A recent study has revealed that more and more Americans are turning to their credit cards to cover basic living expenses.
Of the one thousand-odd respondents, more than a third admitted using plastic to pay for basic needs like groceries, utilities, or mortgage dues. Most have used credit cards in this manner for the five of the past 12 months.
Rising medical expenses are also forcing many cardholders to charge purchases to their cards. Because of this, half of the families surveyed rake an average of $2,194 in debts for health expenses.
Researchers also found out that the average credit card debt of the households who participated in the survey averaged $9,827. On average, their interest rate was 14.8 percent. However, one out of every four respondents cited interest rates that exceeded the 20 percent mark. Families also reported having credit card debts for an average of 5.1 years.
The research was conducted even before the worst part of the economic slump took hold, experts say. The study focused on low and middle-income American families that earn $50,000 or less each year. According to the researchers, most of the respondents have been using plastic to pay for basic expenses prior to the recession.
Demos Associate Director for Research Jose Garcia, said that the study proves that credit card debt is not gained through lavish expenses. He added that majority of the debts incurred by Americans is the result of spending for necessities.
Industry experts as well as the researchers offer several suggestions to avoid incurring huge credit card debts.
First, analysts recommend families to increase savings to avoid relying on credit cards when the times get rough. Experts contend that if more American households set aside money for rainy days, there would be less reliance on plastic.
Specialists are also clamoring for the government to expand insurance benefits and coverage for the unemployed. They contend that without any jobs to pay off debts, the jobless will continue to incur credit card debts. With proper insurance, however, they can minimize the amount of debts.
Researchers also noted a sharp spike in credit debts for seniors. They attribute the sudden increase to rising medical expenses. Health care reforms can help reduce the costs of acquiring medical assistance, leading to lower credit debts.
Industry analysts are also calling for the establishment of a new government agency or body to focus on the protection of consumers.