year, to boost your savings and chip away at credit card debt you already have. Unloading a car you can get by without could be a similarly savvy move that has a big impact.

Of course, giving up things you love, like a larger home, vehicle, or entertainment, isn’t easy. But we’re not talking about doing it forever — just for a bit of time so you can get to a place where you don’t constantly need your credit cards to bail you out.

Given today’s higher living costs and lingering inflation, it’s easy to see why 2 out of 5 Americans depend on their credit cards more so than usual. But if you’re able to break that cycle, your financial picture could improve greatly, and you might enjoy some of the mental health benefits that come with being less financially squeezed all the time.

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