Your credit card utilization rate – your collective credit card balance divided by your collective credit card limit – is an important factor used by most credit scoring models to calculate your score. Generally, lenders see that if you’re using a greater amount of available limit, there is an indicator of a greater risk of not being able to pay your debts. In general, a credit card utilization rate of less than 30 percent is recommended.
According to Credit Karma’s recent Credit Fumble™ research and survey, young consumers are overspending on their credit cards with some regularity. Over half of the respondents (54 percent) to our survey reported that before their 30s they’d racked up credit card debt they couldn’t pay off in a year. These consumers might not also understand the impact that it can have on their credit scores either: 69 percent of people surveyed by Credit Karma said they didn’t understand properly what credit scores were when they got their first card. Over two-thirds of Americans confessed to having made a Credit Fumble before the age of 30, either overspending, missing payments, defaulting on a loan, or having an account sent to collections.
To look at the cities across America where young adults are using up their credit card limits, we turned to data from our more than 50 million members. We examined the 100 largest cities in America and looked at the average credit card utilization rates for our members between the ages of 18 and 24 who were carrying a balance on their credit cards.
The top 10 were as follows:
- Detroit, MI: 68.3%
- Memphis, TN: 63.3%
- Newark, NJ: 62.3%
- Norfolk, VA: 62.2%
- Cleveland, OH: 60.1%
- New Orleans, LA: 60.1%
- Milwaukee, WI: 59.2%
- Philadelphia, PA: 58.5%
- Baltimore, MD: 58%
- Jacksonville, FL: 57.8%
Alongside free credit scores and reports, Credit Karma offers its members friendly, educational information to help each of them understand and make the most of their individual situation.
The data looks at the average credit card utilization rate for Credit Karma members between the ages of 18 and 24 who carry a balance on their credit card, live in the 100 largest cities in the United States and pulled their credit report through Credit Karma in 2015. Credit Karma’s Credit Fumble research draws upon a survey of 1,051 Americans between the age of 31-44, done in partnership with Qualtrics in late 2015, about the struggles they had managing their finances before entering their thirties.