New Consumer Bank Data Finds 69% of Consumers Don't Believe Credit System Is Fair

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Nov 21, 2024, 08:00 ET

SAN FRANCISCO, Nov. 21, 2024 /PRNewswire/ -- Varo Bank, the first nationally chartered consumer tech bank in the U.S., announced the findings of the Varo Consumer Credit Watch survey, revealing ongoing disillusionment in the decades-old credit system and challenges with credit and debt facing low-income Americans.

Whereas credit cards used to be a popular payment method for families going on vacations or for paying off auto/medical payments, a leading 63% of credit card owners surveyed in September 2024 used them to pay for groceries, with dining out/food deliveries usage coming in close behind at 50%. Everyday expenses are the primary source of credit spending, and when asked what they would purchase if credit spending limits were higher, 46% and 33% would use it to buy more groceries and pay down utilities/bills, respectively.

Partnering with Morning Consult to survey employed adults living paycheck-to-paycheck, this report presents a window into the credit spending habits of everyday American consumers and how they manage to combat increasing costs and rising debt.

Key findings:

Only 27% said the credit system is fair
72% pay off their credit cards in part or full each month
43% believe they should have access to more credit
73% have more or the same level of debt compared to last year
Of those saying they would spend more if they had an increased credit limit, 68% said they would only need up to $500 more
69% of people living paycheck to paycheck carry debt
Loan applicants who were denied credit had, on average, $10,455 in previous loans.
45% are not prepared for a financial emergency
53% say their fixed monthly expenses have increased since last year
57% have been denied a loan in their past
When denied access to credit, 35% borrowed money from a friend or family member to pay their bills while 19% resorted to "buy now, pay letter" companies
60% of Black Americans want access to more credit (vs. Gen pop: 43%)

"I feel discredited," says Varo customer Tracey Wright, a dental office manager from Hawthorne, California. "No matter how hard I work, because of the economy I still find myself behind. I would like to have more credit, but it is hard to get. Even though I'm staying afloat and paying bills on time, sometimes I can just pay the minimum instead of the whole thing – just so I am able to pay for food, gas or whatever other bills I have."

The data represents insights from Americans with regional, geographical, generational, educational, employment, ethnic, and gender differences, united by a familiar struggle to make ends meet. Overarching themes of the results indicate that daily necessities are the new luxury standards, overall debt is growing, and the credit system doesn't work for those most vulnerable.

"These findings highlight a critical need for more inclusive financial solutions," says Colin Walsh, CEO at Varo Bank. "We're seeing a shift where routine necessities are becoming increasingly difficult to afford, with borrowing now focused on basic needs rather than discretionary spending. This underscores the importance of expanding access to fair credit products, which can help restore a higher quality of life that many Americans aspire to achieve."

To obtain a copy of the Varo Consumer Credit Watch report, please visit Varo's website.

Methodology
Varo partnered with Morning Consult to survey employed adults living paycheck-to-paycheck to examine their views of financial topics related to credit. The survey was conducted online from August 29 to September 11, 2024, among a national sample of n=1,574 U.S. adults.

To qualify for the survey, respondents had to satisfy the following criteria: 1) Age 18+; 2) Currently employed; 3) have a HHI of $70K or less, 4) Described their current spending as about equal to income, a little less than income, or a little more than income. Those who described their spending as "much less" or "much more" than income were disqualified; 5) Pay all or nearly all of their bills on time.

About Varo Bank, N.A.
Varo Bank is a new kind of bank - the first nationally chartered consumer tech bank in the U.S., built from the ground up with a focus on the needs of Americans striving to get ahead. From credit building to savings to faster payments, Varo has a complete solution to help everyday Americans make progress in their financial lives. Varo combines the capabilities and nimbleness of a technology company with the security and oversight of a regulated financial institution, enabling agile product design that provides technology-first solutions such as Varo Believe, a secured card to help build credit; Varo Advance, to help stretch hard-earned dollars between paychecks; and a high-yield savings account, offering one of the nation's highest APYs. Varo has been named as one of the Inc. 5000 2023 fastest growth companies in the U.S., CNBC's 2023 list of the World's Top Fintech Companies, one of Forbes' World's Best Banks, and Fast Company's Most Innovative Companies. For more information on Varo Advance, Varo Believe, and other offerings such as Perks, visit www.varomoney.com, like Varo Bank on Facebook, and follow us on Instagram and Twitter @varobank. ©2024 Varo Bank, N.A. Member FDIC.

Media Contact: Audrey Jacobson, Consort Partners
[email protected]

SOURCE Varo Bank