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Low-Income Families More Likely to Go Into Debt for Groceries

Debit card at checkout

Families who were already facing food hardship were most likely to take on debt to pay for groceries in 2023, which could leave them less able to meet their basic needs in the future, according to a report from economic and social policy research company Urban Institute.

The report surveyed adults ages 18-64 in 2023 and evaluated individual and family well-being as well as changes to federal programs.

“Increases in the cost of essential goods, a pared-down social safety net, and increased borrowing costs left many families struggling to meet their financial needs in 2023, said Urban Institute in a statement. “Although access to credit and savings can provide a lifeline and help families smooth consumption, overly relying on these resources may lead to financial instability if families have a hard time keeping up with debt or do not recover from using savings.

Some key findings include:

• Roughly 33.4 percent of adults paid for groceries with a credit card and repaid the bill in full, 20 percent paid less than the full balance on a credit card but always made the minimum payment, and 7.1 percent did not make the minimum payment.

• Roughly 3.5 percent of adults reported using Buy Now Pay Later programs to pay for groceries; 37 percent of whom reported missing payments on these loans.

• Nearly one in five adults reported paying for groceries with savings that they did not intend to use for routine living expenses.

• Use of payday loans, Buy Now Pay Later options, and savings to pay for basic needs were increasingly common as households experienced greater levels of food insecurity. For example, adults experiencing very low food security were more likely to report using BNPL to pay for any item (35.2 percent) or pay for groceries (11.5 percent), take out a payday loan (12.6 percent), or pay for groceries with a payday loan (10.0 percent), and draw on savings to pay for groceries (51.3 percent) relative to those reporting less severe food hardship.