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More Americans Rely on Credit Cards for Basics


Americans are increasingly dependent on credit cards just to put food on the table and keep the lights on, a new study shows. Although we’re doing a better job overall paying our bills on time these days, many people are relying on more easily attainable credit just to keep their heads above water. With no home equity left to tap, skimpier health insurance coverage and jobless benefits for the long-term unemployed vanishing, even middle class Americans are once again at risk of tumbling down the rabbit hole of debt.

According to “The Plastic Safety Net,” a survey conducted by nonprofit group Demos, 40% of low- and moderate-income families rely on credit cards for what the group categorizes as basic needs: rent or mortgage payments, groceries, utilities, or insurance. Among households with annual incomes of less than $50,000, this increases to 45%.

That 40% is several percentage points higher than Demos found when it conducted this survey prior to the recession in 2005, when roughly a third of respondents reported relying on credit for everyday expenses. Back then credit was a substitute for an emergency savings fund; people dipped into it when unforeseen circumstances arose. Today, those emergency measures have become everyday survival tools.

In 2012, the average credit card debt among low- and middle-income indebted households is $7,145, down from $9,887 in 2008. That’s good news, right? Not necessarily. During and immediately after the recession, many Americans — especially those who were struggling financially — lost access to credit, so it’s logical that their debts would drop, as well.

Banks also are writing down billions in bad debt, which helps create a deceptively rosy-looking picture. Demos cites Federal Reserve data showing that revolving credit dropped from $965.5 billion in 2009 to $798.6 billion earlier this year. Yes, some of this is due to people paying down balances, but approximately $193.3 billion in credit card debt was charged off by issuers from 2009 through the third quarter of 2011, according to the most recent data available from

Over the past three years, 39% of households have either had credit lines cut or reduced, or been turned down for new credit, and 48% cut their spending as a result. While it’s good that people are spending less, the worrisome flip side to that trend is that when they have access to more credit, they spend more: 39% of Demos survey respondents have more debt today than they did three years ago, and they have fewer resources for paying it off.

Seven years ago, more than half of the households in Demos’s survey paid down credit cards by taking out a home equity loan or refinancing their mortgage, paying off an average of $12,000. The state of the housing market means that’s just not an option for most people today.

People aren’t racking up this debt because they’re living beyond their means, buying new TVs or taking exotic vacations. The two main culprits are unemployment and medical bills. As a result of unemployment within the past year, 86% of people now have credit card debt. As sobering as this is, things are probably about to get worse.