To the limit

Monday, March 3, 2008 | 2:07 a.m.

As the economy continues to falter, credit counselors say they are noticing a surge in the number of families who are using credit cards to buy such necessities as groceries.

Moreover, a story by USA Today on Friday says that people who are in financial straits are increasingly more likely to cover car payments and credit card payments before paying their mortgages. As one credit counselor told USA Today, people know their homes are at risk but they say, “I don’t want to let my credit cards go because that’s my cash flow.”

And such a trend typically signals one thing: desperation.

Not surprisingly, credit card debt has risen sharply in areas where the mortgage crisis has hit hardest: Nevada, Arizona, California and Florida, experts say. Residents in these areas “are losing jobs and overtime hours and other income and are trying to supplement their lower incomes with more spending on credit cards,” Mark Zandi, chief economist for Moody’s Economy.com, told USA Today.

Earlier last week, USA Today also reported that Americans were passing up the little luxuries, such as $5 coffee drinks and expensive bottled water, to save money. But these reports seem to contradict others, such as one by The Wall Street Journal on Friday, that said consumer spending is up. However, the Journal reports, consumers are still waiting for sales to purchase such items as clothing, electronics and furniture.

Still, whatever it is people are buying, more of them seem to be doing it with credit cards. And it is only a matter of time, experts say, before consumers max out their cards and start failing to make those payments as well.

The American economy hinges on consumers spending money, but it isn’t going to boost the economy in the long run for consumers to overload themselves with purchases on credit. What all of us need to do is find that happy median, a balanced approach in which we spend what we can afford.