Credit Card Nation: 40% of Households Get By on Plastic

More than a third of U.S. households relied on credit cards to pay for living expenses, such as rent or mortgage bills, groceries, utilities or insurance, in the past year, according to a new survey on the third anniversary of credit card reform.
While 40 percent of Americans used plastic to cover these expenses, nearly the same percentage of households have experienced tighter credit, such as having cards canceled, credit limits reduced, or being denied a card when applying.
The survey by the think tank Demos is the third such study since 2005.
However, the results are striking because the rate of dependency on credit cards is about the same as that found in the last survey conducted in 2008, the height of the financial crisis.
Those who relied on credit cards did so because they did not have did not have enough money in their checking or savings accounts.
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.
In 2012, the average credit card debt totaled $7,145, down from $9,887 in our 2008 survey.
That lower average credit card debt is indicative of a wave of American’s “getting our financial house in order” during economic hardship, Demos said.
But the same is not necessarily true for low-income and many middle-income households struggling during the prolonged economic recovery.
Three years ago, President Obama signed into law landmark credit card reform – the Credit Card Accountability Responsibility and Disclosure Act, or Credit CARD Act – that restricts some interest rate hikes and penalty fees, and provides many other first-time protections for consumers.
The Demos survey found that the 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 the 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.

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