Savings Barely Covers Credit Card Debt for Paycheck-to-Paycheck Consumers

PYMNTS research shows that many consumers’ savings are barely enough to cover their debts.

That’s according to findings in the February 2023 edition of the “New Reality Check: The Paycheck-to-Paycheck Report,” a collaboration with LendingClub, which shows that those consumers with issues paying their monthly bills on average carry balances of 157% of their available savings — meaning they would still have a balance, even if they emptied their savings accounts entirely to pay their debts.

Consumers living paycheck to paycheck but who report no issues paying bills are in a slightly better spot, carrying credit card balances equivalent to nearly two-thirds (62%) of their available savings, while the average consumer with no issues paying their debts are accordingly in the healthiest financial position, holding outstanding card balances equivalent to a little over a third (35%) of their available savings.

Still, with economic and inflationary headwinds continuing to eat away at both savings and spending power, many individuals will need to continue to adjust and tighten their spending behavior to meet the ongoing challenges of today’s macroclimate.

PYMNTS research shows to stay above water, 70% of consumers made at least one credit card management adjustment, and 66.7% made at least one compromise.

Nearly four in 10 (38.3%) of consumers living paycheck to paycheck with issues paying bills have already pulled money from their savings or investments to help manage their credit card debt load, while 50% have cut down on everyday pleasures.

Rising prices continue to affect individual purchasing power, and consumers across all income levels report finding it harder to live within their means and put aside savings.

Among paycheck-to-paycheck consumers, more than eight in 10 (84%) are taking extra steps to manage debt, and one in five (20%) are using credit cards less due to their tight financial situations.

Yet the situation isn’t entirely hopeless — the share of consumers expecting their financial situation to worsen in the year ahead has decreased, with more people telling PYMNTS they are optimistic about 2023.

Per the report, fewer consumers report living paycheck to paycheck with issues paying bills than one year ago, while the share of those without issues paying bills did not change from one year ago.

To learn more about the impact of U.S. consumers’ 2022 holiday spending on their credit card debt, and discover what discretionary items are getting cut as consumers look to change their daily behaviors to stay financially solvent, download PYMNTS’ free report, “New Reality Check: The Paycheck-to-Paycheck Report.”