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Blacks face many challenges to overcome credit card debt

“Plastic safety net” may not be best option

Ashley Montgomery | 1/16/2014, 9 a.m.

In general, Americans face a plethora of financial challenges but a recent study shows how Blacks in particular are moving a step closer to financial freedom despite their past. New research conducted by the public policy organization, Demos, reveals the exact trends for low-to-middle income households with credit card debt.

Released Dec. 2013, The Challenge of Credit Card Debt for the African American Middle Class results revealed that: “for many people, credit cards becomes a “plastic safety net” to replace dwindling incomes, private assets, and social investments, and to help families stretch their resources when paychecks and savings are not enough.”

Since the recession, Blacks do, however, owe less than they did in 2008, carrying an average balance of $5,784 today compared to $6,671 in the 2008 survey. In the past five years, Blacks have gone through the biggest economic loss of any group in the country, including the highest unemployment rates and the biggest drops in annual income.

Basically, the report states that middle-class Blacks are using credit cards in order to cover the basic living expenses. Rent, mortgage payments, groceries, utilities, or insurance are some of the things that are being paid with credit cards — mainly because Blacks do not have enough money in their checking or savings accounts. In order for Blacks to maintain a decent standard of living — one that is comparable to other groups — they must borrow and rely on credit despite paying high interest rates and suffering negative consequences of debt. The historical impact that Blacks have faced, such as racism in wealth building and current racial bias in lending has made it harder for them to thrive financially as other groups have surpassed them. Today, Black Americans have $1 in assets for every $20 owned by White Americans, and, according to the study, more than half of it is tied to home ownership. Moderate-income Blacks have similar rates of default and late payments to moderate-income whites show no significant differences. White and Blacks show similar rates of frequencies of filing bankruptcy, being evicted, or having property repossessed according to the Demos’, Challenge of Credit Card Debt for the African American Middle Class

Solutions

In 2008, President Obama the Credit CARD Act was signed by Congress to provide security for consumers. According to The Challenge of Credit Card Debt for the African American Middle Class, 37 percent of indebted African American households reported paying more toward their credit card balance as a response to information in their monthly statements mandated by the CARD Act.

Nine out of 10 Black households that are in debt noticed the change on their monthly statements. Grant gave The Miami Times some exclusive recommendations for the Black community about credit card spending and shedding debt.

“I recommend my book, Bold Moves to Creating Financial Wealth — it teaches people how to establish a budget, shows them how to create a savings and is a step-by-step book that is truly helpful,” Grant said.

Also, Grant’s tips for saving are to have an emergency fund because credit cards average up to 10 percent or more of interest.

“You’re creating your own bank by saving and borrowing from yourself,” Grant said.

He also advised those who need help to seek it outright. There are a lot of people out there who have the answers — like credit specialist.

Grant concluded with a thoughtful message: “Today is the first day of the rest of your life, you have to take the first positive step to change your future.