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Data for today’s episode is provided by Mercator Advisory Group’s Report:Credit Card Risk, Protracted Pandemic, and the Household Budget: Advice for Issuers
The Pandemic’s Impact on Household Budgets:
- A lingering pandemic will disrupt the consumer household budget, closely aligning with credit card usage.
- A recent study by the CFPB found that bill payment stress affected all income categories.
- 17.7% of households with income above $100,000 reported difficulty paying for a bill or expense.
- 30.6% of households with income between $70,001 to $100,000 reported difficulty paying for a bill or expense.
- 38.8% of households with income between $40,001 to $70,000 reported difficulty paying for a bill or expense.
- 55.5% of households with income between $20,001 to $40,000 reported difficulty paying for a bill or expense.
Mercator Advisory Group released a report covering the credit card issuer risks in a world of COVID variants, titled Credit Card Risk, Protracted Pandemic, and the Household Budget: Advice for Issuers. The research explains current credit card risk and the impact on household budgets as inflation grows, interest rates increase, and the workplace continues to be disrupted.
The research explains why the latest COVID variation may affect consumers and their spending habits differently than it did in 2020.
“The economic relief programs offered by the U.S. and many other countries might be impossible if the pandemic rebounds,” comments Brian Riley, Director, Credit Advisory, at Mercator Advisory Group, and the author of the research note. Riley continues: “Credit card issuers must keep a keen eye on the impact of inflation, rising interest rates, and employment. Issuers underwrite with higher spreads than ever, but the interest opportunity may not be sufficient if credit losses shift.”