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Do people really carry this much debt on their credit cards?


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#1 of 127 Bryan X

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Posted May 27 2008 - 10:54 AM

I was reading an article today about consumer credit card debt and according to the Consumer Federation of America, the average credit card balance per card-holding household is $8,568! Posted Image

Do people really carry this much credit card debt? And obviously, some don't carry any debt, so others would have debt much higher than that. The amount is just astounding to me.

We pay our cards off every month. What drives people to run up huge sums of debt at outrages interest rates? Is it as simple as keeping up with the Jones' even though they can't afford to?

#2 of 127 Greg_R

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Posted May 27 2008 - 11:33 AM

I have used some 6 month or 12 month no-interest cards to fund large projects around the home ($20k-$30k remodels, etc.) which I'll pay off entirely when the 1st payment is almost due. That way I can sit on my $$$ and earn some interest on it. This is a common (but not always wise) practice with people who "turn" houses...

#3 of 127 bobbyg2

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Posted May 27 2008 - 11:45 AM

Quote:
Originally Posted by Bryan X
What drives people to run up huge sums of debt at outrages interest rates? Is it as simple as keeping up with the Jones' even though they can't afford to?

Stupidity, jealousy, and insanity. Posted Image

Credit cards are usually blamed by a lot of people for debt, when the only thing they can blame is themselves. Credit cards can actually be used as beneficial, but people try to take advantage of it and dig themselves into a 20 foot hole they can't possibly dig out of.

"Blaming credit cards for debt is like blaming spoons for Rosie O'Donnell (sp?) being fat" - My friend Mike.
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#4 of 127 John Dirk

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Posted May 27 2008 - 12:06 PM

It's worse than that. People also carry huge mortgages that they cannot really afford. I don't believe in blaming the supplier [mortgage and CC companies] in general, but they are the ones who qualify people for way more than they can reasonably be expected to repay. It's really not astounding to me at all. People always want a quick fix, and fast cash serves the immediate purpose. On the one hand, people who abuse credit should't be so greedy and short-sighted. On the other hand, the creditors shouldn't be so predatory.

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#5 of 127 bobbyg2

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Posted May 27 2008 - 12:53 PM

That's why you always go the safe route and go 1/3 of your monthly income absolute MAX to keep a roof over your head. Not 1/2 to 3/4's's like a lot of people seem to do...
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#6 of 127 Philip Hamm

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Posted May 27 2008 - 01:04 PM

PBS Frontline "Secret History Of The Credit Card" Credit Card companies do some very predatory lending practices. Also, sometimes people are forced to borrow on credit cards for unexpected expenses such as large car repairs or medical bills.
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#7 of 127 bobbyg2

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Posted May 27 2008 - 01:18 PM

What ever happened to insurance?
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#8 of 127 JoeyR

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Posted May 27 2008 - 01:18 PM

Quote:
Originally Posted by Philip Hamm
PBS Frontline "Secret History Of The Credit Card" Credit Card companies do some very predatory lending practices. Also, sometimes people are forced to borrow on credit cards for unexpected expenses such as large car repairs or medical bills.

+1

#9 of 127 gene c

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Posted May 27 2008 - 01:27 PM

Due to a few car repairs and such, and many, many acts of irresponsibility, I wound up with over $10,000 in consumer debt in the late '80's. And that's 1980's dollars. Took 6+ years to pay it off. Since then, I've only used the card (I'm down to one Posted Image )for major purchases and consumer protection. And I pay it off in full when the bill comes in. As the saying goes, I learned from my mistakes. But there's another saying I like better. Learn from other peoples mistakes. But few of us do. I didn't.
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#10 of 127 gene c

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Posted May 27 2008 - 01:38 PM

Quote:
What ever happened to insurance?
Most people are not adequately covered. Medical and dental in particular. $1500 deductible here, co-payment there, only 80% coverage of what's left over. You often wind up with hundreds or thousands to pay after the insurance company pays it's obligation. After my friends car was stolen a few years ago, the insurance company gave him $2500 less than what he owed on it. Guess who took the bus to work for two years. Shit happens.
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Also have  MB Quart Vera VS05 +.....too much to list. Help me.
 
 

 


#11 of 127 Bryan X

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Posted May 27 2008 - 02:18 PM

Quote:
After my friends car was stolen a few years ago, the insurance company gave him $2500 less than what he owed on it.

He probably financed all or nearly all of the purchase price of the car, right? Vehicles depreciate so fast, if you don't front a good sized down payment, you will quickly owe more than what the vehicle is worth. So if it gets stolen or wrecked, you'll get less than what you owe on it.

#12 of 127 Eric_L

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Posted May 27 2008 - 02:22 PM

Quote:
Originally Posted by gene c
Most people are not adequately covered. Medical and dental in particular. $1500 deductible here, co-payment there, only 80% coverage of what's left over. You often wind up with hundreds or thousands to pay after the insurance company pays it's obligation. After my friends car was stolen a few years ago, the insurance company gave him $2500 less than what he owed on it. Guess who took the bus to work for two years. Shit happens.

Actually, you have it mixed up a bit. Most policies that have 80% coverage have a stop loss provision as well which substantially limits how much the 20% can add up to. To say that it hapens 'often' would also be a gross overstatement.

Sounds like your friend over-leveraged his car. It is not uncommon for dealers to finance 100% or even more of a car's value for people with good credit. Just because you can does not mean you should - as your friend discovered.

Most of people's financial problems can be attributed to sheer financial ignorance. It is not their fault - nobody ever really tells them. Schools sure don't .

Just yesterday I heard some nimrod on TV say "I canceled my health insurance because I paid $200/mo for it for two years and never used it once." Of course, he then was involved in a motorcycle accident. I wonder if he also canceled his vehicle insurance "because he never used it" either?

Again - for those of us who 'get it' it sounds stupid, but really there is no way for young people to learn this sort of thing unless they are lucky enough to have a family member, friend or mentor show them. It is frustrating to see the ignorance.

Oh, and for credit card debt - I carry only about one month's income maximum... but that can be anywhere from $5k to $15k - both balance and income fluctuate...

#13 of 127 Michael Warner

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Posted May 27 2008 - 02:27 PM

I haven't read that article but is it clear that they're only looking at the revolving debt that people carry? I know that whenever I have a credit check run they just look at the current balance on my cards and pay no attention to whether or not that total is paid off in full each month. I use a credit card for every purchase possible in order to rack up free airline tickets so I always have what looks like a huge balance even though I pay it off every month and have never paid a cent in interest.

But I will admit that I did some stupid things with credit back when I was in college. Fortunately I was able to pull myself out of that hole by taking out student loans which were much cheaper and easier to pay back than credit cards.
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#14 of 127 TravisR

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Posted May 27 2008 - 02:40 PM

Quote:
Originally Posted by Bryan X
...the average credit card balance per card-holding household is $8,568! Posted Image
Honestly, I would have thought it was even higher. People are encouraged to buy junk they don't really need (not that I'm above that but I haven't gone into debt by buying things either) or they buy things they do actually need and it all adds up. Fortunately, I've got no credit card debt but I know plenty of people that owe about $10,000 between old school loans and credit card bills.

#15 of 127 gene c

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Posted May 27 2008 - 02:47 PM

Quote:
Actually, you have it mixed up a bit. Most policies that have 80% coverage have a stop loss provision as well which substantially limits how much the 20% can add up to. To say that it hapens 'often' would also be a gross overstatement.
You been to the dentist lately Posted Image . It was 4-5 years ago, but as I recall a trip to the dentist with a company sponsored dental plan, one cavity and two wisdom cost me $5-600 out of pocket. It happens. Whether it's ignorance or circumstance, most people are not adequately covered.
Quote:
Sounds like your friend over-leveraged his car. It is not uncommon for dealers to finance 100% or even more of a car's value for people with good credit. Just because you can does not mean you should - as your friend discovered.
It was about 85% financed. Problem was fast depreciation and a 7 year loan. Again, it happens.
Quote:
both balance and income fluctuate...
I bet that's another reason. Income fluctuates (someone got laid off), the balance doesn't (the bills keep coming).
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Also have  MB Quart Vera VS05 +.....too much to list. Help me.
 
 

 


#16 of 127 John Dirk

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Posted May 27 2008 - 03:02 PM

Quote:
Originally Posted by gene c
You been to the dentist lately Posted Image . It was 4-5 years ago, but as I recall a trip to the dentist with a company sponsored dental plan, one cavity and two wisdom cost me $5-600 out of pocket. It happens. Whether it's ignorance or circumstance, most people are not adequately covered. It was about 85% financed. Problem was fast depreciation and a 7 year loan. Again, it happens.I bet that's another reason. Income fluctuates (someone got laid off), the balance doesn't (the bills keep coming).

Gene. You keep saying "it happens" as if these circumstances [while unfortunate] are arbitrary. Every example you present is based on financial ignorance. If you buy a policy which states it will cover 80% and it pays 80% when there's a loss, who's fault is it when you can't pay the other 20%? Most people could if they would cut back their lifestyle and save some $$ for rainy days.

As for the car, any time you have a 7 year loan you're going to loose. You can get "gap" insurance to cover the difference between the replacement cost and the actual depreciated value of the vehicle, but the real answer is to buy a cheaper car. One that you can pay off in a maximum of 3 years. I'm not trying to preach here, because I've made some pretty foolish financial moves in my day, but they were all my fault, and I learned from these experiences. As long as people don't continue repeating the same behaviors, they'll eventually be financially sound. It's the repeat offenders who fail to learn from their [and others] mistakes who will never get out of the hole.

John
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Any of YOU guys call ME Francis, and I'll kill ya!"

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#17 of 127 Carl Miller

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Posted May 27 2008 - 03:11 PM

What amazes me is the difference in the last 20 years in who gets credit cards. When I went off to college, the only way to get a credit card at that age was if your parents put your name under their account....Now, my son is getting offers every day from banks. And very large credit maximums. What does an 18 year old college bound student with no credit history need a $20,000 credit limit for? Totally predatory.

Similarly, a friend of mine went bankrupt about 15 years ago, and it took him 6 years before he could get a credit card again, at any rate. A friend recently went bankrupt after his business failed, and he got credit card offers within the first year after bankruptcy. Also, large limits, and not terrible rates.

Gotta say though that I once carried $12,000 on a CC which took 6 years to pay...I had no health insurance coverage, and needed a hernia operation. Had to put it all on credit card.
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#18 of 127 gene c

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Posted May 27 2008 - 03:35 PM

Quote:
If you buy a policy which states it will cover 80% and it pays 80% when there's a loss, who's fault is it when you can't pay the other 20%? Most people could if they would cut back their lifestyle and save some $$ for rainy days.
I don't disagree with that at all, except that most don't buy a policy, they get it from an employer. But I'm not saying it's not our fault. Of course it is. But you can't prepare for everything. Life is a gamble. Some people push their luck a little too far and they have to refinance their house or pull out the credit card. So yes, it does..(I won't say it Posted Image )
Quote:
As for the car, any time you have a 7 year loan you're going to loose.
Absolutely. He took a chance he'd have the car for at least 5-6 years. He lost. But who prepares for auto theft.

Bottom line is we are a society of consumers and we often consume more than we can pay for. Sometimes it's because of poor financial decisions, sometimes it's a combination of that and a little bad luck. For me, it was a bunch of bad decisions (but a lot of fun Posted Image ) followed by a sting of bad luck. But I got thru it. But it's much tougher when you're first starting out. There just isn't much left over at the end of the month for that rainy day.
"Everyday room": Panasonic 58" Plasma, Dish HD DVR, Pioneer Elite vsx-23, BDP-23 BR, dv58avi universal dvd player, Paradigm Studio 20 V1, CC-450, Dayton HSU-10 subwoofer.

"Movie/Music room": Toshiba 65" DLP, Dish HD receiver, Marantz 7005, CC-4003, BD-7006, Polk LSI25's-LSi7's-LSiC, 2 original Dayton 10" "Mighty-Mites" subwoofers. (subject to change without notice).
 
Also have  MB Quart Vera VS05 +.....too much to list. Help me.
 
 

 


#19 of 127 bobbyg2

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Posted May 27 2008 - 03:43 PM

What I want to end up doing is keeping a descent sum of money (around $10,000) in a savings account that I wont touch unless something like a car accident, or medical problem, or something that comes along and the amount I have in my normal bank account doesn't cover it.
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#20 of 127 Bryan X

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Posted May 27 2008 - 11:09 PM

^

It's a good plan to keep atleast 6 months of expenses in a liquid account.


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