Americans have been successful at getting some of their debts off their backs, but many still have a long way to go.
Low- and middle-income people are finding an escape difficult as they pay interest on top of interest. Forty percent have turned to their credit cards to cover basic living expenses such as rent, mortgage bills, groceries and utilities, according to a national survey (The Plastic Safety Net: Findings From The 2012 National Survey On Credit Card Debt of Low- And Middle- Income Households) by think tank Demos. Those surveyed were low- and middle-income people who carried a balance on their credit cards for at least three months.
The 2008 financial crisis was a brutal wake-up call for many, as banks abruptly shut down cards and cut debt limits at the same time companies were tossing millions out of work. About 39 percent of households surveyed by Demos experienced some cuts in their credit, and about half of those reduced spending as a result. But 28 percent have taken on more debt in the last year.
Now, the average debt on cards held by low- and middle-income people is $7,145, compared with $9,887 in 2008, according to the survey. Fifty-one percent said cost-of-living expenses contributed most to their current card debt.