Report Finds Credit Card Debt Explosion

Release Date: 
September 8, 2003

New York, NY — Americans faced a massive rise in credit card debt during the 1990s, according to a new study released today by Demos. "Borrowing to Make Ends Meet" found that while low-income and elderly Americans have been hit hardest by the debt boom, Americans of all stripes are suffering under the burden of high-interest credit card debt.

* The average American family experienced a 53 percent increase in credit card debt.
* Credit card debt for very low-income families grew by an astonishing 184 percent.
* Middle-class families were also hit hard — their credit card debt rose by 75 percent.
* Senior citizens saw their average credit card debt load skyrocket by 149 percent.

The report's findings add more evidence to the emerging picture of an economy in which working families face increasing economic insecurity. Cash is tight and millions have seen their savings disappear. As these families turn to credit cards to meet their basic needs — food, rent, health care — they often get trapped in brutal cycles of debt. "Borrowing to Make Ends Meet" includes case studies that illustrate how this cycle of debt keeps Americans from attaining basic economic security:

* Marika, a 61-year-old secretary in New York who got laid off due to 9/11 and had to max out all her cards just to eat.
* The Pickett family of Middletown, Ohio, who have nearly $40,000 in credit card debt from feeding and caring for their three kids when their businesses took an economic hit.
* Roberto, a civil servant who had to declare bankruptcy after using his credit cards for groceries, medicine, and even rent after an injury kept him off the job for two months.

Deregulation of the credit card industry has allowed companies to take advantage of tough economic times. As the report documents, credit card interest rates now routinely top 20%, penalty fees are at record highs, and "low, introductory" rates can be jacked up to 29% if a cardholder misses one payment by as little as one hour. Usurious practices encouraged by this "no-holds barred" climate help credit cards remain one of the banking industry's most profitable sectors.

"Too many Americans are drowning in credit card debt," said Tamara Draut, Director of the Economic Opportunity Program at Demos and co-author of the study, "as a way to deal with the rise in the cost of living as their incomes have stagnated or dropped. It's really been the band-aid holding the family budget together since the 90s."

This study, first in a series of reports about Debt & Assets in America, will be distributed to key members of Congress and will be disseminated to major policy organizations who focus on economic opportunity and consumer protection.

"With the economy in the dumps, consumers need to be protected from exploitative practices by the credit card industry," said Travis Plunkett, legislative director of the Consumer Federation of America. "Congress should move to rein in the industry's aggressive lending and abusive fee practices."

Families like the Picketts are available for interviews with selected journalists. Contact Ellen Braune at (212) 389-1417 or Heather McGhee at (212) 389-1408 to arrange an interview.

Demos is a nonpartisan public policy and advocacy organization focusing on issues of democracy and economic opportunity.

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