Paying bills and maintaining financial well-being may feel like a chore to many, but for nearly half of Americans, it’s a day-to-day struggle.
Whether it’s because of their circumstances or the choices they make, these individuals often find themselves standing on the outside of the financial system, looking in. So, what does seeking access to financial tools and managing credit mean for these financial invisibles?
To find out, PYMNTS, in collaboration with Unifund, created the Financial Invisibles Report, which analyzes the survey responses of more than 2,000 Americans – particularly low-income individuals – about their financial habits and circumstances.
In the analysis, we identified the four personas of financial invisibles:
- No Worries: People who have no delinquencies and can fully participate in the financial system
- Second Chances: Those who have had delinquencies in the past, but can still participate in the financial system
- On the Edge: People who struggle to make ends meet and have no delinquencies, but are not able to participate in the financial system
- Shut Outs: Those who have had delinquencies in the past and, as a result, are unable to participate in the financial system
A large chunk of these invisibles are not invisible by choice, and would much rather participate in the banking system. However, a lack of access to credit and a poor credit rating often get in the way of managing bill payments and seeking financial well-being.
PYMNTS research found that many financial invisibles do not have credit cards – just four percent of Shut Outs and 30 percent of the On the Edge group reported having a credit card, compared to 65 percent of the No Worries group. What’s more, 98 percent of Shut Outs without credit cards cannot get one.
Similarly, these individuals largely have low credit stores. Shut Outs reported an average credit score of 525, while members of On the Edge had an average score of 589. Members of the No Worries group, by contrast, had an average score of 714.
Other key takeaways from the October edition of the PYMNTS Financial Invisibles Report, a Unifund collaboration, include:
- Financial Invisibles largely live paycheck-to-paycheck: 85 percent of Shut Outs, 73 percent of Second Chances and 66 percent of the On The Edge group report doing so.
- 75 percent of Shut Outs have been contacted by a bill collector within the past year.
- 24 percent of respondents are “Voluntary Invisibles,” individuals who have made a decision not to participate in financial systems. Meanwhile, 5 percent are “Involuntary Invisibles,” who have been locked out of the financial system due to delinquencies or other circumstances.
For all the latest findings analysis and trends, please download the Report by clicking the button below.
About the Report
The PYMNTS Financial Invisibles Report, a Unifund collaboration, focuses on how individuals handle bill payments and use credit products, as well as the impact of traumatic events on an individual’s financial stability.
To compile the Report, PYMNTS surveyed more than 2,000 Americans and asked them about their financial habits and circumstances. Overall, our sample demographically mirrors the U.S. population with one important exception: We sought relatively low-income Americans to help deepen our insights into the use of credit by those who are financially challenged.