- Coronavirus
- Credit Card Debt
COVID-19 has had a devastating impact on the US economy and that impact may be felt for years to come. We’re at a pivotal point in the history of the United States, one that will be talked about in years and decades to come.
Whether it will be discussed in the same vein as the 2008 housing crisis or the Great Depression is not yet known, but it’s fair to assume that the pandemic of 2020 will play an important role in the history of the 21st century.
Even if the lockdowns work and the virus infects only a small portion of the US public, the economic effects will be much more widespread. Credit card debt is a great example of this, as numerous issues are causing bills and balances to rise, and this could have a considerable impact on the lives of most American families.
Interest rates and fees haven’t increased and there are few direct and obvious causes, but there are many ways that COVID-19 has indirectly affected credit card debt, including:
Unemployment
Unemployment rates are up. In March 2020, the US economy experienced a loss of over 700,000 jobs, the highest loss since 2009.
That’s just one month, and it was a month that began just 6 weeks after the first COVID-19 case was reported in the United States. If experts are to be believed, there are dark times ahead for the United States and the spring and summer of 2020 could see many more job losses.
The issue is obvious: companies aren’t operating at full capacity. Some of them have been forced to shut down completely. At the time of writing, the US has yet to go into full lockdown like many European countries, but businesses have been suffering regardless.
The travel and tourism sectors have been hit the hardest, as very few people are willing to jump on planes or trains, but the service industry has also suffered immensely. Restaurants and cafes spend huge sums of money just opening their doors. They have wages to pay, perishable stock to sell, and bills to cover. If customers aren’t showing up, it’s all expenses and no income, and that sends finances into the red.
If this continues into the summer, the impact on tourism could be catastrophic, especially for states like Florida, which relies heavily on this sector. Even if the US isn’t in full lockdown, other countries will be, which means fewer tourists will be bringing their money into the states that rely so heavily on it.
As businesses lose control and expenses go through the roof, more purchases will be placed on credit cards, and those balances will just keep climbing.
Self-Employment Issues
Some self-employed workers have avoided the worst of COVID-19. If you’re a writer, coder, designer or translator working from home, it might be more of the same. You don’t need to commute, and you don’t need to meet clients face to face.
But the same can’t be said for plumbers, electricians, consultants, and anyone else who works directly with clients. If you don’t have a steady income stream, the paranoia and restrictions caused by this virus can bankrupt you in just a few months.
Self-employed individuals are in a very tough spot. On the one hand, they may be expecting things to pick up again in a few months, so they’ll keep their expenses and start cashing savings and accumulate more debt. But as those months drag on and work doesn’t get back to normal, they’ll find themselves in a whole heap of trouble they may never escape from.
Hoarding
Toilet paper, face masks, and alcohol-gel have become the must-have commodities during the COVID-19 pandemic. Food is also flying off the shelves and everyone from tea and coffee sellers to supplement purveyors are seeing a sharp increase in sales.
Consumers are doing everything they can to protect themselves from the virus and are also concerned that they’ll be forced to endure long periods of lockdown without access to essential supplies.
They’re buying more food than they need to ensure they are well-stocked for the future. Long-life foods, which were once the reserve of doomsday preppers, have been selling like crazy and many manufacturers have hiked their prices as a result.
All of this is putting a lot of strain on the finances of many American families. On the one hand, logical consumers know that the supply chain can provide all families with the food and supplies they need even during the peak of the pandemic. On the other hand, when they see shelves being emptied and online stores running out of stock, they can’t help but join the panic, jump on the bandwagon, and stockpile whatever they can get their hands on.
That food may not get eaten; those supplies may not be needed, but the credit card bills need to be paid regardless and if your monthly expenses have skyrocketed at the same time your income has dropped, meeting those payments is not going to be easy.
Getting Help
It’s easy to tell people to stop buying more than they need, but if they’re worried about their health and the health of their family, and they can envisage a future where they don’t have food and toilet paper, that stockpiling is forgivable.
If you want to avoid the added financial strain, just add a few more essential supplies to your usual shop, swap fresh and highly perishable food for longer-lasting alternatives, and be a little more creative with the food you have. All American homes have frozen and tinned food that has gone untouched for many months—now is the time to use it.
If you’re unemployed or worried that you might become unemployed very soon, look into getting some work elsewhere. Again, this is easier said than done, but there are a few things you can do.
To learn more, take a look at our guide on how to escape the rat race and work from home. You may also benefit from the following helpful guides:
Bottom Line: Credit Card Debt in the COVID-19 Pandemic
If your credit card debt has spiraled out of control and you can’t see the light at the end of this long tunnel, take a look at our guide to credit card debt relief during the coronavirus. As noted in this guide, many creditors are providing assistance to cardholders as needed and while it won’t result in complete forgiveness, it could alleviate some of your concerns.
Source: pocketyourdollars.com