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Across My Desk: New survey report reveals truth behind credit card debt explosion in the United States



Most folks I know use credit cards to pay for all sorts of things from groceries to exotic trips and gifts. What I don't know is how many of them pay off that debt each month. If credit card debt is of interest to you, here's a report that may be an eye-opener.

According to The Center for Responsible Lending, more families are using their credit cards to keep their life afloat. And with wages relatively stagnant for the low-and middle-income worker bees in America (while soaring for CEOs), that's not surprising.

Here are some findings for a report titled The Plastic Safety Net: The Reality Behind Credit Card Debt in America:

  • Credit card debt in America nearly tripled in the 1990s and has increased 31 percent since 2000. Americans now owe some $800 billion in credit card debt. In addition, owing largely to job instability and medical costs, bankruptcies rose from 616,000 in 1989 to over 1.8 million in 2004.

  • The average credit card debt of a low- and middle-income indebted household is $8,650.

  • Seven out of 10 low- and middle-income households surveyed reported using their credit cards as a safety net--relying on credit to pay for car repairs, basic living expenses, medical expenses or house repairs.

  • One out of three households reported using credit cards to cover basic living expenses on average four out of the last 12 months; households that reported a recent job loss or unemployment, and those without health insurance in the last three years, were almost twice as likely to use credit cards for basic living expenses.

  • 20 percent of survey homeowners had paid off some credit card debt with a mortgage refinance in the last three years.

  • Americans are increasingly relying on credit cards to pay for essentials that wages no longer cover, reliance on credit cards is having a multiplying effect that is creating millions of "debt-stressed" families:

  • 47 percent of households had been called by a bill collector.

  • Almost half missed or were late with a payment in the last year, with nearly a quarter of households reporting paying a late fee at least one or two times in the past year.

  • In addition to charging late fees ranging from $30 and $39, most issuers also penalize cardholders for late payments by increasing the interest rate on the account two- or three-fold, often after only one late payment.

    So how do we solve the growing debt problems? Two solutions include raises --- as in raising hourly wages and then the interest rates on things like savings accounts. Both could encourage savings and discourage debt.


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