Paycheck to Paycheck and Credit Debt Consumers
Rising inflationary pressures continue to weigh on the economic outlook for U.S. consumers, even as pandemic-related restrictions continued to be lifted in late March 2022. The U.S. government reported that inflation has climbed to 8.5% over the past 12 months, with energy and food prices seeing the largest increases. With inflation still on the rise, consumers of all income brackets are feeling the financial crisis, increasing the share of consumers living paycheck to paycheck.
A recent PYMNTS study found that 64% of consumers lived paycheck to paycheck in March, up two percentage points from 62% in February. Additionally, 49% of Americans earning more than $100,000 a year were living paycheck to paycheck in March, down slightly from 50% the previous month. Living paycheck to paycheck means spending your entire salary on expenses with little or nothing at the end of the month. Despite this, these consumers remain solvent, actively managing their cash flow in real time. Nearly a quarter of consumers who live paycheck to paycheck report a credit score above the FICO average of 750.
These are just some of the conclusions that emerge from New reality check: the paycheck-to-paycheck reporta PYMNTS and loan club collaboration. The credit edition examines the growing share of American consumers in all economic brackets living paycheck to paycheck and the impact on their ability to access credit and other expense management tools. The series draws on information from a March 9-11 survey of 2,326 US consumers, as well as an analysis of other economic data.
Other key findings from the study include:
• In March 2022, 49% of consumers earning over $100,000 a year reported living paycheck to paycheck, down slightly from 50% in February. The share of those earning between $50,000 and $100,000 who reported living paycheck to paycheck also fell to 63% in March from 65% in February. Meanwhile, the share of those earning less than $50,000 living paycheck to paycheck has risen from 80% to 82% over the same period.
• Consumers who live paycheck to paycheck have average credit scores ranging from “fair” to “good”. Paycheck-to-paycheck consumers with no problems paying their bills have an average credit score of 694, while those who struggle to pay their bills each month have a below-average credit score of 613. The average credit score for all paycheck-to-paycheck consumers is 664, more than 90 points below the average for consumers who don’t live paycheck-to-paycheck.
• Paycheck-to-paycheck consumers are three times more likely to rollover credit card debt and have higher monthly balances overall. Among cardholders who live paycheck to paycheck, 34% of those who have no problem paying their monthly bills and 47% of those who have trouble paying their bills “always” or “usually” have a revolving balance. Only 12% of consumers who don’t live paycheck to paycheque “always” or “usually” use credit.
To learn more about how paycheck-to-paycheck consumers of different income brackets are faring in today’s changing economic times, To download The report.