Credit Card Debt Affects African-American Middle Class More Than Other Groups

December 6, 2013  |  

So here’s the new progress report on Black America’s debt problem: The good news is that African-American households are less troubled by debt than they were in 2008 (the start of The Great Recession). The bad news is that credit card debt is still an issue for Black Americans —  an issue that mostly plagues the African-American middle class, The Root reports.

A staggering 99 percent of African-Americans who took out business loans admit that they have trouble paying back their debt. Among White Americans, that number drops down to 80 percent. The report, titled The Challenge of Credit Card Debt for the African American Middle Classalso reveals that 42 percent of indebted Black households are borrowing cash to pay for basic expenses such as food, rent, and utilities.

“African Americans rely on credit cards to make ends meet and invest in their futures because they have faced, and continue to face, persistent structural and economic barriers that limit their ability to create wealth and build a solid credit history,” Dedrick Asante-Muhammad, the report’s co-author said.

The report says the Black middle class, who have worse credit scores than their White counterparts, often cite tardy student loans and credit report errors as the culprit behind poor credit. White Americans, on the other hand, point to late mortgage payments as their kryptonite. Only 66 percent of Blacks have a credit score higher than 620, compared to 85 percent of Whites.

Seventy-one percent of African-Americans are targeted by debt collectors; blacks are also more likely to have their credit tightened. Only 50 percent of middle-class White households experience the same problems. “When African Americans are engaging in the credit market, they are more likely victims [of] predatory and discriminatory lending, which further increases their economic insecurity,” Asante-Muhammad said.

It goes without saying a poor credit score affects many broader aspects of the African-American lifestyle. According to The Root, those unimpressive numbers could cause employers to overlook an otherwise optimal job candidate. We’ve also discussed how one’s credit score can affect one’s potential as a partner in marriage.  And of course, a disappointing credit score won’t do anyone good when it comes to taking out a mortgage or car loan. In short, credit card debt mainly affects African-Americans because they claim ownership to fewer assets than their White counterparts.

However, there is an upside to all of this: The 2009 Card Act. This new law forces credit card companies to be more transparent with their billing policies and fee practices. As a result, a quarter of the America’s Black households have seen a drop in interest charges on their bills.

Still, Asante-Muhammad maintains we have a long way to go. “Unless we want to maintain the nation’s historic and contemporary racial economic divide, we must confront the reality of today’s racial inequality and advance reforms that address these disparities,” he said.

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