With the fall of the housing market and the recent rise in fuel and food prices, more consumers are struggling to make ends meet. Many are relying heavily on credit cards, for not just their wants, but also their needs.
“It's gotten to a point where people are charging just basic necessities. So gasoline is expensive, they are charging gas, food, grocery shopping,” said Shantal Sparks, a credit counselor for the non-profit agency GreenPath Debt Solutions.
“It’s even gotten to the point where some people are taking advantage of the cash-advance method for the credit cards just to get their hands on more cash," continued Sparks, "and using that cash to cover other necessities like rents and mortgages.”
According to a recent report by the credit bureau Experian, the average credit card balance in New York State is $7,002, up more than $200 from December. In this economic slump, turning to the already-available credit in the wallet has become an easy answer, especially with lenders tightening standards, making it difficult to even take out home equity loans.
Using a credit card for basic necessities can lead to great costs further down the line. Shazia Khan filed the following report.
Frank Conrad, a retired bankruptcy judge and now an adjunct professor of bankruptcy at Touro College, said reliance on credit credits will only usher in more problems.
“Credit cards are meant to be a convenience, not a crutch and when people start using credit cards for basics and then they can't make the minimum payment or they make the minimum payment and they start accumulating balances,” said Conrad. “This is a mistake. Debt-on-debt ultimately ends up in bankruptcy.”
Poor credit can affect purchases many years down the road. Whether you want to buy a car or a home, or finance your children’s education, your credit history will be a factor.
If you find yourself accruing debt on your credit cards, it’s time to go back to the basics. Review your finances, devise a budget and start tackling that debt.
“Look at those bill statements, try to track the expenses,” said Sparks. “You can clip coupons, pack your work lunch instead of eating out every day for lunch, consider public transportation. Looks at those cable bills and see what extra packages you can cut out for the time being."
It will take some sacrifices now, but the new lifestyle will pay off in the future.