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Credit card debt and bankruptcy increased in 2005.

Now-a-days it seems like the mail box is just more bad news. The credit card bills are coming in faster than the money. This is the case for more Americans than ever before. This is now backed up by a new survey.

The survey finds that low- and middle-income families are acquiring credit card debt to pay for essentials at the same time that business practices in the credit card industry are making this debt more costly and harder to manage.

This survey from Demos and the Center for Responsible Lending arrived just five days before the new bankruptcy bill became effective( October 17, 2005) and undermines consumers’ ability to recover from heavy debt. Research shows that credit card debt in America has almost tripled since 1989 and now stands at $800 billion.

In addition, owing largely to job instability and medical costs, bankruptcies rose from 616,000 in 1989 to over 1.8 million in 2004.

The bankruptcy bill was passed, in part, based the idea that credit card debt results from extravagant and irresponsible use. The Demos/CRL survey contradicts that widespread belief, showing that lower-income families, by and large, are using credit cards judiciously and trying to pay them down responsibly. Among the findings in the survey:

• Seven out of 10 low- and middle-income households reported using their credit cards as a safety net — relying on credit to pay for car repairs, basic living expenses, medical expenses or house repairs.

• Households that reported a recent job loss or unemployment, and those without health insurance, were almost twice as likely to use credit cards for basic living expenses.

• Households that used home equity to pay off credit card debt did not gain net benefits.

• $8,650 is the average credit card debt of a low- and middle-income indebted household in America.

The study also reports that, as Americans are increasingly relying on credit cards to pay for essentials that wages no longer cover, reliance on credit cards is having a multiplying effect that is creating millions of “debt-stressed” families:

• 47 percent of households had been called by a bill collector.

• Almost half missed or were late with a payment in the last year, with nearly a quarter of households reporting paying a late fee at least one or two times in the past year.

• In addition to charging late fees, most issuers also penalize cardholders for late payments by increasing the interest rate on the account two- or three-fold, often after only one late payment. Here is an example of how this can break down – a household with the average amount of credit card debt in our survey ($8,650) would pay an additional $1,100 in costs each year if their card’s interest rate was increased from the typical 12 percent to the average 25 percent “default rateâ€? for one late payment.

Some good news, you could do a search for unclaimed money. Enter your name and within a short time period you will know if there is money in all state and federal databases that is yours. These funds are due in part to people being more transient and forgetting to have accounts forwarded or when moving have not claimed their deposit for the utilities.

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