American consumers remain under financial pressure amid inflation

About a quarter say they are concerned about covering basic household expenses

As Americans work to weather the effects of the pandemic, inflation presents a new wave of setbacks. While consumers are improving their finances through some measures, other signifiers suggest some are making risky decisions that will further their financial footing could endanger.

In a new one Financial Literacy and Readiness Survey from the National Foundation for Credit Counseling (NFCC) and Wells Fargo, a third of respondents say they are “only making ends meet financially.” This survey sheds light on consumers’ behavior and knowledge of key financial areas – debt, personal savings and financial concerns – and where they could use help.

Dealing with financial pressure

In a November poll by Affirm, participants reported worry about their finances at least six times a day on average. Meanwhile, around a quarter (26%) of respondents to the NFCC and Wells Fargo survey said they were more concerned about covering basic household expenses than they were 12 months ago.

Under this pressure, some consumers are making decisions that could worsen their financial situation. More than half (56%) say they don’t have a budget – and with rising gas and grocery prices driving up overall living costs, some say their first means of accessing cash is to turn to high-interest financing.

Here are some trends that emerged from the NFCC/Wells Fargo survey.

High-interest borrowing

Some consumers report using high-yield, high-risk methods to make ends meet. The most common products or institutions they target are check cashing shops and ATMs.

Respondents report the following:

  • 18% use check cashing shops or ATMs to access money

  • 64% of those who have ever used a cash advance or payday loan did so in the past year

  • 9% have used payday loans or cash advances to access money, while 6% have used title loans

Recourse to these financing methods is likely to increase the pressure on borrowers. For a car title loan, the average APR is around 300%, with borrowers risking taking the vehicle back if they don’t pay. Meanwhile, interest rates on a short-term payday loan can reach almost 400% APR.

credit card debt

In the Affirm study, 40% of millennials identified credit card debt as their biggest financial setback – the NFCC/Wells Fargo study shows a similar trend in credit card addiction across the population:

  • 47% have credit card debt, making it the most common type of debt in the general population today

  • 28% of respondents say they would use a credit card to cover a $2,000 emergency

That’s according to another December survey by CIT Bank, which focused on New Year’s resolutions 47% of adults said they had decided to reduce their debt in 2022. But without a household budget, top resolutions like reducing debt, saving more money (77%) and spending less (48%) may be unrealistic.

But despite consumers’ ongoing struggles, some say they are unlikely to turn to a nonprofit credit counseling agency for help, whether because they think they can do better on their own (27%), they don’t know which agency to contact (13%) or they are afraid of the costs (12%).

Those looking for support can visit the NFCC’s website to find one Certified non-profit credit counseling agency in their area. Advisory services typically include budget preparation assistance and debt management tools; Initial sessions are often free, with further support available for a small fee.

Positive consequences of the pandemic

While many consumers are on shaky ground, some are still reporting positive financial milestones. For example, the average amount of self-reported credit card debt is now $1,847 compared to $2,906 in 2020.

Consumers report that they also do well with these measures:

  • 71% pay all their bills on time and have no collection debts

  • 27% are saving a little or a lot more than a year ago

  • 53% would use a savings account to pay for a $2,000 emergency, making it the most popular source of getting cash for an emergency

  • 63% are confident they are saving enough for retirement

Methodology: Commissioned by the National Foundation for Credit Counseling (NFCC) and Wells Fargo, the 2021 Financial Literacy and Preparedness Survey was conducted online November 1-15, 2021 by The Harris Poll. Respondents consisted of 2,000 adult U.S. adults ages 18 and 18 and over, and 500 U.S. adults ages 18 and over currently serving in the U.S. military and conscripted (Reserves and National Guard members (ie, “ Service members”) were excluded), 250 US adults ages 18 and older whose spouses or partners are Service members, and 500 US military veterans.

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