Americans are currently grappling with historically high levels of credit card debt, which may explain why nearly 75% of them perceive credit cards as a significant obstacle in effectively managing their finances, as revealed in a recent survey.
Although a majority of Americans (64%) expressed confidence in their ability to “control their finances,” a notable 79% acknowledged that there is room for improvement in their financial management, as reported in the Affirm survey.
Among the various financial management strategies employed, saving emerged as the most prevalent, adopted by 68% of Americans in the first half of the year to maintain control over their finances. Notably, a recent surge in saving activities led 76% of respondents to believe that they are prepared for a potential economic downturn.
Despite this increased emphasis on saving, the average individual admitted to exceeding their budget by $350 in the past six months. Consequently, a significant 83% indicated their intention to modify their budget for the remaining months of the year, as highlighted by the survey findings.
One contributing factor to Americans potentially exceeding their expenditure is the escalating credit card debt. As per the latest report by the Federal Reserve Bank of New York, credit card balances surged to a record high of $1.03 trillion in the second quarter of 2023.
Affirm President, Libor Michalek, shed light on this issue, stating, “The reality is that the average American holds three credit cards and carries an outstanding revolving credit card debt of nearly $6,000. Concurrently, financial institutions accrue billions in late fees annually. This significantly impacts consumers’ finances, especially when they are in dire need of funds.”
For individuals grappling with high-interest debt amid an economic downturn, one potential solution could be paying it off through a personal loan with a lower interest rate. For a comparison of viable options without adverse effects on your credit score, you may visit Credible.
Buy Now, Pay Later” Gains Prominence as an Effective Financial Management Tool
Amidst the escalating credit card debt crisis, a growing number of Americans are actively seeking control and flexibility in payment alternatives that can assist them in more effectively managing their financial affairs, as highlighted in the survey.
Topping the list of preferred options is “Buy Now, Pay Later” (BNPL), with an overwhelming 48% of respondents indicating that it empowers them to maintain better control over their financial situation, according to insights from the BNPL provider.
This popularity can be attributed in part to the process wherein each use of BNPL necessitates a fresh application. Libor Michalek further explained that the decision to extend a loan is meticulously assessed based on a comprehensive assessment of diverse data points, encompassing a consumer’s credit history, existing debt commitments, current income, and the purchase’s cost.
Consumers have the flexibility to select the most suitable payment option that aligns with their financial situation and budgetary constraints.
Libor Michalek emphasized, “The most detrimental action we could take is extending a loan to an individual when it is financially irresponsible—for both the borrower and us as the lender. That’s why, if we perceive that someone may be exceeding their financial capacity, we will conscientiously advise them against the purchase rather than granting approval.”
In case you require financial assistance for a substantial purchase or project, a viable financing alternative to contemplate is a personal loan. Credible simplifies the process of viewing pre-approved personal loan rates offered by various lenders, presenting them all in one accessible platform.
Credit Card Perks Losing Appeal Amidst Rising Debt Balances
As credit card debt continues to soar, consumer dissatisfaction with credit card perks is on the rise, as revealed by the 2023 U.S. Credit Card Satisfaction report by J.D. Power.
The discontent primarily arises from the rewards earned in proportion to the dollars spent, particularly among cashback cardholders. The report underlines that cardholders who paid an average of $100 or more in annual fees exhibited the highest satisfaction with the benefits and rewards acquired, surpassing those with cards incurring lesser or no annual fees.
However, the report highlights that cardholders paying $500 or more in annual fees expressed reduced satisfaction with the rewards and benefits provided by their credit cards due to the perceived exorbitant fees. For instance, airline cardholders conveyed high satisfaction with the rewards and benefits but were less enthused about their card’s terms and conditions.
Amidst the escalating discontent, credit card installment plans have emerged as a perk that resonates positively with consumers. The report indicates that engaging in such plans is linked with a notable 102-point increase in customer satisfaction, assessed on a 1,000-point scale.
These installment plans provide a fixed interest rate or monthly fee as an alternative to the conventional variable interest rate. Comparable to the “buy now, pay later” or extended payment plans, they aim to simplify the process for cardholders to settle specific purchases by segregating them from the overall card balance.
If concerns about high-interest debt weigh on your mind, considering the settlement of such debt through a personal loan with a lower interest rate could be a prudent approach to reduce monthly financial obligations. Credible offers a convenient platform to swiftly determine your customized interest rates.