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From work reduction to cuts in pay and job loss, millions of people have been impacted financially in the U.S. by the COVID-19 pandemic in one way or another. So it is not surprising that when it comes to reducing debt, a majority of Americans are currently finding it harder than ever to pare it down.
In a recent report released by BAI and the National Foundation for Credit Counseling (NFCC) from a joint Harris Poll on the topic of consumer spending and saving habits in light of COVID-19, the data showed that more than 55% of Americans have factors that have made it significantly more difficult to minimize their debt during this pandemic. The most common factor per the poll was the reduction of income.
Per the study, which polled 2,067 adults in the U.S. between May 12 and May 14, the data showed that this number has increased significantly since both March 2020 and March 2019. Other reason indicated in the survey for the difficulty in debt reduction included unexpected financial emergencies, job loss and/or the inability to find room in the budget to increase payments.
"The challenges related to debt reduction are amplified for those who have lost their jobs as a result of the pandemic," NFCC President/CEO Rebecca Steele said. "Insufficient levels of emergency savings coupled with prolonged periods of unemployment make it more essential for the expansion of long-term debt management solutions provided by nonprofit credit counseling agencies."
Although the majority of those surveyed are not reducing debt, they also are not looking to credit cards to meet short-term income needs, according to the survey. The proportion who have applied for a new credit card in the last three months is only 10%, which is significantly lower than the 19% who reported having applied for a new credit card in the last 12 months.
However, even with all this disruption and stresses on the finances for many, the survey showed that nearly half of adults – which is about the same proportion as in March 2020 – are still very confident in their ability to meet their future financial obligations, with 21% saying they are extremely confident.
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Heather Nevitt
Heather D. Nevitt is the Editor-in-Chief of Corporate Counsel and Global Leaders in Law.
