Are You Among the Americans Utilizing Credit Increasingly More?

• Author: Bryan Miller
• Posted: 2024-09-10

During the COVID-19 pandemic, Americans often faced the choice between their credit scores going down or the inability to afford basic necessities. As such, collective credit card debt grew sizably over the pandemic.

Initially, this increased spending was due to mass layoffs, slow unemployment offerings, and all around fiscal slowdowns. However, we are now a few years into the pandemic. As life has returned to normalcy for many people, credit cards have sprung into the forefront for many Americans. This is because there is rampant inflation across all sectors of the economy.

Many people have noticed that in grocery stores, item prices have skyrocketed. This extends into supermarkets, where many have noticed aisle stickers have ever-increasing prices for items of all types.

What About the COVID Raises?

Beginning when the COVID pandemic initially struck, with many governors putting out executive orders limiting economic activities, employers shut down. Some employers initially laid off too many workers, then had problems obtaining the personnel again. Although many companies and people cited higher unemployment benefits as the primary reason that they could not rehire personnel easily, some economists argue that it was actually other factors that played into this equation.

Because of difficulties rehiring people, some companies ended up offering starting bonuses and initial hourly pay raises to workers. In some cases, these offerings exceeded what employees could get from unemployment payments. However, the federal unemployment offer expired in many states early in 2020, and in other states Fall of 2020. At this point in time, companies began looking at cutting these initial bonuses because they were no longer competing with higher unemployment offerings.

These COVID premium wages hit the dust when federal unemployment offerings expired for the most part. However, a new wage standard had been established for workers in many sectors. This made there be a de facto minimum wage for many workers that is higher than these workers had received prior to COVID.

How Badly Is Inflation Outpacing Wages Now?

Now, inflation is going up because of a number of world events. The war in Ukraine, for example, is making international supply routes costlier to maintain. Rising gas prices as a result of this war have been wreaking havoc on much of the population and on prices of pretty much everything out there.

In a survey conducted by Nationwide, about a third of people stated that they have begun to drive less often. The same survey found that almost half of people who responded dine out less frequently. These mirror trends seen earlier on in the COVID pandemic; however, at that point, they were largely driven by restrictive stay at home orders.

Why Do a Fifth of Americans Put Everything on Credit Now?

At this point, about a fifth of Americans have reported relying almost solely on their credit cards to pay for basic necessities. This may be partially because of inflation, as well.

Credit cards are fine when they are used in moderation and properly. However, many people are finding themselves in a pinch due to inflation. Because the prices of both commodities and necessities have gone through the roof, there are fewer options to those who do not make a high amount of income per year.

Unfortunately, this figure is likely to go up over subsequent months. Credit card debt already saddles millions of people a year. Historically, society has seen this type of credit card debt as the result of irresponsible spending. However, views on this will likely change as more people realize that some must do this out of necessity.

Is There Any Way to Avoid Credit Card Debt?

There are certainly ways that you can reduce the likelihood of having to rely on credit cards to pay for basic necessities. One of these is to get a second job if you have the time and energy to do so. With this additional income, you may be able to put more purchases on debit or pay off your credit cards to avoid paying for additional interest.

You could also consider a side hustle for ride sharing companies, passive income strategies, or even a small local part-time business. With many sectors reopening after being closed for so long with COVID, the opportunities abound.