July 31, 2009
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Credit Card Debt Mess, Pt.1
America's Debt Hits High.Demos' has released their latest national survey reporting on how low and middle income families are handling credit card debt. Demos is a liberal group who call themselves a "think-tank" that provides ideas on power and politics to empower individuals to "shape their own lives." Demo's report "The Plastic Safety Net: How Households are Coping in a Fragile Economy," reveals that America's credit card debt has quadrupled in the past two decades and tops over $1 trillion. Furthermore, a greater number of Americans have looked to the court system for relief as personal bankruptcies have nearly double in just two years. Tamara Drau, VP of Policy and Programs at Demos says that the report confirms that Americans have become dependent on meeting their daily needs with credit cards.
A sluggish economic environment resulting from insufficient wages, high unemployment, rising cost of healthcare, and high fuel prices have placed huge financial burdens on the American family. To meet the demands of these burdens, many lower and middle income families have grown to depend on their credit cards. Adding to this burden, banks and card companies have become fat off of high interest fees and penalties. To avoid these massive fees, consumers have resorted to the lower interest option of home equity lines of credit. By doing so, the report indicates that Americans have topped off their home equity lines in order to pay down the higher interest rate credit card balances. With housing values falling at the fastest rate in decades, most homeowners have little or no equity left.
The report concludes that Americans have been building up to the recession and excessive credit card debt over the past two decades. Finding good employment with adequate wages has been something available to higher educated individuals and virtually impossible for the lower and middle income community. Read on to see details of the report.