A recent study conducted by Demos, a research center, revealed that most American families are heavily in debt, thanks largely to their credit card usage.
Researchers say that economic recession is making things much harder for struggling consumers and their families. As proof, they point out that three out every four families have used plastic to pay for their essential expenses like groceries, and car and home repairs.
Americans also owe banks four times as much as they did in 1989. Total credit card debt has already amounted to over a trillion dollars. Economists say that since 2000, the accumulated debt of cardholders has increased 41 percent. They explain that the substantial increase should have been considered a barometer of the credit industry and its subsequent losses.
The unstable job market and rising medical and insurance costs has also resulted in a sharp spike of reported personal bankruptcies. In 2007, a total of 673,615 bankruptcy declarations were recorded. This figure has since then jumped to over 1.2 million this year.
Analysts have also noted that millions of American families have started running out of money from their home equity as the recession got worst. Home values have also fallen sharply, leaving homeowners little to go on as the economic condition worsened.
Demo officials say that study has revealed surprising data about the spending habits of cardholders. They explain that with the recession being the worst in fifty years, families are experiencing hardships unseen in generations. Researchers have identified skyrocketing medical and housing costs, as well as massive layoffs as the key factors forcing consumers to turn to plastic for their needs.
The same study also discovered that the length of time Americans reported being credit card indebted has stretched to an average of 5.1 years per family. Most households also own an average of $9,827 in card debts. Industry sources contend that with rising expenses, this can still rise to break the $10,000-mark.
Personal expenses for medical costs have also contributed to the significant credit card debts American households owe. One half of the families surveyed reported spending an average of $2,194 annually on health-related expenses.
The average interest rate for majority of the households is estimated to be 14.8 percent with one out of every four family reporting rates of more than 20 percent. Homeowners also shelled out $14,344 from their home equity to pay off credit card debt.