60% of Americans are living paycheck to paycheck heading into the 2022 holidays

Just as the Christmas shopping season is in full swing, families are experiencing less slack in the budget than before.

As of October, 60% of Americans were living paycheck to paycheck, according to a recent LendingClub report. A year ago, the number of adults who felt stretched too thin was closer to 56%.

“More consumers who have historically managed their budgets comfortably are feeling the financial strain, which will affect their spending behavior as we head into the holiday shopping season,”[ads1]; said Anuj Nayar, LendingClub’s chief financial health officer.

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Not only are daily expenses higher, but inflation has also caused real wages to fall.

Real average hourly earnings are down 3% from a year earlier, according to the latest reading from the US Bureau of Labor Statistics.

A separate report by Salary Finance found that two-thirds of working adults said they were worse off financially than a year ago.

Already, credit card balances are rising, up 15% in the last quarter, the biggest annual jump in more than 20 years.

About half of shoppers said they will buy fewer items because of higher prices, and more than a third said they will rely on coupons or other money-saving strategies, according to a separate survey by RetailMeNot.

More consumers also plan to finance their purchases this year with credit cards and buy now, pay later loans.

And 25% of shoppers said they would choose cheaper versions or more practical gifts, such as gas cards, according to another holiday survey by TransUnion.

“People are trying to save money and make the most of what they have,” said Cecilia Seiden, Vice President of TransUnion Retail.

Holiday spending can come at a high price if it means tacking on additional credit card debt just as the Federal Reserve raises interest rates to curb inflation, according to Ted Rossman, a senior industry analyst at CreditCards.com.

“Credit card debt is easy to get into and hard to get out of,” he said. “High inflation and rising interest rates make it even more difficult to break free.”

Credit card interest rates are now up to 19% on average – an all-time high – and these rates will continue to rise as the central bank has indicated that even more increases are coming until inflation shows clear signs of slowing.

“This makes it more likely for credit card companies to raise interest rates and makes the money you owe more expensive over time,” added Natalia Brown, head of customer operations at National Debt Relief.

The increase in inflation and interest rates means that consumers need to be especially attentive, she said.

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