The conventional wisdom says that American households are deleveraging – after years of living beyond our means, Americans are finally paying down debt and getting our financial house in order.

But as Demos’ 2012 National Survey on Credit Card Debt of Low-and Middle-Income Households reveals, that’s only part of the story. In February and March 2012, Demos surveyed a nationally representative sample of 997 low- and middle-income American households who carried credit card debt for three months or more. The research builds on our previous surveys in 2005 and 2008, providing a picture of how the recession, its aftermath, and the passage of major new consumer credit card protections have impacted the financial lives of American households.


Among Low- And Middle-Income Households Carrying Credit Card Debt

  • Average credit card debt has declined, but many households still rely on credit cards to pay basic living expenses.
    • In 2012, the average credit card debt totaled $7,145, down from $9,887 in our 2008 survey.
    • 40 percent of households used credit cards to pay for basic living expenses such as rent or mortgage bills, 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.
  • Since the financial crisis, credit is tighter: half of affected households cut spending as a result.
    • Over the past three years, 39 percent of households have experienced tighter credit, such as having cards canceled, credit limits reduced, or being denied a card when applying.
    • 48 percent of households with reduced access to credit cut the spending they would otherwise have charged to their credit cards.
  • Unemployment and medical bills were among the leading contributors to credit card debt.
    • Nearly half of households carried debt from out of pocket medical expenses on their credit cards. The average amount of medical credit card debt was $1,678.
    • 86 percent of households who incurred expenses due to unemployment in the past year took on credit card debt as a result.
  • People of color report worse credit scores. medical debt is a major contributor to poor credit for all indebted households.
    • While 62 percent of overall indebted households reported that their credit was “excellent” or “good” only 44 percent of African Americans and 55 percent of Latinos described their credit in such positive terms.
    • Among those who say they have poor credit, 55 percent say unpaid medical bills or medical debts contributed.
  • The 2009 Credit Card act is helping households pay down balances faster and avoid fees.
    • One third of households are responding to new information included on credit card statements by paying their balances down faster.
    • The number of households who report paying late fees on their credit cards has declined dramatically: in our 2008 survey, half of households reported accruing late fees – in 2012, it was just 28 percent.
    • Those who did make late payments were significantly less likely to see their interest rate increase as a result: 24 percent fewer households reported interest rates increasing as a result of a late payment in 2012 than in 2008.

This is the first in a series of reports that will look at aspects of the 2012 National Survey on Credit Card Debt of Low - and Moderate - Income Households in greater depth.