Written by: Mike Senecal
Edited by: Lillian Guevara-Castro
Reviewed by: Adam West
- A survey of American consumers living paycheck to paycheck found they often respond to bill increases in ways that hurt rather than help.
- For example, consumers who paid bills manually rather than using autopay tended to choose reactive and ultimately counterproductive quick-fix strategies when expenses suddenly increased.
- The study contributes vital industry intelligence associating various money management behaviors with different financial lifestyles.
Consumers who live paycheck to paycheck have little to no opportunity to save for the future. That puts many in potential peril when emergencies occur, leading to unexpected financial setbacks and creditworthiness challenges that shrink rather than expand the subprime marketplace.
But why aren’t more consumers on the paycheck-to-paycheck hamster wheel jumping off to make a fresh start? Why are some able to manage their money more proactively than others?
The manner in which consumers pay their bills has a lot to do with how well they cope when bills increase, says PYMNTS Intelligence in the latest edition of its exclusive report on the paycheck-to-paycheck crisis.
PYMNTS Intelligence has found that the number of Americans living from paycheck to paycheck has remained just over 40% for the past two years. But that figure shoots to about 65% for consumers who report issues with paying bills.
New research associates living paycheck to paycheck with counterproductive money management behaviors.
In “Struggling Consumers Go to Short-Term Strategies to Manage Higher Expenses,” PYMNTS Intelligence draws on insights from a December 2024 survey of nearly 3,000 U.S. consumers to reveal how short-term thinking can impede proactive goal-setting while costing more in the long run.
The survey sample was balanced according to gender, education level, and income. The study associates reactive behaviors and the tendency to pay bills manually rather than through autopay with bill-paying struggles.
Respondents who reported not living paycheck to paycheck, on the other hand, tended to use proactive money management strategies to reduce the chances of a crisis ever occurring. In fact, proactive money-managing households may even fail to notice when a bill suddenly increases.
“How consumers pay their monthly bills reflects their financial stability,” wrote the report’s authors on the PYMNTS Intelligence team, led by SVP and Head of Analytics Scott Murray. “Barriers to adopting autopay, such as inconsistent income or concerns about automatic deductions, remain significant for many paycheck-to-paycheck consumers.”
The Continuing Challenge to Make Ends Meet
The post-COVID financial landscape is one where the cost of living persistently continues to rise and the American Dream of financial sustainability seems increasingly out of reach for many.
News from the Federal Reserve of total credit card debt approaching $1.2 trillion and delinquencies reaching highs not seen since the aftermath of the 2008 financial crisis raises questions about the sustainability of the status quo.
The PYMNTS Intelligence team found most respondents were affected by cost-of-living increases, with 77.5% reporting at least one bill increase in the past year. More than 50% of respondents reported increases in the cost of essential services, including higher electricity bills and gas prices, and increased insurance costs.
The percentage of consumers who experienced bill increases varied depending on demographic categories such as income and living area. For example, 79.1% of survey respondents living in suburban areas reported seeing increases in at least one of their bills in the last 12 months, followed by urban (77.9%) and rural respondents (74.3%).
Meanwhile, 75.5% of respondents making less than $50,000 per year reported seeing increases in at least one of their bills in the last 12 months compared with 77.1% of those bringing in more than $100,000 who said the same.
Contrary to stereotypes, Gen Z respondents (67.3%) turned out to be those least likely to have seen a bill increase in the past year, while boomers (80.4%) turned out to be the ones with the most concerns.
The category with the most predictable spread across the percentage range may have been financial lifestyle. While 81.9% of respondents who lived paycheck to paycheck — and who had bill-paying issues — reported seeing a bill increase over the past year, only 77.9% of paycheck-to-paycheck respondents without issues reported a rise. And only 73.9% of those not living from paycheck to paycheck had a similar situation.
That still large number serves as evidence of the widespread reality since COVID-19 that worsening macroeconomic indicators are translating into real financial strain for consumers.
How Reliance on Autopay Signals Success
It’s what happens after a bill increase occurs that’s significant. Struggling to make ends meet, paycheck-to-paycheck respondents tended to take more actions to manage bill increases than their peers who did not live paycheck to paycheck.
But their responses were more reactive as opposed to proactive. And the results often ended up doing more long-term harm than good.
For example, those living paycheck to paycheck with issues paying bills were far more likely to react by skipping bills or making partial payments, setting themselves up for higher costs down the line. But those not living paycheck to paycheck were more proactive and more likely to seek negotiations for better rates or terms.
And while only 22.3% of paycheck-to-paycheck respondents with bill-paying issues reported keeping track of usage in response to a bill increase, 24.4% of those with no paycheck issues did the same.
The winners in that category, however, were those who reported living paycheck to paycheck but managing their money successfully. They responded to a bill increase by keeping track of usage at a rate of 27%. It seems the right thing to do.
“That struggling consumers focus on short-term survival rather than long-term stability helps explain why taking more actions does not necessarily mean escaping the paycheck-to-paycheck cycle,” the report’s authors wrote.
The study categorizes the insecurity they feel as stemming from barriers such as inconsistent income and concerns about automatic deductions. From the title of this article, we know struggling consumers are likely to respond by hesitating over autopay.
Only 26% of those struggling from paycheck to paycheck reported using automatic payments to pay most of their bills. But half of those not living from paycheck to paycheck relied on automatic payments for most of their bills.
What’s more, using autopay services was much more likely among those reporting income above $100,000. Meanwhile, respondents who were more likely to report bill increases were less likely to use autopay.
“The trend is evident across most bill categories in our study,” the authors wrote. “This suggests that consumers paying bills automatically may not always be aware when a bill increases.”
