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Credit Card Debt Decreases, But Cards Still Used Widely

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Consumers throughout the nation appear to be bettering their payment habits for credit cards, and in turn, improving their credit scores, as a report by Demos indicates average credit card debt dropped in the first few months of 2012 compared to the last report conducted in 2008.

According to the report, which yielded responses from nearly 1,000 low- and middle-income Americans with credit cards, average credit card debt declined to $7,145 this year from $9,887 in 2008. This dip occurred despite two in five of these households surveyed using credit cards to pay for basic living expenses, including utilities and insurance.

Some bills these Americans used credit cards to pay for contributed to their debt, the report found. Unemployment and medical bills accounted for a considerable portion of debt among respondents. Medical credit card debt this year totaled $1,678 per person, while roughly five in six respondents stated they have taken on debt due to expenses incurred while jobless.

The report was released on the third anniversary of the Credit Card Accountability, Responsibility and Disclosure Act, which was passed to protect consumers from fees and penalties from card issuers. Amy Traub, senior policy analyst for Demos, told CNNMoney this legislation hasn’t done enough to protect consumers.

“The Credit Card Act clearly didn’t solve the underlying problem of households needing to rely on debt to make ends meet,” she told the news source.

Travis Plunkett, legislative director of the Consumer Federation of America, told the source debt can be avoided, even among low- and middle-income consumers, by using credit cards in the right way.

“The old rule of thumb is that you want to use credit to invest in education or buy something that will help you in the future, not for necessities or expendable items like groceries,” Plunkett said.

One major theme of the Demos report was that credit scores were on the rise for more than 60 percent of those surveyed, which could indicate more Americans are using their credit cards responsibly and paying down their balances.

Finding the right credit card depends largely on consumers’ specific situations, so spending the time to research what cards are available can be beneficial to their finances.

Image: Irish Typepad, via Flickr

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