More People then Ever are Living Paycheck to Paycheck

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More People then Ever are Living Paycheck to Paycheck

By Investment Watch Blog

More Americans turning to credit cards to cover basic expenses as inflation rages

35% of households used credit cards to cover basic expenses in December

A growing number of Americans are relying on credit cards to pay for basic expenses as relentless inflation erodes more households’ purchasing power.

New data released by the Census Bureau this week found that more than 35% of households used credit cards or loans in December to assist with spending needs in the past week. That marks an increase from 32% in November and just 21% in April 2021, according to the Household Pulse Survey.

The rise in credit card usage is somewhat concerning because interest rates are astronomically high right now. The average credit card APR, or annual percentage rate, set a new record high of 19.14% last week, according to a Bankrate.com database that goes back to 1985. The previous record was 19% in July 1991.

Credit card payment

A person uses a credit card as a payment.

If people are carrying debt to compensate for steeper prices, they could end up paying more for items in the long run. For instance, if you owe $5,000 in debt – which the average American does – current APR levels would mean it would take about 191 months and $6,546 in interest to pay off the debt making the minimum payments.

By comparison, the 16.3% average rate at the beginning of the year would mean paying about $5,517 in interest and getting out of debt after 185 months.

“Credit card rates are much higher than most other forms of debt,” Bankrate.com analyst Ted Rossman said. “We’re talking three, four or even five times higher than most people are paying for mortgages, car loans and student loans. Paying off your credit card debt should be a top priority, especially with interest rates at record highs.”

Several Visa credit cards

Visa credit cards are arranged on a desk.

A New York Fed survey published in November showed that credit card balances climbed more than 15% from a year earlier, the largest annual jump in more than 20 years.

“With prices more than 8% higher than they were a year ago, it is perhaps unsurprising that balances are increasing,” the Fed researchers wrote in a blog post. “The real test, of course, will be to follow whether these borrowers will be able to continue to make the payments on their credit cards.”

Resources:
https://www.investmentwatchblog.com/more-people-then-ever-are-living-paycheck-to-paycheck/
https://www.foxbusiness.com/money/more-americans-turning-credit-cards-cover-basic-expenses-inflation-rages

Opinion pieces don’t necessarily reflect the position of our news site but of our Opinion writers.

*Note We Deliberately Miss Spell Some Words or Add Capital Letters To Get Around Big Tech Censoring.

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