6 Signs You’re Dependent on Credit

Quick Answer

You might be too dependent on credit if:

  1. You only make minimum payments.
  2. You max out credit cards.
  3. You frequently transfer card balances.
  4. You apply for new accounts often.
  5. You live paycheck to paycheck.
  6. You don’t have a plan for paying off debt.

But you can get back on track by making a plan to get on better financial footing.

A man wearing a gray button-up shirt uses his laptop while holding his credit card at home.

You may be dependent on credit if your monthly expenses routinely exceed your income and you use credit to fill the gap. A dependence on credit for day-to-day expenses can mean credit is not available—or not available on good terms—if you have big, unexpected expenses or if you want to take advantage of a financial opportunity.

Danger signs can include inability to make meaningful progress on paying down balances, maxed-out credit cards and the need to open new cards or loans to get by. Here are signs that could alert you to the possibility that dependence on credit is a problem.

1. You Only Make Minimum Payments

Credit cards give you wide latitude in deciding how much to pay. Paying the minimum amount due will keep you from being reported late, but it will provide little help in getting out of debt, particularly if you continue to use the card to make purchases.

If you pay the minimum amount due because you cannot afford to pay more than that, you may be overly reliant on credit. However, if you've made a conscious decision to pay only the minimum on some bills because you are trying to eliminate others (either the snowball or avalanche strategy for debt repayment), you may be fine. The difference is whether you are doing it because you feel you have little choice or as part of a plan to take control of your finances.

2. You Max Out Your Credit Cards

Credit limits are a good deal higher than the amount you can spend and maintain a good credit score. Credit card experts recommend using no more than 30% of your credit limit to reduce credit score harm—less than 10% is better. Using all or almost all of the credit available on your card can suggest you are having a difficult time managing your credit. Maxing out multiple cards can suggest serious distress.

Maxed out credit cards can be difficult to pay off and have the potential to drag down your credit. Paying them down or paying them off can take care of the problem. If your credit cards are maxed out because you need them for regular monthly expenses that may be a problem that requires making more drastic life changes, such as getting a second job or cutting your expenses.

3. You Regularly Transfer Credit Card Balances

You can be dependent on credit even if you have so far managed to keep your credit score high. If you are simply moving your debt from one account to another, by using debt consolidation loans or balance transfer cards, you may want to take a look at how healthy your relationship with credit is.

A debt consolidation loan can be a great way to potentially get a lower interest rate and a smaller payment if you roll credit card debt into a loan. But if you run up new credit card balances while you pay off the old ones, even with better terms, you might be dependent on credit.

4. You Apply For New Accounts Often

If you open—or try to open—new accounts to try to make room for new spending, you might be overly reliant on credit. There's not an optimal number of credit cards, really, but U.S. consumers have an average of just under four, according to Experian data.

Opening a new account is not necessarily a bad thing. In fact, it can help your overall credit utilization if you keep balances low. But if you need that new credit to stay afloat, you may be dependent on credit.

5. You Live Paycheck to Paycheck (Or Have No Emergency Fund)

If you have no savings earmarked for emergencies, and you are spending everything every month, you are at risk of becoming credit-dependent. That's because your credit is your emergency fund. Having good credit, and access to money in an emergency, is a good thing. Having no room in your budget to pay a new debt… not so much.

6. You Don't Have a Plan For Paying Off Your Credit Cards

If credit card debt seems like an inevitable and insurmountable part of your budget, you may be becoming too reliant on credit. Having a plan to pay off credit cards can help you feel more in control of your finances and your life.

How to Become Less Dependent on Credit

The first step is to come up with a budget. You'll want to list everything you have to pay monthly, as well as how much income you'll have coming in. If they are out of balance, the next step is figuring out how to close the gap without borrowing more money. If the answer is a stricter budget, you have several options, including:

If it's an impossible situation, you may want to talk with a bankruptcy attorney. Bankruptcy is devastating to your credit, but is sometimes the only way to get out from under overwhelming debt.

The Bottom Line

Credit is a tool that can help you use things—like homes or cars—while you pay for them. And credit cards can give you access to consumer protections that cash does not, such as a short window to pay them off without paying interest.

If bills get so big you feel like credit is controlling you instead of the other way around, you may be more dependent on credit than you'd like. But you can make a plan to get on firmer financial footing.

You can see where you stand with Experian's free credit report. Your credit report lists creditors and amounts owed, so you can check on progress as you take control and pay down debt.

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