How rising household expenses are driving short-term borrowing

Ever-increasing household expenses (mortgage/rent, transportation, and food) are pushing many Americans to rely on short-term borrowing options like credit cards and personal loans to get through negative budgets. Many now also use Buy Now Pay Later (BNPL) schemes to cover financial shortfalls.

Indeed, Investopedia reports that nearly half of Americans plan to take out a personal loan in 2026 to help with managing household costs.

If rising household expenditures are straining your household budget, too, it's time to act and reduce household bills and explore smarter credit solutions.

How Are Household Expenses Classified?

There are typically two ways of categorizing household expenses for smarter financial planning for families:

1. By how necessary they are (needs vs. wants)
2. By their predictability (fixed vs. variable)

Understanding needs vs. wants and fixed vs. variable costs allows for more accurate budgeting for households, as they let you know where exactly your money goes. Knowing what you're spending on can then help you identify areas where you can cut back.

What Are the Biggest Expenses for Most Households?

As the U.S. Bureau of Labor Statistics reported in December 2025, the average annual expenses reached $78,535 for all consumer units in 2024. The BLS also categorized these expenditures into 14 types, with the five biggest ones being:

1. Housing ($26,266 in 2024, up from $25,436 in 2023)
2. Transportation ($13,318 in 2024, up from $13,174 in 2023)
3. Food ($10,169 in 2024, up from $9,985 in 2023)
4. Personal insurance and pensions ($9,797 in 2024, up from $9,556 in 2023)
5. Healthcare ($6,197 in 2024, up from $6,159 in 2023)

How Are Rising Household Expenses Driving Short-Term Borrowing?

Rising household expenses wouldn't be much of a problem if only salaries and income also increased proportionately. Unfortunately, while nominal wages have grown, the increase in the inflation rate has been much steeper and faster. As a result, inflation has outpaced any growth in wages.

With the gap between wages and much more significant increases in household expenses widening, many families are using their credit cards more. The need to survive shortfalls is also pushing households to apply for and secure personal online loans.

BNPL programs, a form of short-term credit, are also growing in popularity. They let consumers buy and get what they need now and then pay at a later date, usually in increments.

How to Budget Smarter and Choose Credit Solutions Wisely

Look closely at your budget and find areas you can trim and save on. An excellent example is food away from home (like restaurant meals and take-outs). They cost much more than food at home, so reducing the number of times you spend on them can help you save.

If cutting back on expenses is not enough, and you still need to take on credit, choose a card that offers 0% interest on installment programs.

You should also use free eligibility checkers before applying for a new credit card. They'll check your pre-qualifications with a soft credit pull, meaning they won't have a negative impact on your credit score.

Combat Rising Household Expenses With Better Budgeting and Financing

With household expenses ever on the rise, now's the best time to cut back on discretionary spending (wants). If you need extra help, consider applying for new credit, but be sure to compare your card and loan options (particularly interest rates), and practice responsible borrowing.

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