American’s Credit Use is Rising at the Wrong Time

Survey indicates Americans’ credit use has increased from this time last year, rising inflation and interest rates makes credit use more expensive

Financial wellness platform Credit Sesame conducted a Personal Finance and Credit survey designed to assess the effect of inflation on Americans and their credit in the past year. Survey results show that Americans are relying on credit cards more than ever to cope with the rising cost of goods and services, with more people preferring credit cards over debit cards, an increase from May 2021. The percentage of Americans using over half their credit limit has also increased 9 percentage points from this time last year.

Late payments on credit cards increased by 50% in the past year, from 10% in 2021 to 15% in 2022. This fact combined with the Federal Reserve raising interest rates by 0.75%, the most since 1994, means Americans are not only feeling the pinch from inflation but also having to pay more just to use their credit cards to make ends meet.

Additionally, the survey found that many Americans are misinformed or uninformed about credit and their individual credit scores. Results showed that approximately 1 in 6 Americans do not know their credit scores, and 40% of respondents didn’t know that lenders use credit scores to evaluate ability to repay loans.

Other select findings from the survey include:

• The number of people spending over 90% of their paycheck for month-to-month expenses doubled from 17% in 2021 to 34% in 2022
• The number of people spending over 100% of their paycheck almost doubled from 6% in 2021 to 11% in 2022
• 1 in 6 Americans saw their credit scores decrease May 2021 to May 2022

Perhaps unsurprisingly, the number of people worrying about money in 2022 is greatest in the “very poor to poor” credit score range (74%) compared to 49% in the “fair to good” range and 28% in the “very good to exceptional” range, but is not restricted to lower income individuals –  people making between $100k and $150k are three times more likely to worry about money in 2022. This is in part due to the fact that only 7% of Americans had pay raises that exceed the rate of inflation.

“Inflation and economic adjustments affect us all, but understanding, and improving your credit score can protect against these rising costs and interest rates,” says Adrian Nazari, CEO of Credit Sesame. “The results of this survey prove how important it is for Americans to take care of their credit health to stave off the negative impact of any economic downturn.”

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