Consumers report urgent need to cover basic expenses.
A recent survey sponsored by the nonprofit organization DebtHammer indicates that consumers are struggling in an inflationary economy.
Among the key findings: Consumers are using payday loans to cover primary expenses like groceries and utility bills.
According to the survey:
“About 23% said they had to use a short-term loan to cover basic expenses. The most common reasons cited were to buy groceries (27.59%) and pay utility bills (30.34%) percent. Other reasons cited included gas, car repairs, mortgage or rent payments, medical bills, student loans, or child support and alimony.”
I recently wrote about another solution to the inability to pay for groceries: buy now, pay later:
Warm and Fuzzy Grocery Debt?
The survey also indicates that roughly one-third of Americans are three months behind on at least one bill:
“34% of Americans are three or more months late on at least one bill, leading to costly late fees. Credit cards are the most common, and utilities and mortgage/rental also top the list.”
As noted, falling behind on credit card bills leads to late fees and credit card interest continues to accumulate on what becomes ever-increasing debt.
In fact, the Consumer Financial Protection Bureau (CFPB) notes that consumers pay about $12 billion a year in credit card late fees:
Consumer Bureau Taking on Credit Card Late Fees
The survey also questions the theory that rising wages are driving inflation, noting:
“The annual inflation rate for the United States is 8.3% for the 12 months ending April 2022, but 43% of Americans have seen no wage increase and another 15% have seen their wages decrease.”
While payday loans are notoriously a poor option for consumers struggling to make ends meet, some of the shiny new fintech apps (Dave, SoLo Funds) also present significant financial risks:
Should You Get a Short-Term Loan from the Dave App?
The bottom line: the economy isn’t working for many. Struggling consumers should avoid payday loans at all costs and choose carefully when exploring new options, such as a loan from a fintech lender or using Buy Now, Pay Later.
The reality is that there is room for corporations (which are experiencing record profits) to raise wages to alleviate inflationary pressure.
Disclaimer: In this article we provided only information or this post for informational purposes only. Relation Trends is not offered or intended to be used as legal, tax, investment, financial, or other advice.
