You've probably considered using Buy Now, Pay Later (BNPL) for a trendy pair of designer sneakers or during a holiday shopping spree. But have you thought about using it to buy groceries? Many people are increasingly relying on payment plans and various forms of debt to afford groceries, a trend that may surprise you.
A report from the Urban Institute indicates that numerous US households are relying on payday loans, BNPL, credit card debt, and savings to meet their basic needs. Specifically, 60.5% of adults used credit cards for purchases, 19% dipped into their savings, and 3.5% turned to Buy Now, Pay Later for their grocery expenses.
The rise in essential costs, particularly food, has led many low-income individuals facing food insecurity into a cycle of debt. Kassandra Martinchek, a senior research associate at the Urban Institute, notes, "While we see the inflation rate slowing, in 2023, when we collected this data, families were paying over 25% more for food than they did before."
Food ranks as the third-largest household expense, following housing and transportation, creating considerable financial pressure for families. Those experiencing severe food insecurity were more likely to draw from their savings or incur high-interest debt compared to those facing less severe hardship. The burden of debt while trying to satisfy basic needs can feel overwhelming.
Martinchek describes significant pressures on food prices and budget constraints. Since the end of 2021, there has been reduced public assistance and consumer protections. The removal of SNAP emergency allotments, initially implemented during the pandemic, further exacerbated the problem. By March 2023, many states observed a drastic reduction in assistance, with average SNAP benefits reduced to around $6 per person daily, or $90 monthly. Older adults experienced particularly steep declines—from $281 to just $23 a month.
Salaam Bhatti, the SNAP Director at the Food Research and Action Center (FRAC), emphasizes the growing inadequacy of SNAP benefits when these federal support programs are cut. Families are left with less income to afford essential expenses such as food, rent, and utilities.
To address these ongoing issues, targeted measures are essential to support those facing severe food insecurity. Suggested solutions include increasing SNAP benefits to meet family needs effectively. Bhatti highlights that Congress has a unique opportunity to propose a robust farm bill that significantly raises benefit amounts.
Further, eligibility for SNAP could be expanded for students, allowing them to focus on their education without job burdens. Current restrictions, such as the ban on purchasing ready-to-eat hot meals, should also be reconsidered to ease burdens. Bhatti suggests that buying a rotisserie chicken could save time and provide multiple meals, illustrating how small adjustments can make a difference.
Another avenue to explore is the expansion of the child tax credit. After the expiration of the pandemic-related credit in 2021, rates of poverty and food insecurity rose, with child poverty currently affecting 11.4 million children—or 16% of the total. An expanded child tax credit could significantly reduce these figures.
Lastly, accessible small-dollar credit programs could offer affordable borrowing options for individuals with low incomes or poor credit. Initiatives like no-cost extended payment plans and payday advances can provide financial relief, but individuals should remain aware of potential fees.
Bhatti urges those struggling with hunger to take advantage of available programs, such as SNAP, WIC, and free school meal programs. By leveraging these resources, families can free up funds for other essentials and ensure food security.
Understanding that poverty is multifaceted is crucial. Bhatti remarks on the various pressures individuals face, from skipping meals to make ends meet to juggling multiple jobs.
To truly address the underlying factors affecting families' abilities to meet their basic needs, investments in diverse support programs are necessary. Martinchek emphasizes the importance of tackling the root causes of family financial instability to foster long-term solutions for those in need.