Consumers struggling to pay their bills were nearly five times as likely as other consumers to increase borrowing to cope with inflation, according to an analysis published by the Federal Reserve Bank of Kansas City on October 15.
The study, by economist Ying Lei Toh, uses the Survey of Household Economics and Decisionmaking conducted in October 2025. It found that 37% of financially distressed consumers increased borrowing to manage rising prices, compared with 7.8% of consumers outside that group.
Toh defined financial distress as not paying, or having difficulty paying, all bills in full over the previous month.
Among consumers who increased their borrowing, 50.4% of those in financial distress used credit from alternative financial-services providers or bank overdrafts. The comparable share for borrowers not in financial distress was 20.8%. The 50.4% figure applies only to distressed consumers who borrowed more, rather than to every financially distressed consumer.
Combining that share with the 37% who increased borrowing, Toh estimated that 18.6% of financially distressed consumers may have relied on costly credit to manage rising expenses in 2025. She warned that reliance on high-cost credit could compound their financial hardship.
Across consumers overall, cutting spending was much more common than taking on additional debt: about 70% reduced spending to cope with inflation, while about 16% increased borrowing. Borrowing was the least-used of the grouped coping strategies in the analysis.
