More Americans Using Credit Cards To Stay Afloat

[Purveyor]

Seven years in the credit-counseling business didn't prepare Ann Estes for the alarming trend she began noticing last fall: As her clients' mortgage bills became unaffordable, a growing number of them began paying their credit card bills before — and sometimes instead of — their mortgages.

"We've never seen anything like this," says Estes, who counsels clients by phone from her office in Richmond, Va. "Their homes are at risk, and they know it. But people say, 'I don't want to let my credit cards go because that's my cash flow.' "

Across the nation, credit counselors are reporting the same trend. Credit bureau analyses of consumer payment data show that financially squeezed borrowers have begun paying their credit card and car bills before their mortgages. That's a striking reversal from the norm, one that reflects rising desperation. It suggests that some people essentially have given up trying to stay current with their mortgages and instead are focused on using credit cards to squeak by.

If the trend persists, many economists say, it could accelerate mortgage losses and further drag down the economy.

Rising living costs, along with cheap and plentiful credit, have led consumers to rely more on plastic to pay for necessities they can't live without — and luxuries they don't want to do without. But as the economy weakens, consumers are starting to spend less on discretionary items, such as furniture and electronics, and more on such necessities as groceries and gas, according to government data. Such items increasingly are showing up on credit card bills.

---EOE---

http://www.usatoday.com/money/perfi/credit/2008-02-28-credit-cards_N.htm

[ixion]

1. using your credit card isn't "staying afloat" it's digging a deeper hole

and the sh*t will really hit the fan when these people have maxed out their cards on gas and food and can no longer charge the necessities.

[DJ13]

9. "using your credit card isn't "staying afloat" it's digging a deeper hole"

If you're already in a hole you cant climb out of does it matter how deep it is?

[ixion]

10. well, yes and no

if you plan on ever being in the black again, it certainly does. It also matters if that 'hole' has a bottom (read: credit limit) which most holes do. If you hit absolute bottom and can no longer charge, you're really screwed. And thanks to our "friends" in congress, not even filing bankruptcy will change that.

[sarcasmo]

2. Shred them as soon as possible. This is the next bubble to burst.

Kick and Nom.

[Warpy]

3. Damn, it sure takes these smart people a long time to catch on

I've been saying that people have been substituting debt for decent wages for the past five years.

Sometimes I feel like changing my name to Cassandra.

[Bentcorner]

4. Title should read "Stupid Americans Using Credit Cards To Stay Afloat"

[Selatius]

5. Credit cards offer the last false hope of maintaining a middle class life.

If you're using credit cards just to maintain your current standard of living, you need to accept the fact that you simply aren't middle-class any longer. You're now among the working poor in America. The sooner people wake up to the cold hard truth, the better. The first step towards solving a problem is first identifying and recognizing it.

Here's a clue, America: Dump your luxuries. If you get fooled into trying to keep up with the Joneses, the Joneses have already won.

[dysfunctional press]

6. for many people, their "savings account" is the amount of credit they have available on their cards.

scary stuff.

[Purveyor]

8. I've posted and read several articles on how the banks are cutting home equity lines of credit

and lowering credit limits on credit cards en mass.

One lady was in full blown panic when she learned her bank had canceled her line of credit because the value of her house had dropped so dramatically. "How are we going to live" was her cry...

No, it is going to get much uglier before it gets better I fear.

Fact of the matter is, the banks are out of money to make loans with.

If the entire banking system doesn't collapse, we should consider ourselves 'damned lucky'...indeed!

[jaksavage]

7. East credit is so wrong

and now they can't refinance to hide the Credit Card debt.
How will our economy survive?

Going to be a lot of desperate people.