Some Americans who are impacted by rising inflation have increased their credit balances in order to cope, according to a new study from TransUnion.
Non-prime borrowers have seen the greatest rise in both credit balances and
delinquency rates since early 2021, the same time period that inflation began
to increase, according to TransUnion's study called "Identifying Resilient
Consumers During Inflationary Times."
"Inflation
is expected to remain high through at least the end of 2022," Charlie
Wise, TransUnion senior vice president and head of global research and
consulting, said. "Its impact on consumer wallets is clear – balances are
rising and we are seeing an uptick in delinquency rates."
If you are
looking to pay down your credit card debt, you could consider taking out a
personal loan or even using a balance transfer credit card.
Credit balances grow as consumers face inflation
Americans had
higher balances on non-mortgage products in the first quarter of 2022 due to
several factors, according to the TransUnion study. Among them was that lending
has recovered to a more "normal" level following a slowdown at the
beginning of the pandemic. Higher prices of goods and services — like daily
household purchases, as well as larger categories such as automobiles and home
renovations — have also pushed loan amounts higher.
After months
of increases, inflation eased slightly in
April, with the Consumer Price Index (CPI) reaching 8.3% annually,
according to data from the Bureau of Labor Statistics (BLS). It remained near
its previous 40-year high of 8.5% that
was set the month prior. This came as the cost of energy, food and even child
care all increased.
"Making
on-time payments and keeping credit utilization rates relatively low are key
factors in credit score calculations," Margaret Poe, TransUnion's head of
consumer credit education, said. "While challenges abound for consumers in
the current inflationary environment, it is heartening to see borrowers,
especially those in the riskiest credit categories, make an effort to pay down
more of their monthly payment obligations. Building a foundation of sound
financial and credit habits and practicing them consistently are the keys to
long-term credit health."
If you have accumulated new credit card debt and want help paying off your
balance, you could consider consolidating it with a personal loan. Visit Credible to compare
multiple personal loan lenders at once and choose the one with
the best interest rate for you.
Consumers continue to make on-time credit payments
Although
credit usage has risen, consumers are continuing to make their payments on
time, according to TransUnion. The average monthly minimum credit card payment
due increased to $194 in the first quarter of 2022, up from $182 the same time
last year. For non-revolving lines of credit, the monthly amount rose from $513
to $557 over the same period.
"Our study
determined that consumers in varying credit risk tiers and with different
product types will face unique impacts," Wise said. "One of the key
conclusions from the study is that while a prolonged, elevated inflation
environment will negatively impact many consumers, serious delinquency rates
will generally not rise above levels seen prior to the pandemic, even under
worst-case inflation scenarios. Furthermore, consumer credit markets will
likely see more positive credit behavior once inflation abates."
The study
said that more consumers were making excess payments in the first quarter of
2022 than they were before the pandemic began. That also includes about 30% of
subprime borrowers.
If you are
interested in paying off more high-interest debt, a personal loan could help
you lower your interest rate and consolidate your payments. To see if this is
the right option for you, contact Credible to speak to a
loan expert and get all of your questions answered.
Source:foxbusiness