Inflation Caused 20.5% of Michigan Adults to Increase Credit Card Use

Recent data suggests that efforts to tame inflation are starting to have an effect. After nearly a year of steady interest rate increases by the Federal Reserve, year-over-year growth in the Consumer Price Index slowed to 6.0% in February 2023. This figure was the lowest since September 2021.
While inflation might have finally reached its peak, many Americans continue to struggle with high prices. Nominal wages have grown since the start of the COVID-19 pandemic amid the Great Resignation and ongoing labor market tightness, but this rate of growth has trailed the rate of price increases for most workers. This cuts into household budgets and makes it more difficult for consumers to maintain their standard of living.
One of the factors that has made the recent run of inflation especially challenging is the fact that the spending categories with the greatest price increases are necessities. Inflation has taken place throughout the economy, but over the last three years, the biggest spikes have occurred in the categories of transportation (+23.8%), food and beverages (+21.5%), and housing (+16.4%). These categories are difficult for households to cut back on, and the rate of inflation for each has exceeded the average 16% price increase across all items.
Faced with these circumstances, U.S. households are feeling the pressure of inflation. More than 90% of adults in every age group express that they feel stressed about recent price increases. The most stressed age group is people aged 18 to 24, who are early in their careers and may not have savings, investments, or credit to fall back on. Inflation-related stress is also a widespread concern across income levels. In every income bracket below $75,000, more than 95% of people report feeling stressed about inflation. Even among the highest earners making above $200,000, more than 80% feel stress about recent price increases.
Consumers are adopting a variety of strategies to cope with the effects of inflation. Most commonly, shoppers look to cut costs: more than two-thirds of adults say they look for lower prices or discounts when making a purchase, more than half are eating out less and delaying major purchases, and nearly half are switching from name brand to generic products.
Inflation has also pushed 21% of adults to use credit cards, loans, or pawnshops to help pay their increased costs. Reliance on credit can be a quick way to help make ends meet in the short term, but doing so can be a risky move financially. People who carry balances on their credit cards or pay off loans slowly will ultimately pay more in interest—a risk exacerbated by the fact that interest rates have risen dramatically.
The analysis found that 36.3% of adults in Michigan relied on credit cards to meet their spending needs, and 20.5% have increased their credit card usage due to recent price increases.