News From Terre Haute, Indiana

Local & Bistate

March 10, 2006

Stephanie Salter: Americans using credit cards to pay for basics

For people who pay off their credit cards each month or who never pull a MasterCard or Visa from their wallets, the term “credit card debt” usually conjures up a specific vision: irresponsible spendthrifts charging luxury items that range from expensive designer clothes to tennis ranch vacations.

Recently published evidence suggests the reality is more like groceries, emergency car repairs, medical bills and kids’ tuition.

According to a riveting study by a pair of national not-for-profit, nonpartisan organizations, about one-third of all U.S. households categorized as low-income or middle-income are racking up credit card debt to pay for basic living expenses.

Titled “The Plastic Safety Net: The Reality Behind Debt In America,” the 44-page report is a yearlong, joint effort of Demos and the Center for Responsible Lending. It is based on a national survey that aimed to provide extra dimension to the usual snapshot of Americans’ relationship with the behemoth credit card industry.

As the introduction to the report says:

“The rapid rise in debt among American households over the last decade is well documented, but it’s not well understood … Existing data sources don’t answer basic questions about household credit card debt, including how long the average household has been in debt and what types of purchases led to outstanding balances.”

The answers that emerged from the survey blow up a lot of stereotypes and misconceptions about who runs up credit cards so high they can’t pay them off each month and why they do so.

“Lower-income” and “middle income” are classifications based on an established standard that encompasses households whose incomes fall between 50 percent and 120 percent of their local overall median income.

For many in this economic segment of folks (which includes me and accounts for about half of all U.S. households), the report says, “credit card debt is most aptly described as the new ‘safety net’ for managing essential expenses.”

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