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Debunking Misconceptions: What Really Underlies Credit Card Debt

A common viewpoint espoused by some people seeking to explain why certain consumers in New Jersey and elsewhere face a significant level of credit card debt goes something like this:
Those people simply don't manage money as well as do others with lower debt levels. They lack restraint and make more impulsive purchases. They're into instant gratification. They need a basic course on money management.

According to Demos, a national research and policy center focused on economic reform and progressive change, hardship and not impulsive buying sprees are what thrust individuals and families into debt.  Further, they noted that those with significant debt are actually more frugal than those without.

The Demos report makes several salient observations about most debt holders, including that:

  • It is situations such as job loss and sudden and large medical expenses that result in debt, not questionable budgeting decisions. The report notes that more than 60 percent of households with credit card debt, both with and without insurance, said out-of-pocket medical expenses contributed to it.
  • Families carrying credit card debt usually spend less than those without it.

The Demos report notes that: "broad economic trends and specific policy choices" (for example, unchecked medical costs, high card interest rates and questionable lending practices) have far more directly contributed to high debt levels than have consumers' cavalier purchasing decisions.
That is certainly something to think about for any person with an unreasoned viewpoint regarding families struggling with debt.

Source: ThinkProgress, "No, people don't get buried in credit card debt because they're bad with money," Bryce Covert, May 10, 2014

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