The report shows that for 1 in 3 Americans, credit card debt exceeds emergency savings
A new report shows that nearly a third of Americans say they owe more on their credit cards than they have in their rainy-day fund. The alarming percentage points to why so many people remain pessimistic about the economy despite cool inflation and low unemployment.
According to a new Bankrate study, 36% of Americans say they have accumulated more credit card debt than emergency savings. This is the highest percentage of participants to say so in the 12 years since Bankrate added the question to its annual survey. Sixty-three percent of US adults point to inflation as the main reason they are unable to save for the unexpected.
Mark Hamrick, a senior economic analyst at Bankrate, said in a survey published Wednesday that inflation is a culprit in the way of further progress on the savings front. Fortunately, it has also provided a more generous return on savings.”
But rising interest rates can also hurt finances, as in the case of credit card rates that have risen over the past year. Among survey respondents, 45% say rising interest rates are behind their lower savings account contributions.
Despite rising credit card rates and ballooning balances, 21% of Americans say they would use their credit cards to cover an emergency expense of $1,000 or more and pay it off over time.
But according to Hamrick, they do so at the risk of falling far short of their financial goals.
“The tilt toward credit cards [for emergency spending] is related to … [this] suggests they don’t have many options,” Hamrick told CBS MoneyWatch. There was a time when credit card rates averaged 21%, a less than favorable option.
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Nearly one in four, or 22%, of respondents reported that they have no emergency savings, down one percentage point from last year’s 23% of Americans who found themselves without emergency savings.
Faced with a sudden loss of income, 66% of US adults said they worry they won’t have enough emergency savings to cover living expenses for a month.
“Anyone with no savings, without access to credit, puts a lot of strain on their personal finances, or worse, at risk when paying for a large home or auto,” Hamrick said. is hit with a significant unplanned expense like renovations,” Hamrick said.
Bankrate’s report includes the results of a national survey of 1,036 respondents that was conducted in December 2023, in addition to several other polls conducted last year. Participants responded to the survey online or by telephone, providing their responses in English or Spanish.
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