Young woman feeling concerned about grocery prices listed on supermarket bill.
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Many buyers have been shocked by what they pay at grocery store check.
Food prices exploded in a context of broader inflation in recent years, and stay high for many commodities.
As consumers grapple with food costs this can lead to unpaid debt balances.
Many families have dipped into their savings or turned to credit cards, buy now, pay later through installment programs or payday loans. pay for groceries in 2023, according to a new study from the Urban Institute.
While these payment methods can provide a lifeline, they can also lead to financial instability.
“The pace of price increases is slowing, but households are still paying more for groceries today than last year,” said Kassandra Martinchek, senior research associate at the Urban Institute.
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“This could mean that people have to rely on sources of cash other than their income to be able to meet their basic needs, their food needs,” she said.
According to Martinchek, it's not just those who are most financially disadvantaged who face these challenges.
Pandemic aid expires and inflation affects grocery bills
Consumers have been grappling with rising food prices since 2021. For some, meeting these costs has been more difficult because pandemic aid has expired. Enhanced Supplemental Nutrition Assistance Program, or SNAP, benefits expired in March 2023, allowing the average individual to receive approximately $90 less in benefits per month.
According to the study, approximately 70% of all grocery transactions are made by credit or debit card. These payment methods carry risks, especially for consumers who cannot pay the entire balance.
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By 2023, average annual credit card rates will reach 22.8%, the highest rate ever recorded, according to the Urban Institute.
“When that unused credit limit is in front of you, sometimes it feels like a lifeline,” said Bruce McClary, senior vice president of the National Foundation for Credit Counseling. “In some circumstances, that lifeline is actually a cinder block.”
Grocery Costs Can Lead to Missed Payments
While 33.4% of adults who used a credit card for groceries paid off the charges in full, 20% of adults paid less than the full balance but still paid the minimum payment. Meanwhile, 7.1% have not made minimum payments.
According to the Urban Institute, households with higher levels of food insecurity were more likely to use payday loans, buy now, pay for programs later, or save for basic needs.
Among those who used to buy now and pay later for groceries, 37% of adults defaulted on their loans.
Adults with lower levels of food security were also likely to experience difficulty repaying debt.
Certain policy changes could help alleviate these challenges, according to Urban Institute research, such as increasing SNAP and other social safety net supports; expanding financial options to help families in need and making credit counseling and debt management services more widely available.
Individuals and families who are currently struggling can take steps to prevent their trips to the grocery store from turning into lasting debt.
By making purchases with cash instead of credit, it can help limit spending to a specific amount, McClary said.
For debtors who feel stuck, talking to a nonprofit credit counseling agency can help budget and manage their debts, he said.
“If you can't do it yourself, someone is here to help you,” McClary said.