More low-and middle-income households use their credit cards to pay for everyday living expenses such as housing, groceries, utilities or insurance on a regular basis. Some families have credit card debt that is 70% more than the credit card debt owed by families who did not use their cards in that fashion.
Tamara Draut, vice president of policy and programs at Demos and co-author of The Plastic Safety Net: How Households are Coping in a Fragile Economy, according to the results of a survey of low- and median-income households is clear. “Wages have stagnated while medical and housing costs have sky-rocketed, and if confronted with a leave of absence or health conflict, there are very few personal or public safety nets solid enough to help in a crisis. Households are turning to high-cost credit cards to stay afloat.”
This was the second study done by Demos, a national research and policy center, in an effort to get a more accurate picture of how credit card debt is compiled and affects low- and middle-income families. The last study was done in 2005. The most recent survey of 1,205 adults who reported having credit card debt for longer then the past three months. Now to qualify for this beneficial survey, these adults needed to be part of a household with a total income between 50-120% of the local income. The survey revealed interesting numbers showing an average credit card debt carried by low-and middle-income households in America was $9,827. This number was dependent on weather or not the family made basic living expenses on a credit card.
The researchers did not ask how many of the families actually considered filing bankruptcy to be a solution to their financial mishaps, but they did ask families exactly what their process was to get out of debt. Overall, 59% responded that they did use their income tax refunds to lower their debt, and 45% said there were finding second jobs.
“For a long time families have been using credit cards as a safety net in absence of stronger social policies and federal rules. With so many American households putting their most basic necessities on credit cards and using their limited home equity to pay if off, if they have any equity at all, we have a nation with millions on the financial edge.” -Jose Garcia, associate director of research for Demos