Barely surviving on credit cards

Lois Eldridge, with grandson Logan, is charging more to her credit cards than she'd like.

Credit binge: Consumers drunk on debt

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America's Money: In their own words

Everyday folks tell their stories about hard economic times. Check back frequently for new stories.

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NEW YORK (CNNMoney.com) -- These days, more and more people are saying "Charge it."

Finding themselves strapped for cash and unable to use their home as an ATM, Americans are increasingly turning to credit cards to cover gas, groceries and other living expenses.

But many find themselves struggling to pay the burgeoning bills at a time when even the basic needs are growing costlier.

"Other sources of money for a lot of Americans are drying up," said Dick Reed, regional counseling manager of Consumer Credit Counseling Service of Greater Atlanta, who sees more clients with mounting credit card debts. "Consumers just don't have a place to go to get money. They are digging themselves into a deeper hole not only to pay for normal living expenses, but to make minimum payments on outstanding debt."

Government and agency statistics illustrate this troubling trend. The Federal Reserve reported Wednesday that Americans' credit card debt jumped 6.7% in the first quarter of this year to $957.2 billion. This spike comes despite the fact that nearly one in three banks is tightening guidelines for credit cards.

In Atlanta, debtors calling the agency in the first quarter of this year had an average of $29,300 in unsecured debt, primarily on credit cards, up from $25,700 in 2007. They spent $335 on groceries and $242 on gas, on average, in April. A year earlier, those outlays averaged only $291 and $181, respectively.

For many people, racking up credit card debt is not a choice they want to make, experts say. Not too long ago, they could have tapped into the equity in their homes through loans or lines of credit or refinancing. But this debt, which usually carries lower interest rates, is no longer as widely available with the collapse of the housing market.

So, faced with soaring costs for food and fuel, people find they must charge more to make ends meet.

"They are not able to increase their income, but their expenses are going up, so the credit card becomes a way to cope," said Sara Gilbert, executive director of the Consumer Credit Counseling Service in Fort Collins, Colo.

Take Lois Eldridge. The Arizona retiree has watched in dismay as her credit card balance doubled to $2,000 over the last few months. Higher gas and grocery prices forced her to charge these essentials for the first time late last year.

She has since drastically reduced her spending on clothing, entertainment and dining out. It's helped, but she says she's still adding about a $100 a month to her balance.

The retired criminology professor also has tried to get a job at a local college in order to supplement her Social Security and savings. But she found would-be employers either paid too little or told her she was overqualified. Her only other options were minimum-wage jobs at local retailers.

"My income has stayed the same, but my expenses are much more than they were last year, even with my attempts to cut back," said Eldridge, 71, who plans to put her federal tax rebate toward her debt. "I'm somewhat overwhelmed that I've had to use credit cards, which I've never had to do before. All I've done in the last four to six months is worry, worry, worry."

Eldridge isn't the only one worrying. Industry analysts say that both credit card balances and delinquencies are on the rise, a sign that a growing number of Americans can't afford their spending habits.

Not surprisingly, those facing the greatest stress tend to be in weak housing markets who are already struggling with their mortgage payments, experts said. Also, as unemployment ticks up and companies cut back on overtime, some people find they don't have enough income to pay the bills.

To be sure, many use their credit cards for convenience and pay their bills on time, sometimes to take advantage of reward programs. But cracks are appearing.

Credit card delinquency rates hit a 4-year high of 4.53% in February, according to Moody's, a debt rating agency.

"Once they've fallen behind, it's increasingly difficult for them to become current on their credit card payments again," said William Black, senior vice president at Moody's. "It's a more challenging economic environment. There's less money to go around."

Meanwhile, card balances have been creeping up steadily since the start of 2006, and jumped nearly 9% during 2007, according to Equifax, a credit data and analysis firm. That's due to a combination of people spending more and paying off less each month, said Myra Hart, senior vice president of analytical services at the firm.

The number of credit cards issued has also risen. At the end of 2007, there were 420 million cards on the market, up 7.6% from a year earlier.

Americans are carrying high levels of debt, compared to historical levels, while their savings rate is quite low, Hart said.

"In the long term, that's not a good thing," she said. "We're really at a tipping point for consumer credit. It depends on what happens to the economy and employment."

Growing balances and delinquencies aren't good for the economy, which is dependent on consumer spending, said Bill Hampel, chief economist at the Credit Union National Association.

"A lot of people will quit going out to dinner if they see their balances rise," Hampel said. "This will hurt the economy."

Are you buried under a pile of debt and need help getting out? Did you recently manage to pull yourself out of debt and want to share your story? Tell us about your experience with debt and how the current credit crisis is affecting you.