March 29 – Many US Households Use Stimulus Payments to Pay Off Debt | Fwbusiness
Americans are getting a third round of stimulus checks through the new US bailout law, and data from the Census Bureau’s Experimental Household Pulse Survey shows past stimulus payments have helped to ease financial hardship during the COVID-19 pandemic.
The first round of COVID stimulus payments of up to $ 1,200 per adult and $ 500 per child began to hit households in April 2020.
According to the survey, about a quarter of adults in these households were still using these payments to pay for their usual expenses from the first half of June 2020.
But Household Pulse data also suggests that many households may have racked up debt to make ends meet. About 30% of adults reported using credit cards, taking loans, or borrowing from family and friends between June and December to pay for their usual expenses such as food, shelter and gas.
Credit card use is common, but recent research has found that the pandemic has changed Americans’ credit card habits and reduced discretionary spending. However, Household Pulse data shows that as the pandemic persisted, the number of people who reported using borrowed money and not regular income to pay for their weekly expenses increased.
As of June 2020, 33.7 million adults were using debt but no income to pay their expenses. By the end of December, that number had risen to 43.7 million adults, including 34.0 million living in households that have suffered loss of employment income since the start of the pandemic.
Financial difficulties as the pandemic continues
Household pulse survey data includes other markers of increasing hardship during the pandemic.
At the end of the summer, 76.5 million adults said it was quite or very difficult to pay their usual expenses. That number rose to 89.7 million adults in December.
However, the arrival of the second round of stimulus payments in January – $ 600 for most adults and children – appears to have reduced stress over households’ ability to pay their bills. By the start of January, the number of all adults in households struggling to meet usual costs had fallen to 80.5 million.
Americans also appear to be using the second stimulus check to pay down debt.
Only 15.7% of stimulus recipients reported using their first check to reduce debt, but about half of all adult recipients used their second check to do so.
About 60% of adults in households who suffered a loss of employment income during the pandemic used their second stimulus check to pay off their debt.
The new coronavirus relief program will deliver much larger benefits – up to $ 1,400 per person – in the coming weeks. Data from the Pulse survey shows households are struggling financially, with around 13 million adults saying they are not confident in their ability to pay next month’s rent or mortgage. Against this backdrop, the data also shows that stimulus checks are widely used to pay basic expenses and reduce debt.
The Household Pulse Survey is an ongoing survey providing near real-time data on the well-being of American households during the pandemic. Future analyzes of this data will provide important insight into the impact of the new round of stimulus payments.
Daniel J. Perez-Lopez and Lindsay M. Monte are statisticians in the Social, Economic and Housing Statistics Division.