Americans are Borrowing More to Make Ends Meet, Report Says

As the gap between income and daily cost-of-living expenses grow, more Americans are making ends meet with the help of credit cards, according to a report by Demos.

The report, “Borrowing to Make Ends Meet, The Rapid Growth of Credit Card Debt in America” also showed that homeowners are tapping the equity in their houses to pay down debt and cover basic cost-of-living expenses.

“There is little doubt that America’s low to middle income families are experiencing greater financial strain,” noted report author Jose A. Garcia. “Despite decades of increased productivity and increased overall value of the U.S. economy, the typical American family has experienced a steady decline in inflation-adjusted earnings since 2001.

Demos is a non-partisan, public policy research advocacy organization. Its report, released November 7, analyzes the most recent data from the Federal Reserve Board’s Survey of Consumer Finances and provides data on trends for debt from 1989 to 2004.

Among the Demos report’s key findings:

• Between 1989 and 2006, Americans’ overall credit card debt grew by 315 percent from $211 billion to $876 billion (2006 dollars).

• Homeowners cashed out $1.2 trillion in home equity from 2001 and 2006, often in an effort to cope with mounting credit card debt and to cover basic living expenses (2006 dollars).

• Nearly six out of 10 households with credit cards revolved their balances in 2004. The average amount of credit card debt among those households reached an all-time high of $5,219, an increase of 89 percent from $2,768 in 1989.

• Cardholders incurring fees from late payments of 60 days or more nearly doubled from 4.8 percent to 8 percent from 1989 to 2004.

• In 2004, 46 percent of very low-income (under $9,999) credit card-indebted households spent more than 40 percent of their income to pay off debt.

• Since 1989, Americans 65 and over have experienced the greatest increase in the amount of credit card debt carried. The average balance for American’s 65 and increased 194 percent from $1,669 in 1989 to $4,906 in 2004.