The coronavirus (COVID-19) pandemic has changed the way of life for consumers in both good and bad ways. One change has to do with the way Americans utilize their credit cards post-pandemic.
A recent study conducted by Money and Morning Consult surveyed how American consumers have been using their credit cards during this crisis. What the study found was Americans are continuing to use their cards. However, the way by which they are using their cards has changed.
When the pandemic hit in March 2020, the economic impact was devastating. Many American workers were furloughed or laid off due to widespread government shutdowns. The stock market plummeted due to the uncertainty surrounding the pandemic, and during that first month alone, over 22 million Americans filed for unemployment for the first time.
While the economy is slowly rebounding and many Americans are back to work, others are still struggling with job losses or pay cuts. What consumers are using their credit cards on in terms of spending has changed.
The Money and Morning Consult survey looked at the spending habits of 2,200 U.S. adult consumers. Of those surveyed, 11 percent (11%) said that they were “very stressed” about their credit card debt more than any other type of debt, including student loans, mortgages, and medical debt. Financial loss could be one of the big reasons for this stress. Nineteen percent (19%) of those surveyed said that they had either lost a job or have been laid off since February 15, 2020. Thirty-three percent (33%) reported losing income since the start of COVID-19.
Seventy percent (70%) of Americans said that they had no intentions of cancelling or closing an existing credit card due to the pandemic. Sadly, 38 percent (38%) said credit cards were the only method they were able to make purchases currently due to their financial situations. Twenty-nine percent (29%) of credit card users surveyed said that they were using their credit cards more frequently than they were before COVID-19, when it comes to basic necessities, including food and hygiene products.
According to the study, approximately 25 percent of consumers said they were spending more now than they were pre-COVID-19. However, this was common more for consumers living in cities than in suburban areas. In fact, urban residents were the group that said they were more likely to rely on credit cards for purchase than before.
The study also showed that 32 percent (32%) of American consumers say that they are using their credit cards more at grocery stores or restaurants than they had been before the shutdowns occurred in March.
The survey also reported that only six percent (6%) of American consumers say that they would open a new credit card to pay for a large and unexpected expense. Twenty-one percent (21%) reported that they would pay for the expense with an already-open credit card.
In comparing these figures with the last big recession seen from December 2007 to May 2008, this spending behavior is similar to what was reported during that time. During the last recession, unemployment reached a high of 10 percent, which forced many American consumers to rely heavily on credit cards for making necessary purchases.
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