Isle residents taking it to the limit

The proportion of people in Hawaii who use more than half of their credit exceeds the U.S. average

More Hawaii residents are maxing out their credit cards than the national average, according to a study released yesterday by Experian Consumer Direct.

Nationally, one in seven consumers -- or 14.3 percent -- use more than half of their available credit. In Hawaii and Alaska, however, 17 percent of residents are using more than 50 percent of available credit.

This higher than average figure was not surprising to Wendy Burkholder, executive director of Consumer Credit Counseling Services of Hawaii.

"Consumer debt is rising incredibly fast," said Burkholder, a counselor of 18 years. "Consumer debt is at an all-time high and consumer savings is at an all-time low. It's certainly influenced by our housing and fuel costs and cost of living in general, It's also a testimonial to the attitude of 'have it now and pay later.'"

She attributed the high use of credit, in part, to the housing frenzy just a little over a year ago.

Consumers who barely qualified for mortgages, but were able to take out adjustable rate mortgages or 100 percent financing are suddenly seeing their rates go up -- and now payments are due.

Burkholder says she's seen three families on Maui go into debt when living expenses outpaced income. People are struggling to pay housing costs, whether in mortgages or rents, she said.

Sometimes people use their income to pay off mortgages while using credit cards to pay for daily living expenses, such as food, gas and other essentials, without realizing they're racking up debts.

She recommends, as a general rule, using no more than 20 percent of one's available credit line.

"If you're over 50 percent, you're begging for trouble," she said.

Mike Haxton, a counselor at Hawaii Credit Counseling Service, says that when people max out their credit cards, without paying them in full, the late fees and over-limit fees swiftly escalate.

"A credit card is a great tool, especially when you write a check and pay it off every month," he said. "That's the way to make it work for you."

While the average U.S. consumer has an average of four credit cards, according to Experian's study, Haxton's recommendation is to limit them to two.

"People we see have between eight to 12 credit cards," he said. "My advice is to pay them off every month and pay them in full. If you can't pay them in full, take them out of your wallet, put it in a cup of water and freeze it."

Although unemployment is at a low rate, said Haxton, and people can easily find a second part-time job, many are still finding themselves in debt.

"We're in an unfortunate position that in the state of Hawaii, economically, we're not making enough to justify the cost of housing and cost of living," said Haxton. "That's why you have two, three and four incomes per household, and two to three generations supporting the mortgage."

Burkholder says a common trap is to think of credit cards as a safety net.

"What bothers me is when we have no savings as a safety net and we think of credit as a safety net," she said. "That mindset needs to be adjusted."

As a general rule, she recommends using no more than 20 percent of a credit line.

She also said people should keep three times more than their monthly payments for basic living expenses in their savings account.

"I truly believe we're at an all-time low as far as consumer savings goes," she said. "We have no safety net and we think of credit as a safety net. It is not. Credit is a liability, and the debt has to be repaid. It can't go on forever."

Experian Consumer Direct, a provider of online credit reports, based its index on a national sampling of three million consumer credit files.