Originally published by Upgraded Points.
Inflation forced 18.0% of Maryland adults to increase their use of credit cards
Recent data suggests that efforts to curb inflation are beginning to bear fruit. After nearly a year of steadily raising interest rates by the Federal Reserve, year-on-year growth in the consumer price index slowed to 6.0% in February 2023. This figure was the lowest since September 2021. Although inflation may have finally reached its peak. , many Americans continue to struggle with high prices. Nominal wages have risen since the start of the COVID-19 pandemic amid the Great Retirement and ongoing labor market tensions, but this rate of growth has lagged that of price increases for most workers. This cuts household budgets and makes it harder for consumers to maintain their standard of living.
One factor that has made the recent rise in inflation particularly challenging is the fact that the categories of spending with the highest price increases are essentials. Inflation has taken place throughout the economy, but over the past three years, the largest spikes have occurred in the categories of transport (+23.8%), food and drink (+21.5%) and housing (+16.4%). These categories of households are difficult to reduce, and the inflation rate for each of them exceeded the average price increase by 16% across all items.
Faced with these circumstances, US households are feeling inflationary pressures. More than 90% of adults in every age group say they are stressed out by recent price increases. The most stressed age group are people aged 18 to 24 who are just starting their careers and may not have savings, investments or loans to fall back on. Inflation-related stress is also a widespread problem for people of all income levels. In every income group below $75,000, more than 95% of people report being stressed by inflation. Even among the highest paid workers earning over $200,000, more than 80% are stressed out by the recent price increase.
Consumers are adopting various strategies to deal with the effects of inflation. Most often, shoppers seek to cut costs: more than two-thirds of adults say they are looking for lower prices or discounts when making a purchase, more than half eat out less and put off major purchases, and almost half are switching from big-name brands to generic products. Inflation has also pushed 21% of adults to use credit cards, loans or pawnshops to pay for increased expenses. Being dependent on credit can be a quick way to make ends meet in the short term, but it can be a risky move financially. People who keep balances on their credit cards or pay back loans slowly will end up paying more in interest — a risk exacerbated by the fact that interest rates have skyrocketed. However, U.S. households are not equally turning to credit cards as there are geographic differences in where adults have begun to use cards more frequently. Midwestern states such as Wisconsin and South Dakota and southern states such as Georgia and Mississippi have the fewest adults reporting increased reliance on credit cards to fight inflation. By contrast, in western states such as Utah, Arizona, Nevada, and California, nearly one in four adults use their cards more frequently. But one New England state, Maine, is at the top of the list, with 24.6% of adults reporting increased reliance on credit cards due to rising prices. To find states where inflation is leading to increased reliance on credit cards, researchers at Upgraded Points analyzed data collected in early January 2023 from the US Census Bureau. Census Household Pulse Survey. The researchers ranked the states according to the proportion of adults in each state who increased their use of credit cards, loans, or pawnshops to cope with rising prices. The analysis found that 35.5% of adults in Maryland relied on credit cards for their spending needs, and 18.0% increased their credit card usage due to recent price increases. Here is a summary of data for Maryland:
- Percentage of adults who increased their use of credit cards due to prices: 18.0%
- Percentage of adults who relied on credit cards for spending needs: 35.5%
- Percentage of adults concerned about recent price increases: 92.4%
- Share of adults concerned about future price increases: 94.8%
For reference, here are the statistics for the entire United States:
- Percentage of adults who increased their use of credit cards due to prices: 20.9%
- Percentage of adults who relied on credit cards for spending needs: 37.3%
- Percentage of adults concerned about recent price increases: 94.4%
- Share of adults concerned about future price increases: 95.8%