Do people really carry this much debt on their credit cards? (1 Viewer)

[Eric_L]

No thing - all's good. Sorry if you thought otherwise.

 

[Philip Hamm]

Highly recommended, the Frontline link I posted on page 1. They talk about the usury rates which were used to regulate credit card companies in the past. The problem was, the usury rate defined and capped what interest rate the CC company could charge, but it was a fixed rate. The rate which they borrowed was fluid so that you had a situation where the rate which the bank borrowed at was higher than what they could legally charge the CC holders!!!! Not a very good business model. The regulations were ridiculous and too stringent, then we went too far in the other direction so that now they can do their predatory practices and charge obscene interest rates. Hopefully some sensible regulation can be enforced. However, these are unsecured loans so the rates really should be high by general banking standards.

 

[BrianW]

With this statement, I couldn't agree more.

 

[Patrick_S]

Phillip I’m well aware of the past situation but that information that doesn’t change anything I wrote about. Yes the regulations needed changing but as you wrote they went too far in the unregulated direction.

Besides the whole point of my post was the hypocrisy of the CC companies who aren’t willing to take responsibility for their actions while lecturing the consumer that they need to be more responsible.

In the end nothing excuses the CC companies’ poor practice of extending credit to people who really weren't qualified. It was their decision to engage in highly risky business practices yet they don’t seem to be willing to take responsibility for their own actions. Of course they do demand that their barrowers live to a higher standard and have spent hundreds of millions of dollars in getting the laws changed in order to create a new environment to ensure this demand.

It appears that CC companies are all true believers in pure capitalism's "market forces" and "no government interference" when times are good, but are the first one to suckle from the teat of the government when it suits their needs.

 

[Carl Miller]

I agree Eric. All in general terms though, this lack of ability to manage money is probably half the problem...With the other half being that the $43,000 the average American family makes isn't enough money to live, and save for the future and save for future castastrophies.

 

[Bryan X]

Which probably fits nicely with the fact that most American's are horrible savers. We make more, we spend more.

 

[DaveF]

I want to soften my tone, for I risk coming across belligerent, which I don't mean. But we're online... I don't believe this statement. () And it may be condescending and and socially damaging perspective. It puts us back in this mess: why bother trying to be financially responsible if it's impossible from the get-go?

It's not impossible. It's just not easy. Maybe we just expect too much from life and can't accept that, in fact, not all of us get to live like the rich and famous.

My perspective is that as a graduate student, I lived on $13k per year, I saved money in an IRA every year. And gave 5+% per year to charity.

What I guess, and what I've seen, is that a family can live on $43k per year. It isn't luxurious. I isn't like the people on TV. Or the people over in the rich part of town. But folks can get by, within their means, with some savings, on the median income. (Yes, $600k homes on the Coasts. Exceptions to generalized statement noted.)

 

[gene c]

"Yes they can. But it's easier, and more fun, to spend what you don't have and live better than you should. Until it catches up with you. And that $600K house on the coast was $850K a year ago. And I won't even mention Silicon Valley during the Dot Com boom. You wouldn't believe it anyway.

 

[Carl Miller]

Doesn't this bring you back to the point where sometimes, sacraficing from today, to save for tomorrow just isn't always worthwhile? What if you give up too much? Are you really living?

This is probably too personal but my story is that I was married at 22, became a father at 25 and again at 29, and did nothing my whole life but scrimp and save. We saved for a house, we saved for college funds, we saved for retirement through our 403 b's. We didn't have a "catastrophe fund" because there was no money left for it. We didn't buy our house until 6 years ago if memory serves, and didn't buy my first new car, ever, until 4 years ago. Dining out "nice" for the first 10 years of my marriage meant going to a diner.

But you know, with the rent or mortgage, the kids, the property taxes, school taxes, heat and electric bills, car insurance, contributory health insurance payments, the food for two growing children, their clothing, state income tax, Social Security taken out, life insurance, obligatory (for me at least) union dues, pension contribution and 403b contribution, there isn't much left...then you have to get to work which, here, costs me $3,000 for gas and my wife $2,400 by mass transit each year, you have to buy all kinds of crap for the kids. The kids. Good God they cost a fortune to raise. The cost of diapers alone...whoa, that sent my blood pressure through the roof.

I'm tellin ya, do this for 20 years and you will wake up one morning and ask yourself.....am I really living? Am I enjoying the present enough?

Me? I'm responsible. Been living responsibly, planning and plodding my entire life. No way I'm going spend my golden years in the poor house, so yeah, it's all worth it. But I'm not going to spend the next 20 years of my life living the way I've lived the past 20 years. No way. I'm going to enjoy msyelf a little more.

The average American family making $43,000 per year? I have no idea where they live, but it sure isn't where I live. A single person couldn't live on $43,000 per year where I live, let alone a family.

 

[DaveF]

Maybe it's just the half that live in the "fly-over states", where you can buy a house for $140k (or less). Certainly no one on $43k can afford a $600k "starter" home on the coast.

 

[Carl Miller]

Very hard question for sure, and no right answer that applies to all IMO. I got my answer to that question from my father who died at age 66. He enjoyed 13 months of his retirement, was diagnosed with cancer and died a year later. He said shortly before he died that he felt he didn't enjoy life "along the way" as much as he should have.

He talked mostly about things like when he went to Ireland (the homeland) the only time in his adult life, why didn't he spend 3 weeks there instead of 10 days? Or that he should have taken me and my brother to Mets games 5 times a year instead of once....Should have bought his first luxury car when he was 50 instead of 60 and of course, should have retired 3 years earlier which he didn't do. He was worried about having enough money if he lived until he was 80 and working those extra 3 years effected his pension enough to justify working those years, instead of living them.

And yes indeed..the fly over states. That must be where these folks live.

 

[gene c]

All kidding aside, imagine how tough it is for those earning well below that $43,000 who don't live in those fly over states. There's quite a few of them out here on the "left" coast (I hate that term btw). Don't know how they do it. As for me, I'm just about at that $43,000 level but I'm doing O.K. for now. Not as responsible as I could be but not as bad as I was. I feel I've done a pretty good job of "living life" and "preparing" for it. But only time will tell. So, when it's all said and done, who wins? The one with the biggest bank account, or the one with the most toys?

 

[Eric_L]

I suppose it would depend on how you measure and/or achieve happiness. If you achieve happiness by trips, Mets games and luxury cars then go spend.

There are plenty of people who achieve happiness by fishing, time at the city park, drinking beer with friends, or even volunteering with charity. All which cost little to nothing.

It is true that some people save and save for retirement only to pass prematurely and never experience the fruits of their labor. There are far more people who do not save for retirement who get there virtually empty handed. It also is not uncommon for people to 'overstay' their retirement and run out of money before they run out of time.

What is worse - dying prematurely with too much money or living too long and running out of money? Neither is good, but outliving your assets is worse, IMHO. Dying prematurely sucks at any age, but you still have a spouse and/or beneficiaries who will utilize and appreciate your money - and you never experienced the anxiety of running out in old age. Running out of money when you are far too old to work... that could be a real nightmare....

One more thing on extreme old age - another dimension which totally sucks - being ignored and/or having nobody. I've seen people, mostly but not always, women, living alone - not just unmarried, but ignored. Some are people who just outlive everyone they ever loved. They never had children or their children died prematurely. That is very sad, but even worse - I've seen people with as many as 16 great grandchildren and family galore - yet they never hear from any of them. One lonely woman said to me "I've just lived too long..." Imagine regretting that!

I would gladly give up body parts for the experience of meeting my great grandparents. Yet there are many who have the ability to visit their great grandparents yet seldom do. Sure the sprawl of modern America is part of the problem, but the phone is a magical device and can really bridge a distance. A phone call for them is like a hug - and even someone making under $43,000/yr can afford that...

If you are one of the lucky people with living great grandparents - or even grandparents - or even parents - reach out.. today. Make a commitment to do it every week. The difference it will make for someone is far greater than you could imagine... the sum total could be, dare I say, far better than a Mets game...

 

[Todd H]

To answer the original question, yes some people really carry that much credit card debt.

When I married my wife a few years ago, I was shocked at how much credit card debt she had accumulated. It was well over $8000, with interest rates that ranged from around 12% to 21%. Being that I didn't even have a credit card (and still don't to this day), I couldn't believe it.

The first step was to call all of her credit card companies and ask them to lower the interest rates, which they all did. Next, I cut up every single card she had, much to her dismay. Finally, I put her on a budget and only let her use a debit card for purchases.

Was she happy? Definitely not. But her credit card balances have come down considerably. Thankfully, they will all be paid off soon.

When I was in high school, I had to take a class that taught us about finances, budgets, daily living expenses, etc. When I asked my wife if she had taken anything like this in school, she said no. Have schools done away with these types of classes?

 

[Philip Hamm]

When are they suckling from the government? What in the heck are you talking about?

 

[Patrick_S]

Again my pervious posts were very clear to others but perhaps this will make it clearer to you.

Look at it this way, the CC companies knew all of the environmental conditions (the laws) before they started their reckless business practices. When these existing conditions turned negative towards them because of their practices they decided to not take responsibility for their actions but to change the environment with the help of the government.

Having the government change laws in order to make your business environment more favorable to you is a form of governmental corporate welfare, hence the concept they are suckling from the teat of government.

That is as clear as it gets, if you don’t understand it now I simply cannot help you anymore.

 

[Carl Miller]

Mighty fine post Eric!

FWIW, my father referring to the Mets games was his way of saying he should have spent more time with his sons doing something they, and he enjoyed doing together. Every year, one game from 1968 to 1999. Any time we as adults bought more tickets for the three of us, or he bought them, he begged off and said he had to work. He deeply regretted that in the end.

Gene, if you ask me, I figure the person who wins in the end is the person who leaves with the fewest regrets.

 

[Bryan X]

I thought whoever died with the most toys won.

 

[gene c]

I guess it's not whether you win or lose but how you play the game (yet another cheap metaphor ).

 

[DaveF]

Be sure, though, that begging off family to work is orthogonal to struggling to live on a modest income.

I know people who make plenty of money, and ignore friends and family, working every hour possible. And I know people who live on modest incomes, and have rich lives enjoying time with family and friends.

We make our choices. Those of us who worry and work and save and scrimp -- to the detriment of "fun" -- would likely do the same regardless of earning $43k or $430k. It's the personality, not the income.

We talk about possible regrets in life, but these are not necessarily tied to our income. A person can be frugal and live in their means, and still have a great life affordably. Board games are cheap and have given me some of my favorite memories. A good meal cooked at home can be cheaper and better than eating out. And a great conversation is free!