How Americans Get Out of Credit Card Debt • Hacker News Board

Re: How Americans Get Out of Credit Card Debt

#51

Post by mattm » Fri, Feb 04, 2011, 9:47 PM UTC

meterplech wrote: post #35

dalore wrote: post #26

Earlier quoted context omitted.

If you pay it off in full, and get 2% cashback then that lunch cost you $19.60

You know, obviously you are right. But, I think people (especially intelligent HN type people) greatly underestimate how much psychological tricks affect them. I know deep down that spending with credit card is the same as spending with cash. But, I tracked my spending using cards and only withdrawing from ATMs and using cash. I spent about 20% more. And my life didn't feel any better or anything. Now I use credit ca…

This is actually the reason McDonald's started taking credit cards. Studies find this again and again that people buy more when putting it on their credit card.

Do you think giving 2% cash back is just the credit card companies being generous? They are making way more through that scheme. Plus, those cash-back cards generally take a higher percentage which will lead to higher prices to compensate.

Re: How Americans Get Out of Credit Card Debt

#52

Post by PonyGumbo » Fri, Feb 04, 2011, 9:50 PM UTC

StavrosK wrote: post #6

What happened to "stop buying things you don't need"? I had a friend tell me he was considering a consumer loan because repaying his other loans didn't leave him with enough money. I swear, it's as if people have never seen money before.

It's really much more complicated than this. There are a lot of people in this country who live paycheck to paycheck. Some of those people got there by living irresponsibly, and some didn't. When you're living paycheck to paycheck and an emergency comes up, you use whatever means you have available to get through it. I've certainly been in situations where I've had major unexpected expenses (medical, auto, home, business, etc) that had to be covered, and the only option was to put it on a credit card and hope I could pay it off later.

Re: How Americans Get Out of Credit Card Debt

#53

Post by mattm » Fri, Feb 04, 2011, 9:51 PM UTC

kirpekar wrote: post #23

In the context of getting out of debt: Is anyone a Dave Ramsey listener here? I've been an avid listener for a few years now. I recommend his podcast to everyone -- not only for the financial advice, but also for the cultural education about what America really is.

I listened to him while paying off my student loans. A bit repetitive but very motivational and encouraging.

Re: How Americans Get Out of Credit Card Debt

#54

Post by StavrosK » Fri, Feb 04, 2011, 9:51 PM UTC

PonyGumbo wrote: post #52

StavrosK wrote: post #6

What happened to "stop buying things you don't need"? I had a friend tell me he was considering a consumer loan because repaying his other loans didn't leave him with enough money. I swear, it's as if people have never seen money before.

It's really much more complicated than this. There are a lot of people in this country who live paycheck to paycheck. Some of those people got there by living irresponsibly, and some didn't. When you're living paycheck to paycheck and an emergency comes up, you use whatever means you have available to get through it. I've certainly been in situations where I've had major unexpected expenses (medical, auto, home, busi…

Definitely, but I don't think that's how the majority of people get into debt. My cousin can't make ends meet (he has a deficit of 100 EUR/mo) but he won't quit smoking and he just got a ceiling mural painted. When I asked him why he did it, since it set him back two months, he said "I didn't realise until after the guy had started painting".

Re: How Americans Get Out of Credit Card Debt

#55

Post by lutorm » Fri, Feb 04, 2011, 9:57 PM UTC

yummyfajitas wrote: post #46

dstorrs wrote: post #25

Earlier quoted context omitted.

If the debtor pool varies as widely as you claim, that reinforces something I've been wondering for a while: Is it true that Americans are in debt because they are fiscally irresponsible, or is it because the playing field is tilted? It is hard for me to believe that 33% of all Americans can't grasp the idea of "spend less than you make". Sure, a lot of it is consumer culture / media pressure, etc. But other countrie…

But other countries have the same sort of culture and lack our level of credit card debt. Could it be that the field is tilted -- e.g. wages are simply at a level that does not allow the average person to save much even if they try,... Most other countries have considerably lower wages (PPP-adjusted, not nominal) than we do. http://en.wikipedia.org/wiki/List_of_countries_by_household_... http://en.wikipedia.org/wiki/…

The average American is a mirage. Replace that by the median American, and it's immediately down to $7k. Then notice that this "excludes most non-cash income(e.g., like employer contributions to social insurances, or the value of government provided health care and education)" and we can argue whether, after paying for health insurance and retirement/kids college savings, the median American really is better off.

Re: How Americans Get Out of Credit Card Debt

#56

Post by ams6110 » Fri, Feb 04, 2011, 9:58 PM UTC

kirpekar wrote: post #23

In the context of getting out of debt: Is anyone a Dave Ramsey listener here? I've been an avid listener for a few years now. I recommend his podcast to everyone -- not only for the financial advice, but also for the cultural education about what America really is.

I like his debt snowball approach. I don't have a debt problem (and plan to never have, but crises happen). The way I understand it, you pay off your smallest debt by whatever means necessary, make minimum payments on everything else. Then you take what you were paying on that debt, and apply it to the next. Over time you are eliminating debt and applying all the money you spent on the eliminated debt towards the next debt. So you start paying off faster as you go. At least that's how I think the plan works.

Re: How Americans Get Out of Credit Card Debt

#57

Post by joubert » Fri, Feb 04, 2011, 10:10 PM UTC

lutorm wrote: post #47

StavrosK wrote: post #6

What happened to "stop buying things you don't need"? I had a friend tell me he was considering a consumer loan because repaying his other loans didn't leave him with enough money. I swear, it's as if people have never seen money before.

Elizabeth Warren said that in their bankruptcy study, the vast majority of people who filed for bankruptcy didn't do it because they "bought things they didn't need". They did it because they overextended themselves to get a house in a good school district and then one of them lost their job or they had a medical emergency. It's easy to paint those people as irresponsible, but according to her, it's very far from the…

"overextending" oneself, especially if you have dependents, is irresponsible.

Re: How Americans Get Out of Credit Card Debt

#58

Post by [deleted] » Fri, Feb 04, 2011, 10:12 PM UTC

StavrosK wrote: post #6

What happened to "stop buying things you don't need"? I had a friend tell me he was considering a consumer loan because repaying his other loans didn't leave him with enough money. I swear, it's as if people have never seen money before.

[deleted]

Re: How Americans Get Out of Credit Card Debt

#59

Post by noodle » Fri, Feb 04, 2011, 10:13 PM UTC

kirpekar wrote: post #23

In the context of getting out of debt: Is anyone a Dave Ramsey listener here? I've been an avid listener for a few years now. I recommend his podcast to everyone -- not only for the financial advice, but also for the cultural education about what America really is.

my mother listens to him a lot, so i've heard him quite a lot. his advice is good, of course, but i find it interesting that every program is the same thing over and over, like its a reaffirmation mantra that people need to hear in order to successfully not spend the money they don't have, or how to deal with it when they forget they're not supposed to.

Re: How Americans Get Out of Credit Card Debt

#60

Post by mkr-hn » Fri, Feb 04, 2011, 10:14 PM UTC

joubert wrote: post #57

lutorm wrote: post #47

Earlier quoted context omitted.

Elizabeth Warren said that in their bankruptcy study, the vast majority of people who filed for bankruptcy didn't do it because they "bought things they didn't need". They did it because they overextended themselves to get a house in a good school district and then one of them lost their job or they had a medical emergency. It's easy to paint those people as irresponsible, but according to her, it's very far from the…

"overextending" oneself, especially if you have dependents, is irresponsible.

Putting yourself in heavy debt to make sure your kids have a good shot is not difficult to defend.

It's not something I'd do, but I have a hard time blaming someone for making that sacrifice.