MESA, Ariz.–Credit unions may want to watch some members’ behavior and be prepared to offer financial guidance in the months ahead should the government shutdown continue, with analysts cautioning there could be a surge in credit card debt in November for those who receive Supplemental Nutrition Assistance Program (SNAP benefits.
While a court has ordered the SNAP benefits be paid to the nearly 42-million people who receive the help, the Trump administration has indicated it plans only partial payments, and that could “trigger many to turn to credit cards instead to cover their food necessities, creating an uptick of debt in the process,” according to Newsweek.
Some states have stepped into fill the benefits void. The federal government spends approximately $9 billion per month on SNAP.
High-Rate Cards
“When EBT cards aren’t reloaded on time, people often turn to what little credit they have left, whether that’s maxing out a credit card, taking a quick cash loan with astronomical rate, or simply going without essentials altogether,” Kevin Thompson, CEO of 9i Capital Group and host of the 9innings podcast, told Newsweek.
As the report noted, credit cards today carry some of the highest APRs in decades, averaging more than 20%.
“That kind of cost can turn a temporary delay into long-term debt, especially for households already living paycheck to paycheck,” Cynthia Chen, founder and CEO of Kikoff, a credit building platform, told Newsweek. “As balances grow, so does the risk of missed payments, lower credit scores, and shrinking access to affordable credit options.”
‘Fragile’ Households
Added Thompson, “We may not see traditional ‘bread lines’ like those during the Great Depression, but we’re already witnessing the modern equivalent — cars lined up at drive-thru food banks, pantries, and community centers just so families can eat. It’s heartbreaking, but also a reminder of how fragile many households’ financial situations truly are.”
