Chicago, IL, April 28, 2022 (GLOBE NEWSWIRE) — The Financial Health Network, the national authority on financial health, in partnership with Prudential Financial, today released the FinHealth Spend Report 2022, examining how households Americans manage their finances and access credit during the second year of the pandemic. Analysis of year-over-year trends for more than two dozen financial products and services revealed a rare drop in overall spending, though an outsized cost burden remains for underserved populations, prompting concerns with an increase planned for the coming year.
Key data shows total interest and fees fell to $305 billion for 2021 from a peak of $319 billion in 2020, a 4% drop largely due to shifts in spending on credit cards and student loans. However, access to financial services remains costly for traditionally underserved populations, with massive disparities in spending by race and ethnicity, income, and level of financial health. This year’s report found that households deemed to be in poor financial health accounted for 83% of all fees and interest paid.
As a percentage of their income, black households spent on average more than double what white households spent on interest and fees (7% vs. 3%), while Latinx households spent 40% more than households whites (5% versus 3%). . Additionally, low-to-moderate income households spent almost three times more of their income on interest and fees than higher income households (8% vs. 3%).
“The last two years of the pandemic have been a financial roller coaster for people, often forcing them to recalibrate their lives and finances with each new development of COVID,” said the Financial’s president and CEO. Health Network, Jennifer Tescher. “While we have seen a rare drop in overall spending on financial services in 2021, the confluence of rising consumer spending, the end of government handouts and rising inflation portend higher fees and costs. interest for 2022 that will likely fall disproportionately on households that are already struggling financially.
The 2022 FinHealth Spending Report tells the story of high-level economic trends while providing unique insights into the particular issues shaping individual product markets. A product data snapshot includes:
Overdraft and insufficient funds (NSF) fees appear to have plateaued, totaling around $11 billion in 2020 and 2021. Recent overdraft reform announcements by several major banks could create positive changes in this market in 2022. Black households with bank accounts were almost twice as numerous. as likely as white households to report having paid at least one overdraft, while Latinx households were almost one and a half times more likely. Financially vulnerable households with bank accounts were nearly ten times more likely to have an overdraft than financially sound households.
Interest and fees on total federal student loans fell precipitously from around $25 billion in 2019 to $6.3 billion in 2021 due to the moratorium, which took effect in March 2020 and, as of the publication date of this report in April 2022, is expected to expire in August. 31, 2022. For every month the moratorium is extended, this report estimates that federal student loan borrowers avoid $1.5 billion in interest payments. And, while federal student loans make up 92% of the $1.7 trillion loan portfolio, private student borrowers paid 30% more interest and fees in 2021 than federal student borrowers.
While interest and fees on revolving balances for general purpose and private label cards declined overall in 2021, balances saw a record jump in the last quarter of 2021 and are a wake-up call for financial health. approaching pre-pandemic levels. For the full year, interest and fees on revolving balances for general purpose credit cards fell about 10% to $95 billion, while corresponding totals for branded credit cards private fell about 13% to $11.4 billion.
Buy now, pay later (BNPL):
In March, a supplement
was published offering an in-depth look at these new technology-driven payment platforms showing that around one in four BNPL users are financially vulnerable, meaning they are struggling with most or all aspects of its financial life, and of those users near a quarterly report struggling to make payments.
Loans on pledge, payday and title:
Interest and fees for alternative financial services have dropped dramatically between 2019 and 2021, with pawnbroking income dropping 25%, payday loans 45% and title loans nearly 40% over the course of 2020. this period. Payday loans, in particular, have seen significant declines over the past year, with the percentage of households reporting use dropping from 5% in 2020 to 3% in 2021. Black households, low-income households in moderate and financially vulnerable households all reported significant declines in payday loan use.
“One of the reasons we are collaborating with the Financial Health Network is to further assess how households have managed their finances during the pandemic,” said Sarah Keh, vice president, Inclusive Solutions at Prudential. “Access to affordable, high-quality financial services—particularly in terms of race, ethnicity, and income—provides data for researchers, policymakers, and advocates to track trends and identify opportunities to support more equitable financial health policies and products.”
This report marks the 10th in the series overall and the second based on a new methodology, which combines extensive secondary research with a nationally representative survey of consumer spending. New to this year’s report is year-over-year trend data for consumer spending on a wide variety of common financial services, including bank account fees and most non-mortgage credit products. . This year’s report adds analysis on federal student loans, auto loans buy here, pay here (BHPH), services buy now, pay later (BNPL) and earned wage access products (EWA). In 2022, the Financial Health Network begins producing detailed briefs that take a closer look at products with particular implications for policymakers, financial service providers, and financial health in general.
For more information on the FinHealth Spending Report, please see the 2022 report.
About the Financial Health Network
The Financial Health Network is the leading authority on financial health. We are a trusted resource for business leaders, decision makers and innovators united in a mission to improve the financial health of their customers, employees and communities. Through research, advisory services, measurement tools, and cross-industry collaboration opportunities, we advance awareness, understanding, and proven best practices for better financial health for all. To learn more about the Financial Health Network, visit www.finhealthnetwork.org and follow us on Twitter at @FinHealthNet.