While not everyone is actually getting ill from COVID-19, we are all feeling the far-reaching effects of the virus. The pandemic is especially wreaking havoc on Americans’ financial health. Before the virus reached the US, many were already experiencing financial challenges. A study in 2019 revealed that almost half of respondents — 45% — said they have $0 in a savings account. Another 24% said they have less than $1,000 in savings. The top reason respondents gave for not having enough savings was because they were living paycheck to paycheck. Nearly 33% said this obstacle was keeping them from saving, and about 20% said a high cost of living prevented them from saving more.
Add to this of course, the massive collective credit card debt Americans have incurred. According to the Federal Reserve, total credit card debt has risen year after year, and surpassed $1 trillion in 2019.
Not enough savings, not enough income and already trying to manage high credit cards bills. Then COVID-19 enters the picture. In six weeks, close to 30 million jobs are lost. That’s 30 million people, who based on the overall statistics probably didn’t have a large emergency savings fund and already had accumulated credit card debt. With no income and no cash savings, where else can they turn but to credit cards.
Credit Cards com released a study Monday morning showing the results of COVID-19 on our nations credit card debt. Nearly half (47%) of U.S. adults, or about 120 million people, currently have credit card debt, up from 43% in early March. Additionally, 23% of credit card debtors, or about 28 million U.S. adults, have added to their credit card debt as a direct result of the COVID-19 outbreak.
Below are highlights from the study. The full study can be found here.
Unfortunately, millennial credit cardholders (ages 24-39) have been hit the hardest; more than 1 in 3 (34%) with debt have gone further into the red because of the pandemic versus 23% of Gen X (ages 40-55) and 15% of baby boomers (ages 56-74).
Overall, 45% of credit card debtors are currently stressed about their credit card debt, including 30% somewhat stressed and 15% very stressed.
More than half (58%) of millennials with credit card debt are stressed versus 49% of Gen X and 34% of boomers.
The most common credit card payoff strategies among U.S. adults with credit card debt include paying more than the minimum (60%), balance transfer (13%) and paying only the minimum (13%). Troublingly, a combined 13% are paying nothing at all (9%) or don’t have a plan (4%).
With no clear end to the pandemic in sight, there are a few things you can do now if you find yourself in over your head. Above all else, don’t do nothing. It’s so easy to become paralyzed with fear, mounting bills and fees. The first step is to call your credit card company. They are more willing to work with customers now because of the coronavirus effects. Explain to them your situation, and ask for your options. They may allow you to skip a few payments, create a new payment schedule, waive fees, lower your interest rates or reduce your minimum payment amount. It can’t hurt, and best case scenario you’ll get some much needed relief. If all of this is just too much for you right now, call us, we are here for you and will take care of this for you, always advising you on the best course of action, we are on your side!