Credit card borrowing close to pre-pandemic levels


There are some things we want to see return to pre-pandemic levels, like traveling to remote places or getting together with friends and family.

And then there are some things that, maybe, we might not like to see heading into those pre-COVID-19 high waters.

Not in the paycheck-to-paycheck economy, anyway.

Credit card debt is on the rise, approaching levels seen a few years ago. This trend was highlighted by data from eight issuers, as noted by Seeking Alpha. The overall trend was up, from lows seen during the pandemic, where consumers had used stimulus payments to reduce those balances.

Also Read: Card Issuers See Rise in Borrowing

Problem for Paycheck to Paycheck Borrowers

Inflation, of course, is partly responsible for some of the accumulation. And while it could be argued that the rise in debt could be manageable as it is effectively a “refreshment” from low levels, PYMNTS data shows that trouble may be waiting behind the scenes. .

Especially for those of us who live paycheck to paycheck – that’s most of us, at 59% of the US population. In fact, this designation is so prevalent that 49% of consumers earning over $100,000 don’t have enough money at the end of each pay period. And as noted in a recent “New Reality Check” report, produced in collaboration between PYMNTS and LendingClub, 29% of consumers living paycheck to paycheck who have trouble paying bills don’t have a card. credit. This implies that more than two-thirds of these same consumers have credit cards.

And if the majority of these borrowers have cards in hand and have trouble paying bills, it follows that they would use those cards to make ends meet – especially since we found that consumer savings living paycheck to paycheck have plummeted. from a high of $4,000 during the pandemic to a recent $2,969. The savings cushion can only last for so long, and credit cards fill the gap. But by increasing that monthly debt burden — that is, the cost of servicing that debt — the paycheck consumer is now adding a bit more pressure on the daily struggle to maintain cash flow.

A large majority of our consumers surveyed have had to deal with financially stressful events, and in a time when the “new” emergency event now averages $1,400, it’s easy to see where the pressures. One or two emergency expenses can tip a consumer or family into a precarious financial existence.

Also Read: How Did $1,400 Become the “New” Average Emergency Expense?

The cycle becomes vicious in which paycheck-to-paycheck consumers are likely to take on more credit card debt than other cohorts – and they are the ones who have the hardest time managing that debt. Indeed, data from issuers but also from the St. Louis Fed show that delinquency rates are on the rise. The old saying goes that where there’s smoke, there’s fire, and in the paycheck-to-paycheck economy, the plumes start to rise.

New PYMNTS Study: How Consumers Use Digital Banks

A PYMNTS survey of 2,124 US consumers shows that while two-thirds of consumers have used FinTechs for some aspect of banking, only 9.3% call them their primary bank.

We are always looking for partnership opportunities with innovators and disruptors.

Learn more

https://www.pymnts.com/credit-unions/2022/credit-unions-well-positioned-to-address-inflation-consumer-and-smb-recession-concerns/partial/

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