When Credit Becomes a Bridge—and a Cost

For U.S. households facing a shortfall, the important event is not the approval itself but the coping sequence that follows. This chapter traces what happens when higher prices, variable income, or an unexpected expense meets an insufficient buffer. The goal is to see where credit can buy time, where it can move pressure into the next period, and why a rise in observed debt does not by itself prove which part of that story came first.

Households rarely respond to a difficult month with one clean choice. They may cut another expense, delay a bill, use a card, ask family for help, sell something, or combine several of these responses. Each choice changes the household’s next state. The same action can be a reasonable temporary bridge when income is predictable and a damaging extension of a shortfall when the next payment is already uncertain.

The first response is often a rearrangement

A shortfall begins when planned cash is no longer enough for the obligations due in the current period. Higher prices can create that gap without a job loss. Variable income can create it without a change in yearly earnings. An unexpected expense can create it even when the household’s regular budget was balanced. The trigger is different, but the first task is the same: preserve essential spending while deciding which obligation can be moved, reduced, or financed.

The 2025 Survey of Household Economics and Decisionmaking found that 16 percent of adults had not paid all their bills in full in the prior month. When the survey also included people who had paid but had difficulty doing so, 28 percent had struggled with bills. These are not identical measures. The first records a payment outcome; the second includes effort and strain that may not yet have produced a missed payment. A household can therefore be under pressure before the most visible failure occurs.

Among adults who struggled with bills, 59 percent took steps to manage cash flow. The most common action was cutting back on other expenses, reported by 48 percent. Another 48 percent adjusted the timing of a payment, and 42 percent paid a bill late. Forty-eight percent borrowed or sold something: 23 percent used a credit card they would pay over time, 22 percent borrowed or received money from friends or family, and 12 percent sold or pawned something. Six percent took out another type of loan, such as a payday or personal loan. Respondents could select more than one action, so these are overlapping routes, not shares that add to one hundred.

The pattern shows why “used credit” is too thin a description of household behavior. Credit may be used alongside spending cuts and delayed payments. A credit card may cover a bill while the household postpones a different bill. Family help may prevent a late payment but reduce the support available for a later emergency. Selling an asset may avoid interest but remove a resource that could have helped with future transportation or income. The response changes the set of options that remains.

Savings determines how much rearrangement is necessary. Among adults who struggled with bills, 68 percent could not cover a $500 emergency using savings. Those without that capacity were more likely to adjust the timing of bill payments or borrow or sell something.