Debt concerns have shifted away from inflation, but there are other issues

With inflation starting to ease, the millions of Americans with debt are less likely to cite this as an issue, but that doesn’t mean things are looking rosy.

Two new surveys released Monday reveal how reliant consumers are on debt, with 57% telling one poll that they can only get by thanks to their credit cards including 27% who have been building up balances from everyday expenses for at least six months.

Meanwhile, more borrowers are carrying debt from month to month and some are missing payments.

The first survey, from the Achieve Center for Consumer Insights, a think tank connected to the eponymous digital financial platform, polled 2000 American adults with active accounts across categories of consumer debt, including credit cards, mortgages and home equity lines of credit, and auto and student loans.

Within the research a subset of borrowers who had been at least 30 days past a due payment for a credit account at least once in the last six months were asked why this happened. The top reason was job loss or reduced income (18%) followed by those who forgot to pay (10%), increase in the cost of essentials (10%), those who did not want to pay (8%), cashflow management challenges (5%), and interest rate rises (4%).

During the third quarter, 36% of consumers said it is very difficult or difficult for them to pay their recurring debts on time, up from 31% in the second quarter, with 64% of these saying that they don't make enough money to cover their spending.

Recent positive news about the pace of inflation slowing, and in some cases, even reversing course, appears to be overshadowed by other financial concerns for struggling consumers," said Achieve Co-Founder and Co-CEO Andrew Housser. "In a sign of the beginnings of a choppy job market, more and more consumers are being impacted by reduced income or job loss.  Combine that with interest rates still near decades-long highs, and consumers with significant levels of debt are finding it difficult to make ends meet."

HOLDING ONTO DEBTS

Meanwhile, a Bankrate.com survey found that half of respondents with credit cards carry debt from month to month.

The share of people who said their credit card accounts had balances for at least a year increase from 50% in 2021 to 60% today, 34% said that inflation has made their credit debt burdens worse since the beginning of 2022, while 32% say high interest rates have made their credit card debt burdens worse during that span.

However, 42% said they have a plan to pay off their credit card debt, although 17% worry they might not be able to make their minimum credit card payments at some point in the next six months.

"Credit card balances fell sharply in 2020 as many Americans spent less during the pandemic and used stimulus funds to pay down debt,” said Bankrate senior industry analyst Ted Rossman. “Since the beginning of 2021, however, credit card balances have been off to the races. According to Federal Reserve data, Americans owe 45% more now on their credit cards than they did in early 2021. And the credit card delinquency rate is at its highest point since 2011. High inflation and high interest rates have eroded Americans' savings and more people are carrying more debt for longer periods of time."