Credit Card Problems: 85% of Americans Cite Inflation as Cause

by Esther Adu
5 minute read
High credit card debt due to inflation.

Shocking: Survey Reveals 45% of Americans Rely More on Credit Cards Due to Inflation

Over the past several years, rising inflation has led many Americans to heavily rely on their credit cards, pushing some to the brink of financial strain. With everyday costs increasing, approximately 45% of Americans report that inflation and price hikes have forced them to depend more on credit cards. A survey by reveals that nearly 9% of respondents acquired a credit card specifically to handle financial emergencies. Moreover, about 35% of Americans have maxed out their credit cards in recent years, with 85% of those citing inflation as the primary reason for reaching their credit limits. Additionally, 22% of Americans now owe between $10,000 to $20,000 in credit card debt, and 5% owe more than $30,000.

In response to this growing debt, legislative actions have been set in motion. The House Financial Services Committee recently approved a measure aimed at blocking the Consumer Financial Protection Bureau (CFPB) from capping credit card late fees at $8. This decision, driven by a 28-22 party-line vote, is part of a broader legislative push under the Congressional Review Act. While the Democratic-controlled Senate is unlikely to pass this measure, the debate highlights the ongoing tension between regulatory bodies and legislative actions regarding consumer protections.

Consumer behavior regarding credit cards and personal loans is also changing. A survey by The Motley Fool Ascent shows that Americans prioritize credit card rewards and features over the trustworthiness of the issuer. Cash back credit cards have emerged as the most popular choice, with Capital One being the leading issuer. The survey further reveals generational differences: Gen Z favors credit cards with attractive sign-up bonuses, whereas baby boomers prefer store-specific credit cards.

The influence of social media and Buy Now, Pay Later (BNPL) apps on spending habits is particularly noticeable among younger generations. Gen Z, the first age group to grow up with social media, feels significant pressure to spend money to keep up with peers. According to Lending Tree, 62% of Gen Z-ers feel this pressure compared to the national average of 32%. Credit Karma data shows that Gen Z’s credit card debt is more than double that of millennials. Bankrate’s survey indicates that 48% of social media users made impulsive purchases based on online advertisements, with Gen Z leading at 60%.

Gift card scams continue to plague consumers, leading to substantial financial losses. Scammers exploit gift cards by capturing their bar codes and other details, draining the funds before legitimate buyers can use them. The Federal Trade Commission (FTC) reported that in 2023, gift card fraud accounted for $217 million of the $10 billion lost to scams nationwide. In response, state attorneys general and legislatures are issuing consumer alerts, making arrests, and requiring warning signs on store displays. However, retailers and gift card manufacturers argue that these measures are overly restrictive and could negatively impact small businesses.

The introduction of the Klarna credit card in the United States marks a significant expansion for the Swedish fintech company. Competing with Apple and Affirm, Klarna’s card offers no annual fee or foreign transaction fees and provides up to 10% cash back on select merchants. Integrated with Klarna’s AI assistant, the card helps users find deals on planned purchases and is compatible with Google and Apple Pay.

As credit card benefits evolve, major issuers like Citi and Chase are updating their offerings. Starting October 1, 2024, both companies will cover the increased Global Entry fees for premium cardholders. This change follows a decision by U.S. Customs and Border Protection to raise Global Entry fees by 20%, from $100 to $120. Global Entry facilitates quicker re-entry to the U.S. for pre-approved travelers, and both Citi and Chase offer fee subsidies for some clients.

Digital wallets are transforming the way consumers make payments, particularly in the UK. Despite their introduction in 1997, digital wallets have only recently gained widespread popularity. Advances in biometric authentication, such as fingerprint and facial recognition, have enhanced security, while near-field communication (NFC) technology has enabled contactless payments via smartphones. This convergence of technologies has led to the increased adoption of digital wallets for both personal and business transactions.

Mastercard’s move to incorporate commercial cards into digital wallets exemplifies the industry’s shift towards digital platforms for business payments and expense management. The company’s new mobile virtual card app leverages robust tokenization technology to offer enhanced data security and spend control features. This initiative addresses the evolving payment preferences of younger demographics and the changing landscape of business travel and expense management due to remote working trends.

Robinhood, known for its user-friendly investment platform, has ventured into the credit card market with the launch of the Robinhood Gold Card. This new offering provides unlimited 3% cash back on every purchase and includes travel and purchase protections. To be eligible, users must subscribe to Robinhood Gold, which costs $5 per month or $50 per year.

The security of mobile banking apps is a critical concern for consumers. These apps incorporate various security features, such as biometric authentication and multi-factor authentication, to protect user information. Biometric authentication uses physical characteristics like fingerprints or facial recognition to restrict account access, while multi-factor authentication adds an extra layer of security by requiring a second form of identification. Additionally, many banks employ end-to-end encryption to safeguard data during transmission.

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