The financial toll of the coronavirus pandemic is becoming ever more apparent as the weeks go on. According to a recent study by CCDC, more than 140 million Americans now find themselves suffering from credit card debt. This figure roughly works out to 47% of U.S. adults. In comparison, a similar study last year found that 43% of U.S. adults were in debt due to credit cards. The main factor many cite for their debt is the COVID-19 outbreak.
Coronavirus and Increased Debt
While the jump from 43% to 47% is worrying, the impact of the coronavirus pandemic on those already in debt is even more troubling. According to the poll, 23% of those already struggling with credit card debt claim their debt burden is even higher since the U.S. declared a national emergency on March 13.
This statistic has a direct impact on the financial unease the outbreak is causing, including record levels of unemployment and rises in food and medicine costs. The sudden impact of COVID-19 is also playing a pivotal role, with less time to accumulate emergency funds. With less disposable income, more Americans are becoming reliant on their credit cards to cover the cost of essentials.
Millennials Are the Hardest Hit
The age group hardest hit by the coronavirus appears to be millennials, with 35% of respondents in that group reporting they’ve fallen deeper into debt in the last few months. In comparison, only 15% of baby boomers report further debts due to the coronavirus. Generation Xers face the second-biggest hit, with 23% reporting taking on more credit card debt in recent months.
Debt Rising As Credit Limits Dip
The rise in coronavirus credit card debt also comes at a time when many lenders are lowering credit limits for customers. Reducing credit limits for current accounts minimizes a bank’s liabilities in the event of defaults. At the same time, however, it also increases the credit utilization of many cardholders, resulting in dropping credit scores. According to commerce news site PYMNTS, one-in-four Americans have seen their credit limits cut, or their accounts closed, in the past month. This means around 45 million Americans are facing the prospect of less income – and lower credit limits.
What to Do If You Are Impacted
Those affected by the economic fallout from the coronavirus pandemic should take immediate steps to ensure their finances can withstand the impact of lay-offs and other factors. Many mortgage and credit card lenders are currently offering payment relief. Additionally, they should take steps to manage their credit score, should they need additional protection in the future.
Related Article: 5 Tips for Maintaining a Good Credit Score