Main Street Americans on a Financial Precipice Due to COVID-19?
While a grim 2020 marches on, and Americans lose patience with their government, their health care experts, and increasingly with each other, some cracks are widening on the personal financial front.
Exhibit “A” today is a new Bankrate.com survey, that shows U.S. households are losing ground on debt – and with their credit health, as well. Furthermore, things could get worse before they get better (which is a common and frustrating refrain these days.)
More specifically, the survey finds that . . .
--- 33% of credit cardholders did at least one thing that could hurt their credit score since the pandemic ramped up in March 2020, namely adding to their debt.
--- 17% have paid a bill late and 12% are carrying a balance mistakenly thinking it would help their score.
--- Despite admitting to these behaviors, only 13% of cardholders say they worried their credit score would go down while just one-third checked their credit score since the outbreak began.
--- 49% of cardholders say that their household income was negatively impacted in some way by the COVID-19 outbreak, and almost half of them (47%) did something to potentially hurt their credit score since March 2020.
That compares to just 20% of cardholders whose household income was not negatively impacted by the outbreak, Bankrate reports.
--- More than two in five cardholders (44%) incorrectly believe that carrying a credit card balance can raise your credit score, 28% wrongly think that enrolling in a lender’s hardship program can lower your credit score, and 26% think that canceling a credit card doesn’t lower your credit score.
--- Demographically, some age groups are doing better on the personal financial front than others. According to the survey, baby boomer cardholders (ages 56-74) were the least likely group (24%) to have done something to potentially hurt their credit score compared to 43% of millennials (ages 24-39) and 39% of Gen Xers (ages 40-55).
While the numbers listed above aren’t into “disaster” territory yet, there’s ample evidence that millions of Americans are heading in that direction.
“While the delinquency rates for credit cards and other financial products remain very low by historical standards, there are warning signs on the horizon,” said Ted Rossman, credit card analyst at Bankrate.com. “The government stimulus programs were very helpful, but temporary."
"That's especially with the virus surging in many parts of the country and leading to more fears and restrictions, there’s reason to believe that delinquencies and defaults may have been delayed – and not avoided.”