Household Expenses Contributing To Current Credit Card Debt

Household Expenses Contributing To Current Credit Card Debt

In our 2005 and 2008 surveys, Demos found that households turn to credit cards as a safeguard against economic instability and stagnant or falling income. To cope with daily expenses, or meet the contingencies of emergency car repairs or unexpected medical bills, households that have little in the way of savings to draw on must instead turn to credit cards as a high-interest “plastic safety net.”

Unfortunately, the trend continued in 2012: 40 percent of indebted households used credit cards to pay for basic living expenses such as rent or mortgage payments, groceries, utilities, or insurance, in the past year because they did not have enough money in their checking or savings accounts, a rate comparable to 2008 despite tightening access to credit. Low- and middle-income households struggling to afford highcost essentials like health care, striving to get an education despite rising college tuition, or straining to live on inadequate unemployment benefits as they cope with job loss also relied on credit cards: 47 percent of all indebted households said out-of-pocket medical expenses contributed to their credit card debt; among those who had experienced job loss, 86 percent said this contributed to their credit card debt; for those pursuing higher education, 71 percent said tuition and other college expenses contributed to their credit card debt.