LendingTree Survey: Credit Card Debt Up 30% Over Past Two Years

LendingTree released its survey results on Thursday, revealing that 30% of Americans have seen credit card debt increase over the past two years, mostly due to inflation and loss of income.

In the study, conducted with data from 1,249 consumers, 48% of consumers said inflation led to increased credit card debt, while 34% said loss of income was the main factor determining. The study also revealed that 30% of consumers were able to increase their credit score over the same two-year period.

According to the study, younger generations and parents suffered more than most. Forty-two percent of millennials and 45% of parents of young children have struggled to pay their bills during the pandemic. While some consumers saw their credit score increase, one in five consumers said they hadn’t checked their score in two years.

“There was a huge disparity in how Americans were impacted financially by the pandemic, there’s no question about that,” Matt Schulz, chief credit analyst at LendingTree said in the press release. “Some people emerged from the last two years before the game, while others saw their financial world completely devastated.”

A recent study by Capital One revealed that 58% of consumers have turned to loans or dipped into savings to cover their expenses in the face of rising prices. In addition, the general feeling of inadequate financial health has increased.

Only 18% of consumers said income kept pace with the cost of living. Ten percent of low-income consumers said they had received a non-performance-based raise in the past three months, compared to 20% of middle-income consumers and 30% of high-income consumers.

Turn to credit cards and loans to help cover expenses

With the current economic environment, these results are not surprising. Inflation has hit a 40-year high of 7.5%, gas prices are rising due to Russia’s invasion of Ukraine and the Federal Reserve is expected to raise interest rates in March to combat inflation. Consequently, consumers are turning more to credit cards and loans to make ends meet.

Besides, JD Power found that consumers look to their financial institutions to help support their financial health. Not only that, but employees are looking for more frequent paychecks to make it easier to pay monthly bills through payroll cycle alternatives like pay-as-you-go and prepay. Fifty-one percent of all workers said they would change to an employer that offered more frequent wages.

Banks are placing more emphasis on consumer financial health to cater to the growing population of digital banking customers and to better support customers.

Many big banks, including Chase, Bank of America and Capital One, have reduced overdraft fees and eliminated others while introducing more programs and resources for customers to take advantage of.

The increased focus on lowering fees by financial institutions has also been partly to keep up with banking alternatives like PayPal, SoFi, Chime and even American Express. Consumers have started turning to digital-only options due to ease of use, no fees, and transparent systems.

Ways to use your plastic to cover expenses

When it comes to using credit cards to cover expenses and avoid mounting credit card debt, there are a few things consumers can do. One of the easiest actions, if you’re having trouble making payments on time, is to consider setting alerts on your account.

A slightly more complicated action is to use a balance transfer. If interest is accumulating on a large credit card balance, transfer it to another card that offers 0% APR for a while. Consumers can transfer the card balance with a high interest rate to avoid interest charges and work to pay off the debt.

The increased line of credit from adding a new credit card to your wallet could even improve your credit scores. By having a larger overall line of credit, you will have less credit utilization, which contributes to healthy credit scores.

If you need to use a credit card to cover a bill payment, consider one that offers rewards for doing so. Fixed-rate credit cards, like the Wells Fargo Active Cash card, would work well.

Also: When paying bills with a credit card makes sense — and when it doesn’t

Active Cash earns 2% cash back for every purchase, which means you would see a small return on your spending. Or, if your service provider charges a fee for paying with a credit card, the 2% cash back would help mitigate the impact.

The card also features an intro 0% APR for new purchases for 15 months (then 14.99% to 24.99% variable). This means you can make your bill payment, suffer less from potential charges, and have more time to pay it while the balance earns no interest.

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