Managing Credit Card Debt in a Time of Inflation: New Research from LendingClub & PYMNTS
With the rise in inflation, managing credit card debt is becoming a major concern for many consumers, especially those who are living paycheck to paycheck. In the last year, 70% of surveyed cardholders reported taking at least one measure to help manage credit card payments, with 90% of those living paycheck to paycheck with issues paying bills and 81% without issues paying bills adjusting their use of credit cards. Budgeting and reducing spending were among the most popular strategies, with 32% of cardholders adjusting their budgets and 31% lowering their spending.
However, these behavioral changes may not be enough to balance consumers' finances, as interest rates for debt continue to increase. The average consumer holds outstanding credit card balances equivalent to 35% of their available savings, but those living paycheck to paycheck have much higher debt relative to their savings level. Consumers living paycheck to paycheck without issues paying bills have average outstanding credit card balances equivalent to 62% of their available savings, while those with issues paying monthly bills carry balances of 157% of their available savings, meaning they would still have a balance even if they emptied their savings accounts.
For those looking to decrease their overall debt burden, consolidating and/or refinancing debt into an installment loan could be a good option. Additionally, using a personal loan to pay down debt at a lower interest rate could help save money each month.
In order to gain a better understanding of the impact of U.S. consumers' holiday spending on their credit card debt, LendingClub Corporation and PYMNTS conducted the 19th edition of the Reality Check: Paycheck-to-Paycheck research series. To see the entire report, go to https://www.pymnts.
0. “60% of Americans Now Living Pa” GuruFocus.com, 28 Feb. 2023, https://www.gurufocus.com/news/1959092/60-of-americans-now-living-paycheck-to-paycheck-down-from-64-a-month-ago
1. “60% of Americans Now Living Paycheck to Paycheck, Down from 64% a Month Ago” PR Newswire, 28 Feb. 2023, https://www.prnewswire.com/news-releases/60-of-americans-now-living-paycheck-to-paycheck-down-from-64-a-month-ago-301757630.html
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