Survey Finds Americans Relying More on Credit Cards
With the economy hitting some sour notes, it looks as though the use of credit is on the rise. According to Credit Sesame’s latest Personal Finance and Credit survey, Americans are relying more on credit cards now than they were last year. In fact, the percentage of respondents who reported using more than half of their available credit limit increased by nine points when compared to last year’s survey. Additionally, 47% of those surveyed this year said they preferred credit cards to debit cards (40% chose debit). This was a near inverse of last year when 46% stated a preference for debit compared to 40% for credit.
Unfortunately, Credit Sesame’s survey also found late payments among consumers were on the rise. This year, 15% of respondents noted late credit card payments versus 10% in 2021. Meanwhile, more than one-third (34%) of those surveyed said that they spend more than 90% of their paychecks on expenses each month. This was double the 17% who said the same last year. Similarly, the percentage of those who said they spend more than 100% of their paycheck each month rose from 6% to 11%.
Of course, the increasing reliance on credit is understandable given the four-decade high inflation the United States is currently enduring. However, increases in interest rates could hurt debt-carrying consumers even more. Recently, the Federal Reserve increased interest rates by 0.75% — the biggest single rate hike since 1994.
Also concerning is that a number of those surveyed displayed a lack of knowledge about their personal credit. For example, 1 in 6 surveyed did not know their credit score. What’s more, a surprising 40% didn’t realize that lenders utilize credit scores to evaluate creditworthiness.
Commenting on the survey’s findings, Credit Sesame CEO Adrian Nazari explains, “Inflation and economic adjustments affect us all, but understanding, and improving your credit score can protect against these rising costs and interest rates.” Nazari added, “The results of this survey prove how important it is for Americans to take care of their credit health to stave off the negative impact of any economic downturn.”
All in all, there are many concerning aspects of Credit Sesame’s Personal Finance and Credit survey. Moreover, while economic factors are impacting the results already, there could be more bad news on that front as a recession is widely expected. Alas, although consumers may be having a hard time with their finances overall, one thing they can do is check their credit score and educate themselves on the elements that go into said scores. Armed with this info, hopefully consumers will be able to make better financial decisions as we navigate what’s ahead.