Credit Cards

21% of Americans are now more reliant on credit cards, and that’s bad news

Image Source: Getty Images

Credit cards can be a poor tool to turn to in a pinch.

Key points

  • New data reveals that Americans are changing their financial behavior due to inflation.
  • A lot of consumers are becoming more reliant on credit cards, but that could cause long-term financial damage.

Americans have been dealing with runaway inflation for many months. Unfortunately, the problem could get worse before it gets better.

These days, the cost of nearly every essential expense has risen, from groceries to gas to housing to clothing. While some companies are offering workers higher wages, many people are still losing purchasing power this year despite a pay rise.

Not surprisingly, this recent stretch of inflation is causing some people to change their financial behavior. In a recent Nationwide survey, 35% of respondents say they have started driving less in the past 12 months, while 48% have started dining out less often.

Those are healthy ways to fight inflation. Yet on the other hand, 21% of those surveyed say they have become more reliant on credit cards in the last 12 months to cope with rising costs of living. And that could end up having disastrous results.

The problem of relying on credit cards

Credit cards can be a useful financial tool and, in a pinch, are a reasonable option to turn to. But there is a danger in overusing credit cards: building up a substantial balance and being charged a lot of interest.

At a time when the costs of living are so inflated, it’s easy to see why consumers might charge an extra $100 on a credit card one month or an extra $200 another. The problem, however, is that racking up that debt month after month could trap consumers in a cycle where they can’t get out of that hole.

Also, too much credit card debt could hurt your credit score. Consumers whose credit scores take a hit may find it difficult to get an affordable loan when they need one, or once they have exhausted the credit cards they have.

a better solution

If you’ve been struggling to make ends meet in light of inflation, it’s worth exploring increasing your income with a second job. If you can generate additional earnings, you can use that money to cover your bills and avoid having to incur or add to a credit card balance.

Just as important, by keeping a second job, you could put yourself in a better position to build an emergency fund. Once you have some money saved, you may not have to resort to carrying a credit card balance the next time your bills get out of hand.

Understandably, more consumers have had to turn to credit cards in the last year. But that doesn’t make it a good thing. Before you start relying on your credit cards to bridge the gap between the cost of your bills and what your paycheck can cover, try getting a second job and see if that helps.

Of course, if you have a lot of existing savings to tap into, you may be able to ride out this wave of inflation by dipping them in as needed. But if that’s not the route you want to take, or isn’t on the table, then getting a second job is a solution worth exploring.

The best credit cards end interest until 2023

If you have credit card debt, transfer it to this top balance transfer card locks you in with a 0% introductory APR through 2023! In addition, you will not pay an annual fee. Those are just some of the reasons why our experts rate this card as the best option to help control your debt. Read the full review of The Ascent free and apply in just 2 minutes.

Related Articles