Chicago Tribune: As home loan market tightens, mounting credit card debt could spur new crisis

Posted by Kendall Harmon

It's not just a problem for the working poor, credit counselors say. Many middle- and upper-class households have come to view credit card debt as a reality of modern life.

"The psychology about carrying credit card debt has changed. What used to be a shame is just an additional way to buy stuff, and stuff is the operative word here," said Catherine Williams, vice president of financial literacy at Consumer Credit Counseling Service of Greater Chicago.

Freda Price, a divorced mother of two in Bethlehem, Pa., is trying to get her credit card debt under control. Five years ago, Price had a $49,000 mortgage and no significant credit card balances. But she now is struggling with $100,000 in mortgage and credit card balances because she has refinanced and used the cards to pay for attorneys in a long-running dispute over child custody with her ex-husband.

Price is close to hitting the maximum borrowing limit on her four credit cards, which are consuming about $300 a month in minimum payments. She finds herself charging gas and groceries on the cards, which she doesn't like.

"The sad thing is I never had any of this debt before," she said. "I have to pay the minimum because I can't afford much more."

Price's credit cards also are preventing her from saving for retirement. She is contributing only 1 percent to her 401(k) plan even though her insurance company employer matches up to 3 percent.

"I'm just between a rock and a hard place. I pack my lunch. I get the newspaper at the house. We don't go out to eat. We don't do much of anything," said Price, 51. "I was always very thrifty, but I don't know where else to cut."

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Filed under: * Culture-Watch* Economics, PoliticsEconomy

Posted August 28, 2007 at 9:03 am [Printer Friendly] [Print w/ comments]

1. KAR wrote:

One wonders what underlining cause this break up of a sacred union. This story is supposed to be about credit card debt, but does anyone else see what I do?

Solid finances $49K mortgage, then a causal agent, now $100K mortgage, four maxed-out credit cards and little into retirement. I’ll bet the situation is doubled, while not having the unstructured expenses in raising children, I bet the dad has structured child support that he’s finding a burden as well as his own legal fees which should be nearly equal to hers.

I wonder if their troubles were really that bad to merit these stresses? I wonder if they had to work things out if they’d be happier in the long run? I wonder if any of them knew the financial burden they were taking on when they filed for divorce?

This story really does not seem like a credit debt story to me. That seems an effect of another causal situation.

August 28, 9:25 am | [comment link]
2. Helen wrote:

KAR:  It seems to me you have struck the tender place.  When will we come to see that divorce is an epidemic?  And serial monogamy is no answer.

August 28, 10:12 am | [comment link]
3. DonGander wrote:

Yes, Helen, divorce is much more the problem than credit problems.

I think it interesting how Mr. Harmon posts different articles. It is revealing of our weak culture to see his last post about the ease of breaking up and then see this post about how catastrophic breakup, in the form of divorce, usually is.

August 28, 10:42 am | [comment link]
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