African Americans encounter unique financial strain and are harmed more than other groups from their credit card debt, according to a report from Demos and the NAACP.

The research illustrates ways in which the economic difficulties of African American households are compounded by a legacy of discriminatory policies that have left African Americans with fewer assets and lower rates of homeownership than white households. The report is called, "The Challenge of Credit Card Debt for the African American Middle Class."

Drawing from Demos’ National Survey on Credit Card Debt of Low- and Middle-Income Households, the research shows that despite owing less in 2013 than in 2008, 42% of indebted African American households are borrowing to make ends meet, relying on credit cards as a “plastic safety net” to supplement earnings and pay for basic living expenses such as rent, groceries and utilities.

Nearly all of the African American respondents in the survey who accumulated credit card debt from costs associated with starting new businesses have reported difficulties paying down these debts – 99% of African American households still carry that expense compared to 80% of whites.

The African American middle class reports worse credit scores and vastly different causes of poor credit, with just two-thirds of households identifying a score of 620 or above, compared to 85% of white households. Among those reporting poor credit, African Americans were more likely to cite late student loan payments and errors in their credit reports as contributing factors, compared to late mortgage payments for white households.

The study also reveals that African Americans are far more likely to have seen their credit tighten and to be pursued by debt collectors – 71%, compared to 50% of white middle-income households.

“Much of the disproportionate impact of credit card debt can be attributed to the fact that African Americans have fewer assets than other households to fall back on in emergencies,” said Catherine Ruetschlin, report co-author and Demos Policy Analyst. “Unlike white households, more than half of African Americans’ wealth is held in housing, which was devastated in the financial crisis. We’re also seeing African Americans turning to credit cards to cover their household finances as incomes continue to stagnate and unemployment rates hover around twice that of white workers."

An optimistic finding in the survey, the 2009 CARD Act - which requires credit card companies to comply with fair and transparent practices for billing and fees - has helped African Americans in particular to pay down debt faster and save money by avoiding unreasonable charges.

More than a third of the indebted African American households in the survey, reported paying more toward their credit card balance as a response to information in their statements mandated by the CARD Act. Since the passage of the Act, 25% of African American households experienced a drop in the interest charges on their credit card, proving that well-designed policy can have a positive impact on the financial security of many Americans.

But overall, the report states, a system of credit reporting and scoring that reproduces racial inequality undermines the economic opportunities of African Americans as their widespread use encompasses non-lending purposes including employment and housing decisions.

Demos’ previous research shows employers may eliminate applicants with credit problems. Terms and rates of service often depend on credit reports, creating additional barriers for families trying to meet basic needs or control household budgets.

Dedrick Asante - Muhammad, report co-author and senior director of NAACP Economic Department, adds: "When African Americans are engaging in the credit market, they are more likely victims to predatory and discriminatory lending which further increases their economic insecurity. 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, fairness and security around consumer credit.”

The report highlights positive steps towards providing protection for the country’s middle class, and makes policy recommendations in several areas including medical debt protection, financial regulation and credit scoring.

Demos is a public policy organization working for an America where we all have an equal say in our democracy and an equal chance in our economy. “The Challenge of Credit Card Debt for the African American Middle Class” is part of Demos’ on-going work creating pathways to ensure a strong and diverse middle class. Learn more at


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