Recent reports indicate that a shocking number of Americans are living paycheck to paycheck amid heavy consumer spending this Christmas shopping season. Data from LendingClub showed that American households have been spread thin, leading to higher utilization of revolving, high-interest credit card debt.
According to the latest reports from the Federal Reserve, inflation has eased from historical highs over the past couple of years, although it still remains well above the central bank’s long-term target. The Fed’s last policy meeting reported that inflation had “eased over the past year” but noted that prices are still elevated above desired levels.
While prices may finally be easing due to the Federal Reserve’s aggressive interest rate hiking campaign, the LendingClub data suggests the budgets of American households have not improved from the prolonged period of elevated inflation. Per the report, a shocking 62 percent of adults claim to be living paycheck to paycheck, which is unchanged from the prior year, demonstrating no improvement despite cooling inflation.
Furthermore, holiday spending between November and December is anticipated to increase by around 3% to 4% compared to last year, reaching a record total of nearly $1 trillion. Simultaneously, credit card debt has also reached roughly $1 trillion, where approximately 96% of consumers anticipate spending beyond their means this season.
As the financial data paints a dismal picture for the American consumer this Christmas, financial analysts are stressing the importance of sticking to a consistent budget. “Not only is sticking to a budget harder today, but it’s all the more imperative, too.” Bankrate analyst Sarah Foster. “Credit card financing rates have hovered at the highest levels ever recorded since last fall, meaning carrying a balance could cost a heavy price,” she added.
While credit cards can be an excellent tool with many benefits for responsible consumers, their high interest rates can make them financially disastrous if misused. If shoppers spend beyond their means on credit, they can easily get locked in a vicious debt cycle.
“Credit cards can be an important financing option that credit-savvy consumers use to better manage their cash flows, though it’s concerning that many consumers revolved their credit card balances regardless of financial lifestyle,” said Alia Dudum, money expert at LendingClub. “Credit cards keep many in debt,” she added.
While these personal finance trends during the holiday season are problematic per se, they could be considered microcosmic of a broader financial pessimism. The American Tribune reported earlier this year on comments from Heritage Foundation economist E.J. Antoni, who denounced Bidemomics, claiming it has morphed the “American Dream” into a “nightmare.”
“Restoring the American Dream?” Antoni questioned. “That’s an utterly appalling claim for an American president to make right now, given the state of the housing market. The American Dream is owning your own home, and the policies of this administration have made that all but impossible for nearly an entire generation of Americans.”
“An American family is now paying over $13,000 a year more for the same house,” he continued. “The situation is no better for renters, who face record prices for their housing, too, with high rents making it difficult to save for a down payment. The Biden administration has turned the American Dream into a nightmare.”
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