Using Buy Now, Pay Later (BNPL) plans to pay for groceries might seem unusual, but a recent report from the Urban Institute reveals that many U.S. households are increasingly relying on various forms of debt to cover essential living expenses. According to the report:
- Credit card usage: 60.5% of adults resorted to credit cards for their purchases.
- Savings: 19% tapped into their savings.
- BNPL: 3.5% covered their grocery costs using BNPL services.
This trend is particularly concerning for low-income households facing food insecurity. Kassandra Martinchek, a senior research associate at the Urban Institute, notes that families paid over 25% more for food in 2023 than before, exacerbating the financial strain on households.
Food is the third-largest household expense, following housing and transportation. Those experiencing severe food insecurity are more likely to rely on savings and high-cost forms of debt compared to those with less severe food hardship. The struggle to pay off debt while trying to meet basic needs can feel overwhelming.
The Hunger Cliff
The Urban Institute highlights the increasing pressure on food prices and affordability. After 2021, there was less public support and consumer protection, coinciding with rising food prices. Additionally, emergency SNAP allotments, which had been introduced during the pandemic, were discontinued in March 2023, leading to a significant loss of benefits in many states.
According to the Food Research and Action Center (FRAC), many Americans are facing a “hunger cliff.” With average SNAP benefits dropping to just $6 per person per day (or $90 per month) after the removal of emergency allotments, many households are struggling. Older adults, in particular, saw their minimum benefits fall dramatically from $281 to $23 per month.
Salaam Bhatti, the SNAP Director at FRAC, points out that inadequate SNAP benefits, combined with the rollback of federal programs like the expanded child tax credit, has left many families with insufficient income to meet their basic needs.
Potential Solutions
To address the growing food insecurity crisis, several long-term solutions could be considered:
- Increase SNAP Benefits: Bhatti suggests that Congress could pass a strong farm bill to increase SNAP benefits so that they adequately meet families’ needs.
- Expand Eligibility for Students: Allowing students to access SNAP benefits without work requirements would provide much-needed assistance to those focused on their studies.
- Revise Hot Food Restrictions: Currently, SNAP benefits restrict the purchase of prepared hot foods. Lifting this restriction could provide families with convenient meal options that save time and resources.
- Expand the Child Tax Credit: Restoring and expanding the child tax credit, which was increased during the pandemic, could significantly reduce child poverty and food insecurity. The current child poverty rate in the U.S. stands at 16%, impacting approximately 11.4 million children.
- Implement Accessible Small-Dollar Credit Programs: Providing affordable credit options, such as no-cost extended payment plans for BNPL loans, can help those struggling with food insecurity access necessary funds without falling into high-cost debt.
- Leverage Existing Programs: Many struggling families are unaware of available assistance programs like SNAP, WIC, and free or reduced-price school meals. Utilizing these resources can help alleviate financial pressure and ensure families have food on the table.
- Addressing Root Causes: Experts emphasize the need for broader investments in programs that address the cost of living and the root causes of financial instability. Comprehensive strategies are essential to help families achieve long-term financial security.
Bhatti notes that being in poverty is multifaceted, with numerous pressures impacting families. Tackling these issues requires a coordinated effort to improve access to resources, enhance financial stability, and ensure that all families can meet their basic needs.