As inflation strains household budgets, consumers are racking up credit card debt to afford basic needs, from groceries to healthcare. Financially struggling cardholders now carry an average balance of more than $7,000, well above the sample average. This suggests those who can barely make ends meet are relying on credit more and more.
Moreover, many consumers — especially those having trouble paying their monthly bills — report maxing out their cards regularly. With lower average spending limits, these individuals are more likely to face ongoing constraints, creating a cycle of debt. Even high-income earners, who typically carry higher balances, are not immune. These trends highlight the pervasiveness of debt across income levels.
These are just some of the findings detailed in “New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS Intelligence exclusive report. This edition, “How Financial Lifestyles Impact Credit Card Debt,” examines how outstanding credit balances vary depending on consumers’ financial standing. It draws on insights from a survey of 2,627 U.S. consumers conducted from Oct. 9 to Oct. 16.
Financially Struggling Cardholders’ Average More Than $7,000 in Credit Card Debt
From September to October, the share of consumers living paycheck to paycheck overall rose slightly. Sixty-seven percent of consumers live paycheck to paycheck as of October, up from 66% the month prior. However, the share of consumers living paycheck to paycheck with difficulties paying bills fell slightly. As of October, this share stood at 23%, down slightly from September’s 24%.
Credit card debt is a significant challenge among paycheck-to-paycheck cardholders who have difficulties with their monthly expenses. Ninety-one percent of these individuals have an outstanding balance of any amount. That share drops to 84% for cardholders who live paycheck to paycheck without issues paying their bills. Among financially stable cardholders — those who do not live paycheck to paycheck — only 56% have an outstanding balance.
Whether or not consumers have credit card debt has more to do with their financial lifestyles than their incomes. Among high-income cardholders annually earning more than $100,000, 75% have an outstanding credit balance. This share is the same for middle-income cardholders annually earning between $50,000 and $100,000. A similar share — 74% — of lower-income cardholders, those annually earning less than $50,000, carry balances.
Not only are financially struggling consumers the most likely to have an outstanding balance in the first place, but their average balances are higher. The average outstanding balance among paycheck-to-paycheck cardholders who have difficulties paying their bills is $7,038. Meanwhile, those who live paycheck to paycheck without such difficulties averaged an outstanding balance of $5,766. Financially stable cardholders, for their part, averaged $3,202.
High-earning cardholders rack up the most debt, averaging $6,046 in outstanding debt. This figure is 34% higher than middle-income cardholders’ $4,512 and 48% higher than low-income cardholders’ $4,098. This implies that high-income paycheck-to-paycheck consumers are driving up the average debt of paycheck-to-paycheck consumers overall.
Cardholders see their credit card debt rising.
Most cardholders say their outstanding credit balance is either holding constant or increasing. Overall, 25% said their outstanding balance increased over the last year, while 55% said it stayed about the same. Just 21% said that it decreased.
Financially struggling consumers were the most likely to see their credit card debt grow. Among cardholders living paycheck to paycheck with issues paying bills, 34% said their outstanding balances increased. For those paycheck-to-paycheck cardholders without difficulties paying their bills, 30% said the same. In contrast, only 14% of cardholders not living paycheck to paycheck saw their outstanding balances rise.
This accumulation of debt comes as consumers see their spending power dwindle. Previous PYMNTS Intelligence research shows that most consumers say their income has not matched inflation.
Many Consumers Are Turning to Installment Plans to Afford Necessities
As inflation drives costs up, many consumers are leveraging installment plans — even to purchase basic necessities. Nearly one-quarter of cardholders say their outstanding credit card debt includes a card-linked installment plan.
Forty-seven percent of consumers with these plans stated that their plan balances include food purchases from a grocery store. The next most common item category for using these installment plans is clothing and accessories. We find that 45% of those whose balances include card-linked installment plans said they were paying for items from this category in installments. The third-most common category was food from restaurants, at 39%. Taken together, it is clear that many consumers rely on these plans to meet their basic needs.
Food inflation is still stubbornly high, per the Bureau of Labor Statistic’s Consumer Price Index data. It remains elevated even as other categories’ price increases have normalized. While the price of medicines, medical equipment and supplies fell 0.2% in the last month, they are 1% higher than they were in October 2023. Even these modest price increases make it harder for paycheck-to-paycheck consumers to afford their basic needs.
Most financially struggling consumers are using installment plans for basic necessities.
Using card-linked installment plans to purchase necessary items varies considerably by financial lifestyle but is most likely among consumers living paycheck to paycheck with difficulty paying bills. Among cardholders whose credit card debt includes these plans, 62% of these most struggling paycheck-to-paycheck individuals use them to purchase groceries. Roughly two-fifths of installment plan users of other financial lifestyles said the same.
Struggling installment plan users were also the likeliest to have credit card debt from using such plans to purchase other necessities. For instance, 40% of these consumers used them to cover vehicle maintenance, compared to 35% of card-linked installment plan users overall. Similarly, 32% of paycheck-to-paycheck consumers struggling to pay bills used them to cover healthcare expenses, versus 27% of card-linked installment plan users overall.
In contrast, financially stable cardholders using installment plans were the most likely to use them to cover nice-to-have purchases. For example, 40% used them for leisure travel expenses, versus 26% of installment plan users overall. Similarly, 45% used them for appliances, exceeding the 29% for all installment plan users.
Two-Fifths of Financially Struggling Cardholders Regularly Hit Credit Card Spending Limits
Dependence on card-linked installment plans could contribute to the trend of financially struggling consumers hitting their credit limits. Struggling consumers tend to have lower credit limits in the first place, which exacerbates this.
The average limit for cardholders living paycheck to paycheck with issues paying their bills is $4,965. This figure is 38% lower than the sample-wide average of $7,958. Moreover, it is less than half of financially stable consumers’ average spending limit of $10,277.
It is likely that at least partially due to having lower limits, 41% of financially struggling cardholders often or always reach them. They are more than six times as likely as financially stable consumers to do so. Just 6.3% of those not living paycheck to paycheck regularly hit their spending limit.
It is worth noting that these trends do not seem to link with consumers’ total number of cards. Financially stable cardholders have 2.6 cards, on average, while paycheck-to-paycheck consumers average 2.5.
Like with outstanding balances, financial lifestyle matters far more here than yearly earnings. While cardholders’ spending limits vary considerably across income brackets, their tendency to reach these limits does not. High-income consumers’ average spending limit of $9,542 is 60% higher than lower-income consumers’ average of $5,955. However, they are roughly equally likely to report that they often or always reach their spending limit. About one-fifth of consumers in each group said as much.
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Methodology
“New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS Intelligence exclusive report, is based on a survey of 2,627 U.S. consumers conducted from Oct. 9 to Oct. 16. The report digs into how consumers are accumulating credit card debt across different financial lifestyles. Our sample was balanced to match the U.S. adult population in a set of key demographic variables: 51% of respondents identified as female, 33% were college-educated and 30% declared incomes of between $50,000 and $100,000 per year.
