The impact of Covid-19 on the personal lives and economies of people and countries around the world has been massive. Credit card debt increases have been seen after restrictions were lifted.
The restrictions on travel and interactions because of the pandemic wreaked havoc on the world’s economy, leaving individuals and businesses struggling. Though there was some decrease in credit card debt as more folks stayed home and weren’t spending money out, unfortunately, it did not last. Forbes reports consumer credit debt hit record highs in February 2023.
According to bankruptcy lawyer, Bill Kain of the Minnesota bankruptcy law firm, Kain + Henehan, “human nature being what it is, we have more credit card debt increases now than we had in 2019, and that had greatly decreased during the pandemic. Savings went up. Credit card balances went down. Now the savings are down and the credit card balances are up.”
As people slowly return to their routines, they are spending more, leading to an increase in credit card spending. Also as pandemic aid has stopped, families are struggling to replace that help with their own incomes in spite of rising costs on housing and groceries.
There are factors that historically and currently contribute to the increase in credit card debt, such as increased activity after the pandemic, job loss, uncovered healthcare costs, or tempting credit card offers.
Consumer Credit Debt Goes Up After the Pandemic
You couldn’t spend money on a restaurant or a movie theater or a theme park if it was closed. When the pandemic restrictions were lifted, people wanted to eat at restaurants, travel, and go out with friends. As always, people were eager to explore new destinations, connect with family and friends, and create new memories, especially after long periods of isolation. For some, this may have meant prioritizing spending money on these things, instead of saving money for a “rainy day.” One side effect of the pandemic was that people learned to appreciate being with family and friends, dining out, and other activities. But along with these activities, came a rise in consumer credit debt.
Lack of Income and Financial Instability
Even after the worse of the pandemic, many people are still struggling. Many lost jobs or had their work hours reduced during the pandemic. The loss of income due to layoffs, business closures, and reduced hours has made it challenging for many to maintain the financial stability they once had.
Also people experiencing unexpected illnesses may have to rely on credit cards to pay for unplanned expenses. That unexpected medical debt is causing hardship. For some, financial instability has resulted in difficulty meeting even essential expenses such as housing, utilities, and healthcare.
The pandemic has highlighted the vulnerability of individuals and families who have limited emergency savings and those who rely on one source of income. Without assistance and solutions, many may continue to struggle with their financial situations. If you find yourself stressing over meeting your financial obligations and dealing with rude debt collectors, you may find talking with a bankruptcy attorney enlightening.
Credit card issuers are constantly seeking to capture new customers with enticing offers. These promotions often feature delayed interest, possible sign-up bonuses, cashback rewards, and initial low-interest rates. But once you take advantage of these promotions, if you do not keep up or if you use the cards for everyday purchases, you may end up digging a hole that, when times get tough, is too deep to climb out of. Credit card companies and banks make it easy to spend and then you have a difficult time paying it back. When you have those difficulties, you may be harassed by debt collectors.
All this has directly impacted the disposable income of a vast majority of people, which, for many, led to credit card debt. The effects of the pandemic on the economy remain. While our governmental officials address the economy with some success, average people are still struggling with rising costs and high interest rates. High interest rates on credit card balances make paying off those balances impossible if your income has been reduced or remained the same while the cost of living has increased.
If you’re having problems managing your monthly expenses, it’s important to seek financial advice, and talking with a reputable bankruptcy lawyer should be part of that discussion. At Kain + Henehan, we have designed our practice to make clients feel respected and understood. We know how difficult times are and if bankruptcy is a good solution, we can help you file easily and properly.
To schedule a consultation with a Minnesota bankruptcy lawyer, contact Kain + Henehan today. Contact Kain + Henehan by calling (612) 438-8006 or filling out the online form.