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89% of consumers now using credit cards for essentials, says Varo Bank

Wednesday, May 08, 2024 — 12:47:04 (EDT)

SAN FRANCISCO, May 8, 2024 /PRNewswire/ -- Varo Bank, the first nationally chartered consumer tech bank in the U.S., announced the release of new research about the impact of inflation on cash-sensitive consumers in a new Wealth Watch Insights report. The data shows the strain inflation has caused for this demographic, with 89% of respondents reporting that they now rely on credit cards to pay for everyday expenses.

Authored with Morning Consult, this new report offers a look at the real-world impact of inflation and the associated rising debt as Americans struggle to keep pace with increasing costs. The data represents U.S. adults across generations, geographical regions, education levels, employment sectors, and ethnicities.

"Inflation has really hit my pocket hard - rent, healthcare and groceries have all gone up. The only way I can now pay for the increases in these essential items is to turn to my credit cards - an unsustainable solution to a growing problem," said 34-year-old Derrome Edwards, a baseball coach from Los Angeles.

Everyday Americans are struggling with credit card debt due to the ongoing effects of inflation, slowing income growth, reduced pandemic savings and resumed student loan payments. With credit card debt and delinquencies rising, this is a worrying situation for the cash-sensitive population that has been hit hard by inflation, creating elevated levels of financial stress.

Key Research Findings:

89% of respondents are now using credit cards for everyday expenses. Women have more difficulty paying bills: 58% of women vs. 49% of men report challenges paying bills over the past six months.

More women than men say they are uncomfortable in their financial situation: 36% vs. 23%.

More women cite everyday expenses as a reason for increased credit card usage (68% for women vs. 60% for men).

Gen Z is increasing credit card usage the most of any generation surveyed: Over the past six months, 35% of Gen Z reported increased usage.

Rising credit card usage is causing major stress, with 64% of respondents worried about their credit card spending.

45% of respondents indicate that the increase in the cost of daily living, such as food, transportation, rent, and childcare, is their greatest source of stress.

54% of respondents say it is somewhat difficult to cover expenses and pay bills.

69% of respondents indicate they need fairer credit and more accurate credit.

38% of respondents say credit scores don't accurately reflect their financial picture.

52% of respondents want credit that more accurately represents their financial picture.

"Despite headlines of a strong labor market and record stock market levels, many Americans are feeling the sustained impact of inflation," said Colin Walsh, CEO at Varo Bank. "This data shows the need for financial products and services that can help people understand how they are spending the money they have, build their credit, and ultimately take advantage of high-interest savings. By empowering consumers with the right tools and knowledge, we can help them navigate this challenging economy."

Previous research has revealed that financial stress leads to more negative health outcomes due to missing doctor's appointments, the inability to afford medications, neglecting mental healthcare, and being unable to purchase healthy food.

To obtain a copy of the Wealth Watch Insights report, please visit Varo's website.

Methodology

In March 2024, Morning Consult conducted a survey of 1,001 people who met the following criteria: they were US residents aged 18 years or older, currently employed, and living paycheck-to-paycheck. Results from the full survey have a margin of error of +/- 3 percentage points.

About Varo Bank, N.A.

Varo Bank is a new kind of bank - the first nationally chartered consumer tech bank in the U.S., built from the ground up with a focus on the needs of Americans striving to get ahead. From credit building to savings to faster payments, Varo has a complete solution to help everyday Americans make progress in their financial lives. Varo combines the capabilities and nimbleness of a technology company with the security and oversight of a regulated financial institution, enabling agile product design that provides technology-first solutions such as Varo Believe, a secured card to help build credit; Varo Advance, to help stretch hard-earned dollars between paychecks; and a high-yield savings account, offering one of the nation's highest APYs. Varo has been named as one of the Inc. 5000 2023 fastest growth companies in the U.S., CNBC's 2023 list of the World's Top Fintech Companies, one of Forbes' World's Best Banks, and Fast Company's Most Innovative Companies. For more information on Varo Advance, Varo Believe, and other offerings such as Perks, visit www.varomoney.com, like Varo Bank on Facebook, and follow us on Instagram and Twitter @varobank. ©2024 Varo Bank, N.A. Member FDIC.

Media Contact: Audrey Jacobson, Consort Partners

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Source: Company press release.