‘Timing Couldn’t Be Worse’: Inflation Is Easing, but More People Are Using Credit Cards for Unexpected Expenses Amid Climbing Interest Rates
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How would you pay for an unplanned $1,000 car repair these days?
Dreamstime
A record number of people say they would need to pay for an unplanned $1,000 expense by using their credit card, according to a new survey showing the burden of high prices even as inflation rates ebb from four-decade highs.
One quarter of people said they would rely on credit cards and have to gradually pay off $1,000 in unanticipated costs for something like a car repair or a medical problem, according to a Bankrate.com survey released this week.
That’s the biggest percentage of people saying they would need to finance the un-budgeted $1,000 expense through credit cards since Bankrate began asking about topic in 2014. The number is up from 20% one year earlier and up from 16% in January 2020, the survey noted.
More than four in ten poll participants (43%) said they could cover the cost with savings, down slightly from the record high of 44% last year who said they could pay with savings.
It’s no surprise the current economic climate is the culprit behind saving less. Around two-thirds (68%) said inflation and increasing costs were the reason they were saving less, the poll said.
In the separate, but widely-watched Federal Reserve question released last year about the capacity to cover an unplanned $400 expense, 68% of Americans told Fed researchers they could cover it with cash, savings or a credit card.
But that might feel long ago at this point.
One inflation gauge on Friday showed a 5% rise in December prices year over year. That’s down from the 5.5% print for November, and well off the 7% high last summer.
But the growing reliance on credit cards is especially challenging because of the climbing interest rates, which would make it even more expensive to carry the balance during a gradual pay off. The…
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