A new survey commissioned by the advocacy group Demos revealed some interesting and somewhat frightening information. The general consensus has always been that people with substantial credit card debt are living beyond their means and spending frivolously. Well, it turns out that that’s not always the case.
Many low and middle income Americans have in increasing numbers turned to their credit cards just to pay for their basic living expenses such as rent and mortgages, groceries and utility bills. Hardly lavish spending wouldn’t you say? The survey found that more than one third of respondents have turned to their credit cards to pay for these basic living needs… food and shelter.
Over the past 12 months people that responded to the survey have used their credit cards to make on average five months worth of payments. The survey also found that one out of every two households use their credit cards to pay for out-of-pocket medical expenses.
The average credit card debt of those surveyed was $9827. The average interest rate of their credit cards was 14.8%. And for a truly frightening number… nearly 25% of those surveyed said they are paying in excess of 20% interest on their credit cards.
It was also reported that the respondents have been in credit card debt for an average of 5.1 years. And of course, that number is only going to grow.
While the recession has most certainly made things worse, people using their credit cards to pay for their basic living expenses is not a new phenomenon.
As José Garcia, the associate director of research for Demos stated, “One of the biggest myths about the rising credit card debt is that it is a result of frivolous spending.”
Well now we know better.
The bottom line is that we number one, have got to be more responsible with our use of credit and number two, we need this damn recession to end.