One-fifth of families could not live on a cash-only basis without overhauling their lifestyle, according to a national poll that found those families need a credit card just to maintain current lifestyle.
“Credit should be used as a convenience, not to supplement income,” Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, said in a news release about the group’s survey. “It is a warning if a person is not able to manage his or her daily lifestyle without the use of credit cards, as this is a dangerous habit that could lead to serious financial distress.”
The average consumer who came to the group last year for help had multiple credit cards and unsecured debt that was equal to half of annual household income.
Asked whether they’d be able to live on a cash basis, one-third polled said they’d be fine after making some adjustments, while 27 percent said they could maintain their lifestyle. Another 22 percent said they would have to make significant lifestyle changes, and 20 percent said they could not make ends meet without credit.
The news is very different among millennials, who are more wary of credit or more likely to pay as they go, according to a Bankrates survey conducted by Princeton Survey Research Associates International that found two-thirds of young-adult millennials, ages 18 to 29, don’t have a single credit card.
As Fox Business reported, “There are, admittedly, external factors influencing the statistics. An April 2014 Gallup poll found Americans’ reliance on credit cards, in general, has declined steadily since the Great Recession. Moreover, the Credit Card Accountability, Responsibility and Disclosure Act of 2009, or CARD Act, made it harder for anyone under 21 to get a credit card.”
Millennials who have credit, though, are not necessarily using it more wisely than others. “Bankrate’s survey found that millennials who do have credit cards aren’t as good at paying down their bills as other demographic groups. Only 40 percent of people ages 18 to 29 pay off their balances in full each month, compared with 53 percent of adults 30 and over. Additionally, 18- to 29-year-olds were most likely to often miss payments completely,” the Fox story said.
“Total outstanding consumer debt has reached about $3.237 trillion, up from $3.056 trillion in the third quarter of 2013. Both revolving (credit cards and the like) and non-revolving credit totals have increased since this time last year, with revolving up $27 billion during that period, and non-revolving up $154 billion,” according to Commercial Property Executive, which looked at new numbers released Monday by the Federal Reserve.
The credit counseling foundation notes warning signs that consumers are getting in too deep when it comes to debt. Among red flags: Making only a minimum payment on credit cards each month, balances that grow, not paying on time, using balance transfers to make payments, charging items that one used to buy with cash and considering bankruptcy, among others.
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