The high levels of inflation over the past few months have had an impact on American households. According to new data many Americans are now opting for “buy now, pay later” loans or credit cards to cover all of their expenses. This includes both gas and grocery bills.
The latest consumer price index reading released by the Labor Department has shown a price increase in gas, rent, and food. As of August, the increase in the last year has been 8.3%. For food, the increases over the past year have been 11.4% higher, while for gasoline the price increase is at 25.6%.
Even with the current wage gains, many are unable to cover their running expenses which is why they are resorting to using credit.
The Federal Reserve Bank of New York reported that in the second quarter the credit card debt per household increased by 13%. This is the largest increase in 20 years. A study by Wells Fargo also found that many Americans have to use credit to cover the increased cost of daily life.
Krista Phillips, Wells Fargo executive vice president and head of branded cards and markets, has said that credit card spending has shifted in the past couple of years with now the top categories of spending being groceries and gas.
For those whose credit cards have been maxed out, BNPL loans have now become a way of covering their additional expenses according to a Harvard Study. Those who appear to be using those services frequently usually have sub-prime credit scores and an annual income of $50,000 or less.