Where will the money come from?
Gas and food prices are rising, mortgage interest rates are adjusting higher, loans are harder to find and unemployment is ticking up.
There's only one place left to turn, many consumers believe: credit cards.
Now, instead of using cards for large items such as a plasma television or new furniture, many people are charging gasoline, milk, food and even, in some cases, other bills, experts said. And many of them are only making the minimum payment on each card - if they can afford even that.
It's now far more difficult for many consumers to find a way out of debt, since other options, such as home equity lines of credit, aren't as readily available and it's not as easy to refinance a home or take out a loan with a lower interest rate, experts said. And there's evidence that the overall tightening of credit is spreading to credit cards, too, potentially reducing the availability of new credit and lowering credit limits - moves that could affect consumer spending and overall economic growth.
Nationwide, revolving debt - almost all of which comes from credit cards - reached a record $962 billion in May, up from about $800 billion four years ago.
Many consumers are in plenty of trouble. And the moment they're late on a payment, all bets are off, debt counselors said.
"A lot of these people are now maxing out these credit cards and are at a point where they can't put anything more on them," said personal finance counselor Colin Nupp, with Debt Counseling Corp. in Hauppauge, N.Y. "Then the minimum payment is only going toward the finance charges, and a lot of people feel like they're spinning their wheels."
That ripples beyond the consumer, affecting credit card companies and other financial firms, which are seeing more and more accounts go bad. Moody's Investor Service reported that the charge-off rate - which measures those credit card accounts that are considered uncollectable as an annual percentage of all outstanding loans - reached 6.27 percent in April, its highest level since December 2005.
"Credit quality in the credit card world has deteriorated as of late, but it's not as bad from a historical perspective as conditions in the mortgage world," said Scott Hoyt, senior director of consumer economics for Moody's Economy.com. "And conditions are going to continue to deteriorate because credit quality in the credit card world tends to be driven by labor market conditions," which are weakening.
For many, tough times are bringing more trouble.
"To bridge the gap between expenses and income, they're supplementing with credit," said Christian Moriarty, president of American Debt Resources, a credit counseling firm in East Northport, N.Y. "We all know that all it takes is one missed payment, and before you know it, your interest rates are at 30 percent."
Small-business owners, too, are relying on credit cards more and more, said Marianne Garvin, who heads the Community Development Corporation of Long Island, N.Y. They have the same problem as consumers, Garvin said, adding: "Whatever discretionary money they may have had to pay down their credit card debt is now being sucked up to pay their utilities and gas."
Making matters worse, there are fewer ways out. Consumers used to use the equity in their homes to consolidate debt and utilize lower interest rates. With the credit crunch, this door is closing.
"Right now, you don't have the relief valve," said Brian Riley, research director for TowerGroup, a research and advisory firm based in Needham, Mass.
Riley noted that credit card issuers could be the next corporate victims of the credit crunch as their risks rise. "It used to be in this business that bigger is better. Now, it's safer is better," he said.
The bigger problem, said Riley, is that everything - from higher unemployment and gas prices to tighter credit and lower home prices - is hitting at once.
"It's not a pretty world right now," Riley
Randi F. Marshall writes for Newsday.