With Unemployment Extension Nowhere in Sight, Credit Cards Last Option for Millions
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As the Senate returns to work this week, millions of unemployed Americans will be anxiously waiting to see if Senate Democrats will find the last vote needed to pass the unemployment extension for the long-term unemployed. So far, the Senate has failed three times to muster the votes to pass the bill, leaving millions of Americans with only one remaining option for putting food on the table and paying their bills: credit cards.
Many of the near 10 percent unemployed Americans are facing acute financial hardship: having used up their emergency savings and even their 401k savings, many are now looking at losing their homes, their cars, and even their phones. Some report being unable to even pay for the gas they need to go out hunting for a job.
For people in such situations, credit cards provide the only recourse left for keeping their heads above water. However, turning to credit cards to pay bills provides at best a short-term solution, at worst only exacerbates the situation. While putting a utility bill on plastic may keep the water running for a while, those who eventually are unable to keep up with even the minimum monthly credit card payments, face penalty interest rates as high as 29.99 percent on their credit card debt.
In addition, credit card issuers already struggling with record credit card defaults are more weary than ever of customers who look like a potential future credit risk. According to a new study of credit card lenders by the Federal Reserve, several major card issuers seek to protect their bottom line by keeping an eye out for cardholders who show signs of financial hardship. For example, cardholders making frequent charges for everyday purchases like groceries and utilities, or who develop a high debt-to-credit ratio, may well find their credit limit cut or find it difficult to get approved, when they apply for a new credit card.
Senate Republicans have been blocking the employment extension bill, citing fears that the bill will further increase the U.S. deficit. Proponents of the extension bill argue that plunging millions of Americans further into financial distress will only serve to worsen the economic downturn and thereby weaken the country’s ability to deal with the deficit.
Meanwhile, the Senate is expected to try for another vote on the unemployment extension by mid-July. Political pundits predict that, with a democrat filling deceased Sen. Robert Byrd’s seat, next week’s congressional session may well deliver more hopeful results for the millions of Americans still unable to find work.
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