War On Credit Debt
Why do some low- and middle-income homeowners continue to carry large credit card balances even after they have used equity in their homes to pay off credit card debt? Was it over-consumption?
No. The reasons were the same ones discussed earlier: bad luck and lack of other traditional safety nets such as savings and unemployment benefits.
Homeowners who use proceeds from a mortgage refinance to pay down credit card debt are more likely than other homeowners to have incurred subsequent credit card debt because of home repairs, car repairs basic living expenses, or a layoff.
For low- and middle-income homeowners who use credit cards and home equity as their primary safety net, the debt cycle continues.
Regardless of the uncertain benefits in trading home equity for credit card debt, the reality is that using home equity does not in fact decrease credit card debt levels for low- and middle-income households.
20 percent of homeowners who had paid off some credit card debt with a mortgage refinance in the last three years had added $12,000 to their mortgage debt and at the time of our survey still had average credit card debt of over $14,000.
As a result, they were carrying 18 percent more debt than homeowners in our survey who had refinanced a mortgage but not paid down credit card debt—even though their incomes were almost identical. Adding to secured debt and incurring more credit card debt is a recipe for financial disaster—and one faced by millions of Americans. Federal Debt Relief System wants to help you.
Go to FDRS.org now to learn more and find out how you can free yourself from eternal debt slavery!
