People aren’t just getting ill from the coronavirus pandemic. They are also going deeper into debt because of it. Find out how many people have accrued more debt due to the crisis and how they plan to pay it off.
Sickness isn’t the only symptom of the novel coronavirus – 23% of U.S. adults with credit card debt have added to it during the pandemic, according to a CreditCards.com poll.
The new survey reveals nearly half of U.S. adults (47%) currently have credit card debt, up from 43% in a similar survey conducted in early March.
That’s approximately 120 million Americans.
Millennial credit card holders have been hit the hardest – 34% said they went more deeply into debt because of the pandemic, compared to 23% of Gen Xers and 15% of baby boomers.
“Between this and the Great Recession, it’s no wonder millennials have had a harder time accumulating assets than Gen Xers and boomers,” said CreditCards.com industry analyst Ted Rossman.
Rossman added that some older millennials also hit adulthood right around the dot-com bust and 9/11.
“Adjusted for inflation, average hourly wages have barely budged in 50 years, but some major expenses such as housing and college have grown exponentially,” Rossman noted.
Credit card debt poll: main findings
Here are some other key results from our credit card debt poll:
- Debtors are distressed: Almost half of debtors are currently stressed about their credit card debt (45%) and out of those, 15% said they’re “very” stressed. More than half of millennials (58%) are worried about their debt versus 49% of Gen Xers and 34% of boomers. Parents with children under 18 (57% versus 46% of non-parents) and lower-income households (54%) are also stressed about debt.
- People’s payoff plans are diverse: When respondents were asked about their payoff strategies for debt, more than half of U.S. adults with credit card debt said they would pay more than the minimum (60%), and small percentages said they would use a balance transfer card (13%) or pay only the minimum (13%). Very few said they would ask a card issuer for a break (7%), take out a personal loan (6%), seek credit counseling (5%) or choose an installment plan such as American Express Pay It Plan It (5%). And a combined 13% either don’t plan on paying anything (9%) or don’t have a plan at all (4%).
- Millennials asked issuers for a break more than others: More than 1 in 10 millennial cardholders with outstanding debt (12%) asked issuers for a break versus 6% of Gen Xers and 4% of boomers.
The survey of 2,552 U.S. adults was conducted online between April 15-17, 2020. See survey methodology.
Financial therapy can help you make money changes
Ed Coambs, a financial therapist based in Charlotte, North Carolina, counsels many clients who have debt.
He typically recommends that clients have three to six months of expenses set aside and said that if many more Americans did that, their credit card concerns would not be so stressful.
Coambs said that understanding external market factors like stagnating income growth and increasing home and college expenses is important to keep debt down. But he acknowledged there is little people can do to immediately change these realities – particularly as the U.S. economy suffers unprecedented job losses.
He encourages those who can’t get their finances in order on their own to seek help from a financial therapist. That may be difficult while much of America remains on lockdown, so you may want to find a therapist that offers virtual sessions.
“Addressing problems with debt can evoke significant shame for people and it is certainly not my intention for people to experience shame related to their credit card debt,” Coambs said.
Credit cards are a lifeline for many of us
San Francisco-based marriage and family therapist Thomas Faupl specializes in financial therapy and coaching.
For many people, credit cards are the only lifeline available to them to pay for food and other essential expenses.
“It’s not surprising that nearly half of those in debt are feeling increasing stress of building up credit card debt,” Faupl said.
It’s important that consumers who are struggling ask for help from creditors and get sound advice from accredited consumer credit counselors, such as from NFCC.org, Faupl advised.
“Knowing one’s options can help people make better financial choices when under significant financial and emotional stress,” he added.
If you’re struggling with card debt, ask your issuers for help
More people should be seeking credit counseling than the survey revealed, according to Rossman.
He said one of these professionals can help you with good advice, lower interest rates and consolidated payments in exchange for minimal fees.
And there are other ways to deal with debt, of course.
“I definitely recommend asking your card issuer for a break,” Rossman said.
You can potentially skip a payment or two (sometimes even without interest), get a lower interest rate, get other fees waived and protect your credit score, he added.
Also, there isn’t a risk involved with asking your issuer for help during the coronavirus crisis. The worst that can happen is they say no, but most of the time they’ll do you a favor.
While balance transfers and personal loans used to be good strategies, both have gotten much harder to qualify for because lenders have tightened approval standards, Rossman pointed out.
“Your best bet nowadays probably isn’t a new application,” he said.
“You might be able to qualify under an existing relationship – a credit card you already have might have a 0% balance transfer offer for you, or you could get a lower interest rate via the American Express Pay It Plan It, My Chase Plan or Citi Flex Plan if you have one of those cards.”
CreditCards.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,552 adults, including 1,230 adults with personal debt. The survey was conducted online from April 15-17, 2020.