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More Americans Using Credit Cards to Stay Afloat
Posted By admin On March 1, 2008 @ 8:22 am In Economic Crisis | Comments Disabled
February 29, 2008
|Sooner or later, when the banks turn off the easy credit, there will be a collective howl as the heavily indebted middle class is turned out in the street in a modern version of the Grapes of Wrath.|
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.
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