We all know that budgeting requires recognizing the difference between our wants and needs but for many American families the gap between needs and wants is growing. More and more families are not able to worry about wants, as the needs are demanding a greater and greater portion of their hard earned dollars. Everyday, credit cards are increasingly chosen as the bridge to make ends meet or a plastic safety net for emergencies.

Meanwhile, purveyors of plastic debt continue to expand the availability and usability of their product. For example, American Express offers double points for grocery purchases made using their plastic. Every day more and more fast food joints are accepting credit cards for payment. Even the IRS began accepting plastic in 1999 to repay tax obligations.

This may not be news to some households. In 2003, Americans charged $50.6 billion in household expenses, including rent or mortgage, insurance, home & cell phone, and cable bills on their Visa cards (to say nothing of MasterCard, Discover, or any others).

Nevertheless, a recent report from Demos and the Center for Responsible Lending (CRL) suggests that seven of ten low and middle income households are using credit cards as a safety net. Those surveyed admitted paying for, among other things, basic living expenses, medical expenses, house repairs, and car repairs. Additionally, one in three households reported paying for basic living expenses with credit cards on average four of the last twelve months. Is this the abusive debt targeted by the bankruptcy reform laws going into effect this week? No. This is getting by, making ends meet, living paycheck-to-paycheck, or survival debt that more American consumers are facing and trying to overcome.

Let’s face it. You would have to be living under a rock not to realize that American families have been facing increasingly burdensome financial hardships. Wages for the American worker have remained stagnant, with annual raises barely keeping up, if at all, with increases in the cost of living (think health care, food, insurance, gasoline, home heating to name a few). Maybe credit cards should change the tag line from “accepted everywhere you want to be” to “accepted everywhere you need to be”.

Still, by winning the day-to-day battle are American families losing the survival debt war? Maybe.

Earlier this month the American Bankers Association announced record credit card delinquencies for the second quarter (April - June) of 2005. They also noted increased delinquencies of personal loans, auto loans, home equity, and lines of credit.

The CRL/Demos survey also reported apparent delinquencies. Results revealed that almost half of the households surveyed missed or were late on payments within the last year, including nearly a quarter of whom reported paying at least one late fee, if not more, in the last year. Forty-seven percent reported they had been called by a debt collector. As a result, the combination of harsh late charge penalties, universal default interest rate increases, and regulation requiring increases to minimum payments, more American families are finding that the plastic safety net can quickly turn into a plastic debt trap.

What to do?

• Work hard to focus on setting aside and saving money as your emergency fund.
• Recognize that creditors grant credit based on the likelihood you will repay them - not whether you can realistically afford it. (Exercise good judgment when considering credit use.)
• Don’t fall for the lure of ‘free & easy’ money. Purchase no more than you would if you were paying cash. Examine ‘upgrades’ rigorously compared to needs.
• Most obvious - avoid putting day-to-day expenses on plastic.
• Pay off credit card account monthly, but if that is not possible at least pay more than the minimum payment due.
• Finally, if you find you’re on a roller coaster of plastic survival debt, contact a certified credit counselor for help immediately.