NEW JERSEY – The COVID-19 pandemic drastically affected American purchasing habits. Social distance and stay-at-home instructions resulted in a shift away from transportation, restaurant, and entertainment expenses in the early days of the pandemic.
Rising Inflation And Interest Rates Increase Credit Card Debt And Interest Rates
Consumer expenditure has since recovered, although rising inflation has increased the basic cost of living. Furthermore, rising interest rates are increasing the cost of borrowing. While many Americans use credit cards for their perks and benefits, according to a new report by Upgraded Points, more consumers are turning to credit cards for temporary relief as prices continue to climb.
Large reductions in consumer spending combined with stimulus checks and other financial assistance helped cut revolving credit card balances in 2020 and 2021, which is the amount that accrues interest carried from one billing cycle to the next. In addition, overall revolving credit card debt fell to its lowest level since 2014 in the spring of 2022. However, as consumer spending began to recover and inflation rose, revolving debt began to rise steadily and is now approaching pre-pandemic levels.
Unfortunately, when credit card balances mounted, so did the burden of holding credit card debt. The Federal Reserve has raised interest rates ten times since March 2022 in an attempt to control inflation. As a result, the average credit card interest rate for interest-bearing accounts increased from 16.17% in early 2022 to nearly 21% in Q1 2023.
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Americans Are Increasingly Using Credit Cards Or Loans To Pay For Essential Living Expenses
The combination of high loan rates and growing costs has placed American families in a difficult situation. According to the U.S. Census Bureau, about 70% of individuals now say it is difficult to pay for essential living expenditures, up from less than 50% in May 2021. The Household Pulse Survey was conducted by the Census Bureau. At the same time, an increasing number of Americans have turned to credit cards. 37% of adults reported they used credit cards to meet essential living expenses in February 2023, up from 23% in March 2021.
Apart from regular sources of income, credit cards or loans are the most prevalent payment methods used to cover essential living expenses. The 37% of adults who reported using credit cards or loans to pay for living expenditures are roughly 10% more than the 28% who used savings, sold assets/possessions, or drew from retirement accounts. Borrowing from friends or relatives, various government assistance programs, and money saved from deferred or forgiven payments are all less typical ways to pay for living expenses.
Upgraded Points researchers examined the most recent data from the United States to find the states where individuals use credit cards to fund essential living expenditures. The Census Bureau. The researchers ranked states based on the percentage of respondents who said they had recently used credit cards to meet their expenditure demands. During the month of February 2023, adults were polled. Researchers also computed the total number of people who use credit cards to cover expenses, the percentage of adults who have difficulties covering expenses, and the total number of adults who have difficulty covering expenses.
The following is a summary of the data for New Jersey:
- 39.7% of individuals use credit cards to cover expenses.
- Total number of adults who use credit cards to pay for expenses: 2,422,101
- 69.2% of adults have difficulties covering their expenses.
- Total number of adults having financial difficulties: 4,331,596
Here are the statistics for the entire United States for your convenience:
- 37.4% of individuals use credit cards to cover expenses.
- Total number of adults who use credit cards to pay for expenses: 84,142,385
- 69.7% of adults have difficulties covering their expenses.
- The total number of adults having financial difficulties is 160,668,322.
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