The pandemic has devastated the global economy and caused a lot of financial hardship — but it’s also exposed a lot of financial weakness that was already there.

The result? A nearly unprecedented spike in individual debt.

A new study from Clever Real Estate looks at how Americans are coping with this COVID-induced recession, and how different generations are feeling the recession’s impacts.

Most Americans Were Already on Shaky Ground Financially

Big picture, the warning signs were there even before the pandemic. Household debt had been steadily rising over the past seven years, hitting record highs in 2020. That was coupled with a historically low savings rate, with half of Americans in March 2020 reporting that they had a month or less of expenses in their savings account, and 27% with no savings at all. That matches earlier findings by the Federal Reserve that nearly 40% of Americans couldn’t even cover an unforeseen $400 expense.

When the economy is steady, that level of precarity can be manageable. When the economy tanks, however, it can lead to disaster. The Clever study found that 54% of Americans have missed at least one payment in 2020 to pay for food or groceries instead (37%), prioritize other debts (33%), or make up for lost income (28%).

If the recession worsens and, for example, people are forced to sell their homes quickly because they can’t afford their mortgages, the economy could spiral badly, and 2021 could see a wave of devastating foreclosures and mass evictions of renters.

Falling Back on Credit Cards

Faced with these tough choices, many Americans are relying more on credit cards. The large majority of Americans (92%) already have a least one credit card, but the Clever study found that more than three-quarters of Americans have opened a new credit card account in 2020.

People are using those credit cards more than they were just a year ago; 53% of respondents said they carry a month-to-month balance on their cards, up from 47% in 2019; 79% are carrying more than $1,000, compared to only 72% in 2019. With an average APR of 15.57% to 22.87% across all credit cards, Americans were already spending an average of $890 a year just on credit card interest; now that more people are carrying higher balances, we can expect that number to increase steeply.

And that’s before you consider penalties and delinquencies: 30% of Americans have already missed a credit card payment this year, and severely delinquent accounts were already up 8% at the end of Q2 2020.

It’s possible to dig yourself out of debt like this, but it’s not easy and can take years. And unless people can figure out how to earn money quickly, it's unlikely to happen for many Americans anytime soon.

The Financial Generation Gap

The pandemic has hit everyone hard — but it’s hit some people harder than others. Looking at how baby boomers and millennials have handled the economic shocks of 2020 reveals starkly contrasting financial situations.

The wealth gap was huge to begin with; adjusting for inflation, millennials only have about 2% more family wealth than families the same age in the early 1980s. Baby boomers, on the other hand, have 135% more wealth than similar families 30 years prior. So, it should come as no surprise that millennials have had a rougher year.

Circling back to the previous section, millennials were 29% more likely than boomers to rely on credit or other forms of debt to cover expenses in 2020. The division looks even starker when you use the age of 40 as a dividing line; Americans under 40 increased their debt by 2% between Q1 and Q2 of 2020, while Americans over 40 decreased their debt by 1% over the same time span.

Millennials are three times more likely to miss credit card payments compared to boomers and, compared to 2019, are 32% more likely to carry a month-to-month credit card balance. Strangely, millennials seem to be more perceptive about their financial situation than boomers: When asked in January if they expected to miss at least one credit card payment in 2020, 29% said yes. So far, 31% have actually done so. Asked the same question, only 5% of boomers said they expected to miss a payment, and 17% have actually done so.

This millennial clarity doesn’t always translate into wise financial decisions, though. Millennials are 100% more likely than boomers to miss a payment due to spending too much money on non-essentials. That lack of financial discipline, combined with a low level of generational wealth, has had a measurable impact; 55% of millennials have missed at least one payment this year, compared to 33% of boomers.

Americans Want — and Need — More Help

Americans are nearing the end of their financial rope. Although most Americans are using high-interest credit cards to finance their daily necessities, even the 31% of Americans who did have savings have already burned through more than $5,000. According to a survey in September, 61% of Americans had either already gone through all their savings or would exhaust their funds before the end of the year. So, it’s probably no surprise that a large majority of Americans say another government stimulus check would be a huge help.

Overall, 81% of Americans say they’d welcome another stimulus check, a staggering 29% increase since April. According to the survey, they would spend the stimulus money on necessities, with 47% saying they’d put it toward bills, 45% to pay off debt, and 32% on necessities such as groceries.

So, will Americans — and the economy — receive more stimulus? That’s up to our elected representatives. But while they debate and delay, the economic damage only worsens, as Americans take on more debt, miss more payments, and, day by day, lose hope.

Dr. Francesca Ortegren, Ph.D. is a Research Associate at Clever Real Estate where she focuses on helping people understand complex data, real estate, finances, business, and the economy by researching various topics, analyzing data, and reporting useful insights for general consumption.