More and more families are taking on debt to pay for groceries

You’ve probably been tempted to use Buy Now, Pay Later (BNPL) on a pair of designer sneakers or during a holiday spending spree. But what about putting food on the table? It turns out that tapping into payment plans and other forms of debt to pay for groceries is more common than you think.

According to a report from the Urban Institute, many American households turn to payday loans, BNPL, credit card debt and their savings to meet their necessities. Bottom line: 60.5% of adults resorted to credit card spending, 19% had to dip into their savings, and 3.5% covered their shopping with Buy Now, Pay Later.

The spike in the cost of essentials, especially groceries, can push low-income people experiencing food insecurity into a cycle of debt.

“Although we see inflation slowing, in 2023, when we collected this data, families were paying more than 25% more for food than before,” said Cassandra Martinchek, a senior research associate at the Center of Labor, Human Services. and Population at the Urban Institute.

With food being the third largest household expenditure – after housing and transport – more and more families are feeling the financial pressure.

Adults experiencing very low food security – the most severe form of food problems – were more likely to report dipping into their savings and expensive debt than those who reported less severe food problems.

Furthermore, those facing very low levels of food security were also more likely to experience barriers to paying off those debts than those who said they had less severe levels of food insecurity. Being saddled with debt and struggling to meet your basic needs can feel like you’re under attack from multiple sides.

Experience a hunger cliff

There has been a lot of pressure on food prices and what people can afford, Martinchek explains. At the same time, there was less public support and consumer protection after 2021.

In addition to a rise in food prices due to inflation, SNAP public health emergency allocations that were rolled out during the pandemic were eliminated. So in March 2023, the 35 states that still had emergency allocations at the time saw a dramatic loss of coverage.

With food prices and other costs of living rising sharply, the Food Research and Action Center (FRAC) describes more and more Americans facing a hunger gap. With the end of the federal public health emergency in spring 2023, average benefits have fallen to $6 per person per day, or $90 per month, according to the FRAC. At the minimum benefit level, older adults experienced the steepest decline, from $281 to $23 per month.

“When you couple inadequate SNAP benefits with rollbacks of federal programs like the Emergency Appropriations and the Expanded Child Tax Credit,” said Salaam Bhatti, Esq., SNAP Director at FRAC. “This ultimately means less income that people have to work with as they try to make sure there is food on the table, paying rent, utilities and all the other necessities.”

Providing long-term solutions

Since there are no signs of this trend slowing, measures should ideally be implemented to help those facing the most severe levels of food insecurity. Here are some possible ways to tackle the problem:

Increase the SNAP benefit amount. Bhatti points out that Congress has an opportunity to pass a strong farm bill with higher benefit amounts so that they are adequate for the family’s needs. “The numbers (in the report) were shocking,” he said. “Now is the time to create a SNAP program to respond to that crisis.”

Some ideas include expanding eligibility to students without forcing them to work when they should be focusing on their studies. There is a restriction on hot food with SNAP benefits, so people cannot get prepared, ready-to-eat hot food, such as rotisserie chicken.

“If you buy a hot rotisserie chicken, think about how much time it will free up, how many leftovers you will have, and how many meals you can prepare for days with just that one chicken,” says Bhatti.

Expand the child tax credit. When the child tax credit expansion expired at the end of 2021, Bhatti points out that poverty and food insecurity rose. An expanded child tax credit can help reduce child poverty. Currently, the child poverty rate in the US is 16% – or a total of 11.4 million children.

Not only do we need an expanded child tax credit like the one offered during the pandemic, which increased to $3,000 per qualifying child ages 6 to 17 and to $3,600 per qualifying child, we could also get by on a better amount. “Given that we can create policies that will eliminate or halve child poverty, why not invest a little more and reduce child poverty completely?” he says.

Implement accessible small-dollar lending programs. According to the Urban Institute report, another way to help people struggling with food insecurity is to provide affordable credit options to people with bad credit and low incomes. This can be accomplished through small dollar loan programs, no-fee extended payment plans for BNPL loans, or special purpose loan programs.

Some financial institutions and platforms offer payday advances, which are small amounts of money deducted from their paycheck before their payday arrives. The amount will be paid with the next pay slip. While there are usually no fees or interest, it is important for those looking for options to see what could result in costs.

Take advantage of existing programs. “People need to know that they are not alone in their fight against hunger,” says Bhatti. “Tens of millions of people across the country are in the same situation.”

For those struggling with hunger, Bhatti recommends taking advantage of programs like SNAP, WIC and free or reduced-price school meals for their children. Taking advantage of all of these programs can free up your income for other necessities and ensure there is food on the table for your family. You can check your eligibility for SNAP benefits at SnapScreener.com.

“Living in poverty is not one-dimensional,” Bhatti says. “There’s so much pressure coming from all sides. Whether it’s not being able to put food on the table, skipping a meal so your kids can eat, juggling multiple part-time jobs that don’t give you enough hours to get the benefits that you need.”

“If we want to address the dynamics that contribute to a family’s ability to meet its basic needs, we will need investments in different types of programs that address the cost of living,” says Martinchek. “And that gets us to the root causes of what drives family financial instability and what support can put people on a path to long-term success.”