According to a recent study, around one-third of Americans claim to have larger credit card balances than rainy-day savings. Despite low unemployment and declining inflation, the concerning percentage explains why so many people are still pessimistic about the state of the economy.
A recent Bankrate research claims that 36% of Americans have more credit card debt than emergency funds. In the twelve years since Bankrate included the subject in its yearly survey, that represents the greatest proportion of respondents to express this opinion. Sixty-three percent of American adults said that their inability to save for unforeseen expenses is primarily due to inflation.
One major obstacle preventing greater progress in the area of savings has been inflation. Thankfully, increased interest rates have also resulted in more substantial returns on savings, according to a poll released on Wednesday by Bankrate senior economic analyst Mark Hamrick.
However, as demonstrated by the sharp increase in credit card rates over the past year, higher interest rates can also negatively impact finances. Forty-five percent of the study participants attribute their decreased contributions to savings accounts to rising interest rates.
21% of Americans said they would use their credit cards to cover an emergency need of $1,000 or more and pay it off over time, despite those growing credit card rates and skyrocketing balances.
But, according to Hamrick, they do so at the risk of slipping further behind on their financial objectives.
“Leaning on credit cards [for emergency expenses] is concerning…. [it] suggests they don’t have many alternatives,” Hamrick stated to CBS MoneyWatch. “At a time when credit card interest rates are averaging nearly 21%, that’s a less than optimal option.”
Almost one in four respondents, or 22%, said they have no emergency funds at all. This is a one percent drop from the 23% of Americans who said they were in the same risky situation last year.
Sixty-six percent of American adults expressed concern that they wouldn’t have enough emergency savings to meet living expenses for a month if they suddenly lost their job.
“Anyone with no such savings, including those without access to credit, risks tremendous stress, or worse, on their personal finances when hit with a significant unplanned expense such as a major home or auto repair,” Hamrick stated.
Results from multiple polls taken last year, as well as a nationwide survey with 1,036 respondents performed in December 2023, are included in Bankrate’s study. Respondents provided their responses to the survey in either Spanish or English, either over the phone or online.