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April 20, 2004
BY ANDREW HERRMANN
Chicago Sun Times
Staff Reporter
About half of Americans with credit cards say they
owe money on that plastic. But like a nation of Alfred E. Newmans,
we've got a "What? Me Worry?'' attitude about debt.
The average hole for those carrying a balance is
$3,815.
When asked by Gallup pollsters if they are concerned
about not be able to make the minimum payment, only 17 percent
say they are "very'' or "moderately" worried.
The Gallup poll also finds:
*The percentage of people who always pay the full
amount monthly has dropped a few points since 2001. In the most
recent survey (of 1,014 adults nationwide) 37 percent said they
pay up in full every month, down from 42 percent in 2001. Some
16 percent say they "usually'' pay the full amount.
*Those with a household income of $75,000 to $100,000
carry the most debt -- about $7,896. As a percentage of their
paycheck, those making less than $20,000 have the highest burden:
Their debt is about 14 percent of their annual household income.
[See chart.]
*The average number of cards held is 3.8. That
is about the same as in Gallup's two previous credit card surveys,
in 2001 and 2002. About one in five say they do not own any cards.
Credit card debt carriers are in for a "sticker
shock,'' warns Robert Manning, author of Credit Card Nation and
the coming Give Yourself Credit. Misunderstood by many consumers,
a lot of new credit cards carry variable rates, which escalate
as overall interest rates increase. A year from now "people
are going to be unprepared when the rates go up,'' predicts Manning.
Too many people don't understand how credit works
-- an ignorance by design, Manning charges. Banks and businesses
profit mightily from it -- credit cards earned a reported $30
billion last year. "The best customer is the one who never
pays off'' debt, he said. And the government wants consumers to
keep spending to keep the economy active.
The middle class is paying more for housing: 30
years ago, shelter took up about 30 percent of one's income; today,
it's 43 to 46 percent. But we haven't cut back on other spending
to compensate, said Manning, a professor at the Rochester Institute
of Technology in Rochester, New York.
In DuPage County, Glenn Dagenais sees middle class
credit card problems as a financial specialist in the Wheaton
office of Metropolitan Family Services. He says credit card companies
have been lowering monthly minimums, once 4 to 5 percent of the
debt owed and now as low as 2 percent. "At that rate, the
debt never gets paid off,'' he said. Consumers think they're in
good shape as long as they make the minimum payment.
"People don't understand what carrying debt
does to their bottom line,'' he adds. "Carrying $10,000 costs
about $2,000 a year.''
A bump in the road -- it could be the loss of a
job but also merely the lowering of sales commission rates --
can put middle class families into trouble. They begin to use
their credit cards to make up the difference in income, Dagenais
said. "They're living on the edge.''
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