You've likely been tempted to use Buy Now, Pay Later (BNPL) on a pair of designer sneakers or during a spending flurry during the holidays. But what about to put 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 released by the Urban Institute, many US households are tapping into payday loans, BNPL, credit card debt, and their savings to cover living essentials. Breaking it down, 60.5% of adults resorted to credit card spending, 19% had to pull from their savings and 3.5% covered their groceries with Buy Now, Pay Later.
The spike in the cost of essential goals, particularly groceries, can cause low-income folks who are experiencing food insecurity to get into a debt cycle.
"While we see the inflation rate slowing, in 2023, when we collected this data, families were paying over 25% more for food than they did before," says Kassandra Martinchek, a senior research associate with the Center of Labor, Human Services, and Population at the Urban Institute.
With food being the third largest household expense–behind housing and transportation — more families are feeling the financial strain.
Adults struggling with very low food security — the most severe form of food hardship — were likelier to report tapping into their savings and expensive forms of debt than those reporting less severe food hardship.
Additionally, those who deal with very low levels of food security were also more prone to experience hurdles in paying off that debt compared to those who said they had less severe levels of food insecurity. Being saddled with debt and scrambling to meet one's basic needs can feel like being attacked on multiple sides.
Experiencing a hunger cliff
There's been a lot of pressure on food prices and what folks can afford, explains Martinchek. At the same time, there was less public support and consumer protection after 2021.
Besides an increase in food prices due to inflation, the SNAP public health emergency allotments, which were rolled out during the pandemic, were removed. So, in March of 2023, the 35 states that still had emergency allotments at the time saw a dramatic loss in coverage.
With steep increases in food prices and other living expenses, the Food Research and Action Center (FRAC) describes more and more Americans facing a hunger cliff. With the halt of the federal public health emergency (PHE) in the spring of 2023, per FRAC, average snap benefits have dropped to $6 a person a day, or $180 a month. At the minimum benefit level, older adults experienced the steepest drop — from $281 to $23 a month.
"When you couple inadequate SNAP benefits with the rollback of the federal programs like the emergency allotments and expanded child tax credit," says Salaam Bhatti, Esq., who is the SNAP Director at FRAC. "This leads to ultimately less income that people have to work with when trying to make sure there's food on the table, paying rent, utilities and all other necessities."
Offering long-term solutions
As there are no signs of this trend slowing down, ideally, measures need to be implemented to help those dealing with the most severe levels of food insecurity. Here are some potential ways to tackle the problem:
Increase the SNAP benefit amount. Bhatti points out that Congress has an opportunity to deliver a strong farm bill with increased benefit amounts so they're adequate to the family's needs. "The numbers [in the report] were shocking," he says. "Now is the time to deliver a SNAP program to respond to that crisis."
Some ideas include expanding eligibility to students without forcing them to work when they should be focused on their studies. There is a hot food restriction with SNAP benefits, so folks aren't able to get prepared, ready-to-eat hot food–like rotisserie chicken.
"When you buy a hot rotisserie chicken, think about how much time that frees up, how many leftovers you get, and how many meals you can make for days just from that one chicken," says Bhatti.
Expand the child tax credit. When the expansion of the child tax credit expired at the end of 2021, Bhatti points out that poverty and food insecurity numbers went up. An expanded child tax credit can help lower child poverty. Currently, the child poverty rate in the US is at 16% — or 11.4 million kids total.
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 between 6 and 17 and up to $3,600 per qualifying child, we could fare with a better one. "Considering that we can create a policy that will eliminate or cut child poverty in half, why not invest a little more and cut child poverty entirely?" he says.
Implement accessible small-dollar credit programs. According to the Urban Institute report, another way to help those struggling with food insecurity is to provide affordable credit options to those with poor credit and low incomes. This can be achieved through small-dollar credit programs, no-cost extended payment plans for BNPL loans, or special-purpose credit programs.
Some financial institutions and platforms offer payday advances, which are small amounts deducted from their paycheck before their payday hits. The amount is due at the next paycheck. While there are usually no fees or interest, it's important for folks looking for options to see what might trigger fees.
Take advantage of existing programs. "People need to know that they're not alone in their struggles against hunger," says Bhatti. "Tens of millions across the country are in the same situation."
For those facing hunger, Bhatti recommends hopping on programs like SNAP, WIC, and free or reduced price school meals for their children. When you take advantage of all these programs, you can free up your income for other necessities and ensure you have food on the table for your family. You can check your eligibility for SNAP benefits through SnapScreener.com.
"Being in poverty is not one dimensional," says Bhatti. "There are so many pressures coming in from all different sides. Whether it's not being able to put food on the table, skipping a meal so your kids can eat, trying to juggle multiple part-time jobs that aren't giving you enough hours to get the benefits you need."
"If we want to address the dynamics contributing to a family's ability to meet their basic needs, we're going to need investments in different types of programs that address the cost of living," says Martinchek. "And that's getting at the root causes of what's driving family financial instability and what support can set folks up on a path for long-term success."
