LendingClub Corporation (NYSE: LC), the parent company of LendingClub Bank, America’s digital marketplace bank, released key findings from the 29th edition of the Reality Check: Paycheck-To-Paycheck research series.
The Credit Card Use Deep Dive Edition examines “the financial lifestyles of U.S. consumers and explores how they use credit cards to manage their cash flows to get by.”
This edition draws on insights “from a survey of 3,252 U.S. consumers conducted from Nov. 6 to Nov. 22 and an analysis of other economic data.”
As of November 2023, 62% of consumers “lived paycheck to paycheck, mirroring last year’s statistics and slightly higher than last month. For those Americans, this means that they need their next paycheck to cover their monthly financial outflows. Among income brackets, 77% of consumers earning less than $50,000 annually lived paycheck to paycheck as of November 2023, as did 67% of those earning between $50,000 and $100,000 and 45% of consumers earning more than $100,000.”
These shares have also remained stable “since last year, indicating that U.S. consumers, in the face of ongoing inflation, have adjusted their spending where they can and still see their financial obligations outpace their incomes.”
Consumers living paycheck to paycheck “own nearly 60% of the credit cards in the U.S. Moreover 80% of paycheck-to-paycheck consumers own at least one credit card, and two credit cards on average.”
Overall, 54% of all consumers surveyed “report having super-prime credit scores, with 77% of those not living paycheck to paycheck saying they have these high scores. That said, paycheck-to-paycheck living does not preclude consumers from these high scores, with 40% of these consumers report having super-prime credit scores.”
The data also shows “that paycheck-to-paycheck consumers are more likely to use debit cards than credit cards for everyday transactions, indicating that though these consumers have access to credit, they aim to live within their means and preserve that flexibility to remain creditworthy.”
Regardless of financial lifestyle, “the majority of consumers (80%) consider their credit scores very or extremely important, with the average consumer checking their credit scores every 76 days.”
The report establishes a connection “between financial distress and credit behavior, revealing that financial strain is linked to a higher frequency of reaching one’s credit limits and a higher tendency of revolving one’s credit card balances.”
The research also confirms “that those living paycheck to paycheck are more likely to struggle with higher credit balances and to pay bills. Cardholders revolve their credit card balance when they carry an unpaid portion over to the following month.”
Data shows that paycheck-to-paycheck cardholders “are more than twice as likely as those not living paycheck to paycheck to have revolved their credit card balances at least occasionally in the last year. Among all consumers, revolving has increased relative to 2022, with 43% of cardholders doing so at least occasionally in 2023 (up from 41% in 2022), highlighting a concerning shift over the past year.
Close to one-third of consumers say they have “reached their credit card limit, an average of $9,200, at least occasionally in the last year.”
However, that amount more than “doubles to 64% for those having a hard time paying bills.”
Credit limits average $11,500 among those “not living paycheck to paycheck, with only 10% reaching their limit in the last 12 months.”
Financial distress is also linked to “a greater use of installment or split payment plans. One-quarter of cardholders overall have repayments pending as a part of an installment plan.”
The likelihood of a cardholder “having pending repayments from an installment plan rises sharply among those who live paycheck to paycheck.”