Credit card debt impacts African-American middle class differently than white counterparts

New research by Demos, a New York City-based public policy organization, finds that many African-American families are using credit cards as a “plastic safety net” to help them stretch their resources when paychecks and savings are not enough to cover essentials.

The report, National Survey on Credit Card Debt of Low-and Middle-Income Households, found the African American middle class is paying down debt but still relies on credit cards to make ends meet. Forty-two percent of African Americans reported using their credit cards for basic living expenses like rent, mortgage payments, groceries, utilities, or insurance because they do not have enough money in their checking or savings accounts.

In early 2012 Demos surveyed a nationally representative sample of moderate-income households carrying credit card debt for at least three months. The report was a part of a series that Demos will publish on its findings.

Here are some of the other findings in the report:

The African American middle class reports worse credit scores and different causes of poor credit.
• When asked to identify their credit score within a range, just 66% of African American households report having a credit score of 620 or above, compared to 85 percent of white households.
• When asked to describe their credit score, only 42 percent of African American households reported having “good” or “excellent” credit, compared to 74 percent of white households.
• Among households reporting poor credit, African American households were more likely to report that late student loan payments or errors on their credit report contributed to their poor credit scores.

African Americans are more likely to be called by bill collectors, and to have seen credit tighten.
• Seventy-one percent of African American middle-income households had been called by bill collectors as a result of their debt, compared to 50 percent of white middle-income households.
• Just over half of African American middle-income households reported having a credit card cancelled, seeing their credit limit reduced, or being denied for a credit card in the three years following the recession.