New Report Reveals Irresponsible Spending is not the Main Cause of Credit Card Debt

Jun 05, 2014

It was previously believed that irresponsible spending habits were the cause of credit card debt in the U.S. However, the recent report, The Debt Disparity: What Drives Credit Card Debt in America, has shed new light on the issue. The national survey of 1,997 households has revealed that credit card debt accumulates for working age low- and middle-income households due to the lack of insurance coverage, expenses for children, and unemployment.

According to the report, as detailed by ACA International, “Contrary to popular belief, we find little evidence that households with credit card debt are less responsible in their spending habits than households that do not have accumulated debt,” according to the report. “Instead we see that, among similarly situated low- and middle-income households of working age, factors like education, the value of assets to fall back on, insurance coverage, and whether a household member has lost a job are among the foremost predictors of whether a household will accumulate credit card debt.”

In addition, it seems that education and savings, and home value are indicators of credit card debt. Those who responded to the survey that had a college degree are 22 percent less likely to carry credit card debt. Also, those who do not have credit card debt have more in their savings while those who have negative equity in their homes are more likely to carry debt.

According to an article concerning older Americans and credit card debt by Amy Traub of AARP, “The report shows older households carried an average credit card balance of $8,278 in 2012. For those under 50, credit card debt averaged $6,258.” It would seem that a third of older citizens who carry debt use their credit cards to pay for basic living expenses: groceries, utilities, mortgage payments, etc.

In 2012 when the survey was conducted, 50 million Americans were without health insurance.  Those who were fortunate to have full coverage experienced increasing rising premiums, copayments, and deductibles. According to the report itself, “Thirty-six percent of households carrying credit card debt report that in the past three years, someone in their household has been without health insurance. This compares to 21 percent of households that report not having insurance in our sample without credit card debt.”

In the conclusion of the report, policy recommendations are given in hopes of strengthening the public safety net and medical debt protection. Employers commonly use credit histories when considering job candidates. The main concern here is that using credit reports as criteria exacerbates the hardships facing households. They may be carrying debt because of a medical emergency, a divorce, a layoff, or because of an economic downswing. So far, according to the report, ten states have passed legislation that will limit the use of employment credit checks.


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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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