American Consumers Continue to Face Financial Pressures Amid Inflation

American Consumers Continue to Face Financial Pressures Amid Inflation

Roughly one-fourth say they worry about covering basic household expenses
woman grocery shopping

As Americans work to overcome the impacts of the pandemic, inflation is presenting a new wave of setbacks. While consumers are improving their finances by some measures, other signifiers indicate that some are making risky choices that might further compromise their financial footing.

In a new Financial Literacy and Preparedness Survey from the National Foundation for Credit Counseling (NFCC) and Wells Fargo, one-third of respondents report that they're "just getting by financially." This survey highlights consumer behavior and knowledge in key financial areas — debt, personal savings and financial concerns — and reveals where they could use support.

Managing financial pressures

In a November survey from Affirm, participants reported worrying about their finances at least six times a day on average. Meanwhile, roughly one-fourth (26%) of respondents to the NFCC and Wells Fargo survey said that they worry about covering basic household expenses more than they did 12 months ago.

Under this pressure, some consumers are making choices that could worsen their financial footing. More than half (56%) report having no budget — and as rising gas and food prices increase the overall cost of living, some say they turn to high-interest financing as their first means of getting access to cash.

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

High-interest borrowing

Some consumers report using high-interest and high-risk methods to make ends meet. The most common products or institutions they turn to are check cashing stores and ATMs.

Here's what respondents report:

  • 18% use check cashing stores or ATMs to access money
  • 64% of those who’ve ever used a cash advance or payday loan last did so in the past year
  • 9% have used payday loans or cash advances to access money, while 6% have used title loans

Resorting to these financing methods is likely to create more pressure on borrowers. For a car title loan, the average APR is around 300%, with borrowers risking vehicle repossession if they fail to pay. Meanwhile, rates on a short-term payday loan can reach near 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 reveals a similar trend of credit card dependency across the general population:

  • 47% have credit card debt, making it the most common type of debt currently held by the general population
  • 28% of respondents say they’d use credit card to cover a $2,000 emergency

Another December survey from CIT Bank, focusing on New Year's resolutions, showed that 47% of adults said they resolved to reduce their debt in 2022. But without a household budget, top resolutions like debt reduction, saving more money (77%) and spending less (48%) may be unrealistic.

Yet, despite consumers' ongoing struggles, some say they weren’t likely to turn to a nonprofit credit counseling agency for help, whether because they believe they can do better on their own (27%), they don't know which agency to turn to (13%) or they're afraid of the cost (12%).

Those seeking support can visit the NFCC's website to find a certified nonprofit credit counseling agency in their area. Counseling services typically include budget-building assistance and tools for managing debt; initial sessions are often free, with further assistance available at a low cost.

Positive outcomes of the pandemic

While many consumers are on shaky ground, some still report experiencing positive financial milestones. For example, the mean amount of self-reported credit card debt is now $1,847, down from $2,906 in 2020.

Consumers report doing well by these measures, too:

  • 71% pay all of their bills on time and have no debts in collection
  • 27% are saving either a little or a lot more than they were a year ago
  • 53% would use a savings account to pay for a $2,000 emergency, making it the most popular source to get cash for an emergency
  • 63% are confident they're saving enough for retirement

Methodology: On behalf of the National Foundation for Credit Counseling (NFCC) and Wells Fargo, the 2021 Financial Literacy and Preparedness Survey was conducted online by The Harris Poll from Nov. 1 to Nov. 15, 2021. Respondents consisted of 2,000 U.S. adults ages 18 and older, as well as 500 U.S. adults ages 18 and older currently active and enlisted in the U.S. military (reserve members and those in the National Guard (i.e., "servicemembers") were excluded), 250 U.S. adults ages 18 and older whose spouses or partners are servicemembers and 500 U.S. military veterans.