New Demos Study Underscores Struggles Faced By Latino Households With Credit Card Debt
(New York, New York) – Today the national public policy organization Demos and The National Council of La Raza (NCLR) released a new report that explores the use of credit cards and the impact of debt on Latino households in America.
The housing crash resulted in a tremendous loss of wealth in the Latino community. Households have fewer resources to draw on in times of need.
Credit Card Debt in the Latino Community draws from Demos’ 2012 National Survey on Credit Card Debt of Low- and Middle-Income Households. The study finds that, while Latino households are carrying less credit card debt than they were in 2008, four out of ten survey participants reported using their credit cards to pay for basic living expenses such as rent, mortgage payments, groceries, utilities or insurance because they did not have enough money in their checking or savings accounts.
“Across the board we see too many low- and middle-income Americans relying on credit cards because their wages aren’t keeping up with the cost of living. At the same time, the Latino community faces distinct challenges,” said Amy Traub, Demos Senior Policy Analyst and report author. “The housing crash resulted in a tremendous loss of wealth in the Latino community, meaning households have fewer resources to draw on in times of need. Meanwhile, Latino borrowers are less likely to have health coverage than other communities, and one outcome is that they’re more likely to be carrying medical debt on their credit cards.”
Key findings from the study include:
- 49% of Latino households carrying credit card debt reported that they or someone in their household has been without medical insurance in the last three years, compared to 34% of the indebted population as a whole
- Among indebted Latino households that experienced job loss, 87% said the job loss contributed to their debt
- 43% of Latinos surveyed reported using their credit cards to pay for basic living expenses because they did not have enough money in their checking or savings accounts.
“It’s good news that Latinos are carrying less credit card debt, but still we remain concerned that even as the economy is improving, Latinos are still waiting to feel the effects from the recovery,” said Eric Rodriguez, Vice President, NCLR. “Too many in our community have to use their credit cards to pay for basic necessities because their income and wages are insufficient to help them make ends meet. New Census data reflect that Latinos continue to work at high levels, but more can and should be done to improve wages.”
While Latino households are more optimistic than the population as a whole about paying down their credit card debt quickly, the most common ways of doing so include using a tax refund, working extra hours or getting an additional job, drawing on savings, and borrowing money from family or friends.
The CARD Act of 2009 has provided new protections for Latino borrowers – with 41% of Latino households reporting that they have been charged less late fees as a result of the act and 38% saying the new disclosure information has caused them to pay more toward their monthly balance.
This report offers other policy recommendations to help alleviate the burden of debt for Latino households including medical debt protection, borrower security, the elimination of credit checks as a part of the hiring process and the regulation of non-traditional lenders to cap exorbitant interest rates that accompany payday loans.
Credit Card Debt in the Latino Community is a part of Demos’ ongoing work to build pathways to a strong, diverse middle-class. Previously, Demos partnered with the NAACP to release The Challenge of Credit Card Debt For the African American Middle Class, which examined the struggles faced by the indebted African American community trying to pay down credit card debt.
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