ICYMI: 58% Of Americans Now Living Paycheck To Paycheck, Counting on Credit Cards To Meet Needs

CBA General Programs
April 20, 2023

A new CNBC survey released last week found 58% of all Americans are now living paycheck to paycheck while 70% of the nation said they feel stressed about their finances due to ongoing economic headwinds. Even as a growing share of consumers are leaning on credit cards to afford increasingly expensive necessities such as food and rent, a recent CBA poll found nearly half are largely unaware of the consequences associated with missing payments. Here’s what’s happening, why it matters, and how banks are working to empower consumers with improved financial literacy to make better informed credit decisions.

What’s Happening

Amidist persistently high inflation, rising interest rates, and other economic pressures, millions of consumers are struggling to make ends meet. According to the CNBC survey:

  • More than half, or 58%, of all Americans are now living paycheck to paycheck.
  • 70% of Americans feel stressed about their finances.
  • Financially vulnerable Americans say a lack of savings or credit card debt is a problem and twice as likely to fear being laid off.

To cover the costs of everyday purchases and emergency expenses, more Americans are relying on credit cards, with overall utilization and balances continuing to rise over the last year following dramatic drops during the height of the pandemic. 

Why It Matters 

Credit cards and other financial tools within the well-regulated, well-supervised banking system provide millions of consumers with a valued emergency safety net in times of need. Banks are obligated to manage credit risk, which includes taking action to prevent consumers from defaulting and recover losses. But, as a recent CBA poll found, nearly half of Americans mistakenly believe nothing happens if they pay their credit card bills late. 

  • When asked “which of the following actions do you believe happen if you pay your credit card bill 30+ days late?” nearly half (48%) mistakenly selected “I pay a late fee and nothing else happens until my next payment is due.”

Missing payments can negatively impact ones’ credit score and therefore their ability to qualify for a home or auto loan. It can also trigger a higher penalty interest rate or result in the loss of special low or zero percent interest rate introductory offers from credit card companies. Of the consequences that can follow late credit card payments, survey respondents answered the following ways:

  • Only 1/3 (33%) selected “my interest rate goes up to a temporary penalty rate”
  • Less than 1/3 (31%) chose “my credit score can go down by as many as 100 points”
  • Only 26% acknowledged “I lose access to special offers, like introductory low or 0% interest rates”
  • Meanwhile 46% mistakenly believed “My credit score can go down a little, by 10 or fewer points”

Bolstering Financial Literacy 

America’s leading banks remain fully committed to expanding access to credit across every community they serve. This financial literacy month and every day of the year, banks are working to ensure customers are empowered with the education and resources necessary to utilize these financial tools, including credit cards, in a responsible manner. Some of these bank-led efforts include:

  • Digital Channels: From monthly AI-powered spending insights to personalized savings plans, and more, new innovations across enhanced digital platforms are helping consumers to better manage credit, build a strong credit history, and maintain a healthy debt-to-income ratio.
  • Branches: As banks continue to make historic investments to transform branches across America – with a strategic focus on underserved communities – consumers benefit from the ability to participate in free financial literacy workshops on how to build credit while keeping debt manageable. 
  • Classrooms: Many banks also have dedicated programs focused on students, bringing financial education into classrooms across America and preparing the next generation of consumers with the skills they need to make smart credit decisions for years to come. 

To learn more about the steps banks are taking to support hardworking Americans in good time and bad, visit www.BanksMakeItPossible.com