Plastic May Pose Next Big Threat to Economy

Experts expect credit card trouble to track mortgage woes
By Colleen Barry,  Newser Staff
Posted Aug 26, 2007 4:54 PM CDT
A customer swipes his credit card at a gas station pump in Morganton, N.C., Friday, June 15, 2007.   (Associated Press)
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(Newser) – The subprime mortgage crisis may spark another financial disaster: bad credit card debt. When rates hit 50-year lows, many owners borrowed against their homes to pay off high-interest credit cards. Now, with rates increasing, many may not be able to pay down both their mortgages and their credit cards, the Chicago Tribune reports, and will default or go bankrupt.

"Median-earning families simply don't have enough money to pay the mortgage, buy health insurance, pay for transportation and day care and still put groceries on the table," says a law professor. They make up the difference with credit cards, but when an unexpected expense arises, there's no money left to handle the higher bills.