U.S. consumers continue to face financial pressures amid inflation
About a quarter say they worry about covering basic household expenses
As Americans struggle to ride out the effects of the pandemic, inflation presents a new wave of setbacks. While consumers are improving their finances through some measures, other signifiers indicate that some are making risky choices that could further jeopardize their financial footing.
in a new Financial Literacy and Readiness Survey from the National Foundation for Credit Counseling (NFCC) and Wells Fargo, one-third of respondents say they are “barely getting by financially.” This survey highlights consumer behavior and knowledge in key financial areas – debt, personal savings and financial concerns – and reveals where they might need help.
Manage financial pressures
In a November survey from Affirm, participants said worrying about finances at least six times a day on average. Meanwhile, about a quarter (26%) of respondents to the NFCC and Wells Fargo survey said they were more worried about covering basic household expenses than 12 months ago.
Under this pressure, some consumers make choices that could worsen their financial situation. More than half (56%) say they don’t have a budget — and as rising gas and food prices increase the overall cost of living, some say they are turning to interest rate financing. high interest as the first way to access cash.
Here are some trends that emerged in the NFCC/Wells Fargo survey.
High interest loan
Some consumers report using high interest, high risk methods to make ends meet. The most common products or institutions they turn to are check cashing stores and ATMs.
Here is what the respondents report:
18% use check cashing stores or ATMs to access cash
64% of those who last used a cash advance or payday loan did so in the past year
9% used payday loans or cash advances to access cash, while 6% used title loans
The use of these modes of financing is likely to create more pressure on borrowers. For a car title loan, the average APR is around 300%, with borrowers at risk of repossessing the vehicle if they don’t pay. Meanwhile, rates on a short-term payday loan can reach nearly 400% APR.
Credit card debt
In the Affirm study, 40% of millennials identified credit card debt as their biggest financial setback – the NFCC/Wells Fargo study finds a similar trend of credit card addiction in the general population:
47% have credit card debt, making it the most common type of debt currently held by the general population
28% of respondents say they would use a credit card to cover a $2,000 emergency
Another December survey from CIT Bank, focusing on New Year’s resolutions, showed that 47% of adults say they are committed to reducing their debt in 2022. But without a family budget, major resolutions like reducing debt, saving more money (77%) and spending less (48%) may be unrealistic.
Yet despite consumers’ continued struggles, some say they weren’t likely to turn to a nonprofit credit counseling agency for help, whether because they think they can do better on their own (27%), they don’t know which agency to turn to (13%) or they are afraid of the cost (12%).
Those looking for help can visit the NFCC website to find a not-for-profit certified credit counseling agency in their field. Advisory services typically include budgeting assistance and debt management tools; initial sessions are often free, with additional assistance available at low cost.
Positive assessment of the pandemic
While many consumers are on shaky ground, some are still reporting positive financial milestones. For example, the average amount of self-reported credit card debt is now $1,847, up from $2,906 in 2020.
Consumers also report good results from these measures:
71% pay all their bills on time and have no outstanding debt
27% are saving a little or a lot more than a year ago
53% would use a savings account to pay for a $2,000 emergency, making it the most popular source for emergency cash
63% believe they are saving enough for retirement
Methodology: On behalf of the National Foundation for Credit Counseling (NFCC) and Wells Fargo, the 2021 Financial Literacy and Preparedness Survey was conducted online by The Harris Poll from November 1 to November 15, 2021. Respondents consisted of 2,000 US adults ages 18 and older. older, as well as 500 U.S. adults ages 18 and older currently active and enlisted in the U.S. military (members of the Reserves and those of the National Guard (i.e., “service members”) were excluded), 250 U.S. adults ages 18 and older whose spouses or partners are military personnel, and 500 U.S. Army veterans.