CHICAGO, Aug. 14, 2024 (GLOBE NEWSWIRE) -- The FinHealth Spend Report 2024, released today by the Financial Health Network, the leading voice on financial health, documented another year of surging interest and fees paid on financial products by Americans. While inflation slowed and real wages grew, analysis in the long-running study on the costs of financial services to U.S. households found payments associated with credit products, such as credit cards, auto loans, and student loans, drove a 17% jump that resulted in a record estimated $415 billion spent on interest and fees in 2023.
In studying more than 20 of the most widely used consumer financial products and services, this year’s report found that while consumer usage remained roughly unchanged, increasing debt balances and higher borrowing costs led to a dramatic increase in total spending in part due to an estimated 25% increase in fees and interest charged for credit card accounts that carry balances from the year prior. The data also showed that households spent more on auto and installment loans than in 2022, while interest and fees on federal student loans doubled as payments resumed in 2023.
Strikingly, the percentage of people who report holding an unmanageable amount of debt also increased from 26% to 28% over the last year. For those households that carry revolving credit card debt, the proportion of households reporting unmanageable debt was substantially higher, rising from 38% in 2022 to 42% in 2023.
This year’s report also continues a troubling trend of financially vulnerable households and households of color paying an outsized portion of spending on interest and fees. Despite making up only 15% of the survey sample, financially vulnerable households accounted for 27% of the total spend (an estimated $110.6 billion). Overall, these households spent 16% of their income on interest and fees on average. Black and Latinx households also paid more of their income towards interest and fees than white households (8% and 6%, respectively, compared to 4% for white households).
“These worrying increases in total spending and unmanageable debt are a clear warning sign that, despite some positive shifts in our economy, American households are not on solid footing,” said Jennifer Tescher, founder and CEO of the Financial Health Network. “It’s especially concerning for the most vulnerable, who continue to pay a disproportionate share of interest and fees. As economic uncertainties persist, financial services providers, researchers, policymakers, and advocates play a critical role in designing equitable solutions that improve financial health for all.”
Additional key product trends:
- Overdraft/NSF fee revenue continues to decline, while maintenance and ATM fees increased
- Estimated overall spending on bank account fees fell by 7% or $1.3 billion from 2020 to 2023
- Total revenue from overdraft contracted from $9.8 billion in 2022 to $7.9 billion in 2023
- Revenue from account maintenance and ATM fees increased by $1.6 billion since 2020
- Rising balances and rising interest rates contribute to higher credit card costs
- Consumers who carried balances on general-purpose credit cards paid an estimated total of $150 billion, up approximately $30 billion from the prior year and more than $50 billion from 2021
- The proportion of respondents with revolving credit card debt who said they had unmanageable debt increased from an estimated 38% in 2022 to 42% in 2023
- Total estimated interest from auto loans for new and used cars topped $100 billion for the first time
- Approximately two-thirds (67%) of this total comes from auto loans for used vehicles
- Average monthly auto loan payments rise as interest rates increase and average loan terms shorten
- Spending on unsecured installment loans continues to expand
- While there was a three percentage point decrease in the proportion of households using installment loans, the total spent on these products jumped from $37 billion in 2022 to $42.4 billion in 2023
- Higher loan balances per borrower were particularly pronounced among super-prime borrowers with credit scores near the top of the score range
- Fees and interest paid on student loans double, likely due to the resumption of federal student loan repayments
- Total estimated fees and interest on federal student loans doubled from $8.3 billion in 2022 to $16.6 billion in 2023
- Loan holders of color more frequently reported difficulty in making payments
- Use of alternative credit holds steady, but communities of color continue to use alternative credit products at disproportionately higher rates
- Black and Latinx households used pawn loans at more than three times the rate of white households in 2023
- Black communities turned to title loans, refund anticipation checks and loans, and rent-to-own twice as frequently as white communities
- Earned Wage Access (EWA) products that allow employees early access to wages remains a small but growing market
- In 2023, an estimated 7% of employed households reported having access to EWA via their employer, compared with 5% in 2022
- Among households with access to EWA, 37% reported using the service at least once during the previous 12 months
“While the topline data is troubling, we are optimistic about the power of innovation and well-designed policy considerations to relieve some of the extreme financial burden increasingly high interest and fees place on consumers,” said Angela Fontes, Ph.D., Financial Health Network’s Vice President, Policy and Research. “We see enormous potential for new fintech solutions designed with financial health at their core and continue to encourage all financial institutions to reimagine how they can better operate in service to their customer’s financial health.”
This edition of the report marks the 12th in the FinHealth Spend series overall and the fourth under a new methodology, which pairs extensive secondary research with a nationally representative survey on consumer spending. In this year’s report, we present data on product spending and usage spanning 2021 to 2023, three years marked by above-average inflation. We updated prior estimates to include the most recent data available for those years.
In addition to this annual report, the Spend initiative produces supplemental analyses that explore critical or emerging topics. Our most recent brief, Life Insurance in America: Understanding and Closing Gaps, was released in January 2024. We anticipate publishing additional analyses leveraging 2023 data throughout the year, including upcoming briefs on overdraft usage, investing, Earned Wage Access (EWA), and Buy Now, Pay Later (BNPL). Since 2020, FinHealth Spend research has been made possible through the financial support of Prudential Financial.
About the Financial Health NetworkThe Financial Health Network is the leading authority on financial health. We are a trusted resource for business leaders, policymakers, and innovators united in a mission to improve the financial health of their customers, employees, and communities. Through research, advisory services, measurement tools, and opportunities for cross-sector collaboration, we advance awareness, understanding, and proven best practices in support of improved financial health for all. For more on the Financial Health Network, go to www.finhealthnetwork.org and follow us on Twitter at @FinHealthNet.
Contact:
Michael Salmassian
Financial Health Network
msalmassian@finhealthnetwork.org
