Varo Bank, a federally chartered digital bank, has shared research about the impact of inflation on cash-sensitive consumers in a new Wealth Watch Insights report.
The data shows the strain inflation has caused for this demographic, “with 89% of respondents reporting that they now rely on credit cards to pay for everyday expenses.”
Authored with Morning Consult, this new report “offers a look at the real-world impact of inflation and the associated rising debt as Americans struggle to keep pace with increasing costs.”
The data represents U.S. adults “across generations, geographical regions, education levels, employment sectors, and ethnicities.”
Derrome Edwards, a baseball coach from Los Angeles said:
“Inflation has really hit my pocket hard – rent, healthcare and groceries have all gone up. The only way I can now pay for the increases in these essential items is to turn to my credit cards – an unsustainable solution to a growing problem.”
Everyday Americans are struggling “with credit card debt due to the ongoing effects of inflation, slowing income growth, reduced pandemic savings and resumed student loan payments. With credit card debt and delinquencies rising, this is a worrying situation for the cash-sensitive population that has been hit hard by inflation, creating elevated levels of financial stress.”
Key Research Findings:
- 89% of respondents are now using credit cards for everyday expenses.
- Women have more difficulty paying bills: 58% of women vs. 49% of men report challenges paying bills over the past six months.
- More women than men say they are uncomfortable in their financial situation: 36% vs. 23%.
- More women cite everyday expenses as a reason for increased credit card usage (68% for women vs. 60% for men).
- Gen Z is increasing credit card usage the most of any generation surveyed: Over the past six months, 35% of Gen Z reported increased usage.
- Rising credit card usage is causing major stress, with 64% of respondents worried about their credit card spending.
- 45% of respondents indicate that the increase in the cost of daily living, such as food, transportation, rent, and childcare, is their greatest source of stress.
- 54% of respondents say it is somewhat difficult to cover expenses and pay bills.
- 69% of respondents indicate they need fairer credit and more accurate credit.
- 38% of respondents say credit scores don’t accurately reflect their financial picture.
- 52% of respondents want credit that more accurately represents their financial picture.
Colin Walsh, CEO at Varo Bank, said:
“Despite headlines of a strong labor market and record stock market levels, many Americans are feeling the sustained impact of inflation. This data shows the need for financial products and services that can help people understand how they are spending the money they have, build their credit, and ultimately take advantage of high-interest savings. By empowering consumers with the right tools and knowledge, we can help them navigate this challenging economy.”
Previous research has revealed that financial stress “leads to more negative health outcomes due to missing doctor’s appointments, the inability to afford medications, neglecting mental healthcare, and being unable to purchase healthy food.”
Methodology
In March 2024, Morning Consult “conducted a survey of 1,001 people who met the following criteria: they were US residents aged 18 years or older, currently employed, and living paycheck-to-paycheck.”
Results from the full survey have “a margin of error of +/- 3 percentage points.”