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How Americans Get Out of Credit Card Debt

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Re: How Americans Get Out of Credit Card Debt

#61

Post by jpadvo »

dalore wrote: post #26
Retric wrote: post #19

Earlier quoted context omitted.

The most useful way of thinking of CC debt is how much it INCREASES THE PRICE of what you buy. That nice lunch might cost 20$ if you paid cash, but use your CC and it's really 20$ + the interest you are going to pay. If it's going to take you 4 years to pay off your 20% APR CC debt then that 20$ lunch is really 41$ 50c. PS: That is not to say paying cash for lunch changes the numbers when you are in debt; CC increase…

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

But only because the credit card company charges merchants an unnecessary extra 2% in fees so they can bribe you with your own money.

The cost of that lunch should be $19.60, or less.

Re: How Americans Get Out of Credit Card Debt

#62

Post by TheAmazingIdiot »

thompo wrote: post #39

i rang up about 5k in credit card debt. six months ago, i decided to put my nose to the grindstone and get it done. i paid my last $600 off this morning. i stopped buying unnecessary shit, stopped eating out all the time, and most importantly, made payments -every- time i possibly could. if i opened my bank account online and had $400 left in checking, i'd put $250 into the card. if i had $200 left, i'd put $100. the…

I'm sure you're up there with those who think that people who owe large sums of money should "just work harder" or "lay off alcohol and cigs".

I had a medical injury that has royally screwed up my life. I also HAD insurance, but starbucks switched insurance and I was now in preexisting condition hell. I had no money for a lawsuit, so I'm now 12k in the hole, along with basic living expenses that I had to cover while not being able to work. Its upwards of 20k and I have no way to pay it off.

So no. Quite many people in USA are just 1 accident away from ruin. I've seen it 3x before, and now with me. And there's not much at all that could be done.

Re: How Americans Get Out of Credit Card Debt

#63

Post by joe_the_user »

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.

And a "medical emergency" can have unlimited costs today...

Re: How Americans Get Out of Credit Card Debt

#64

Post by joe_the_user »

randrews wrote: post #8
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.

You can buy things you don't need, and you can buy things with money you don't have, but doing both at the same time is a really bad idea.

By say, taking out student loans?

Considering that this is pretty much the primary way that education is paid for these days, simply repeating "debt is a bad idea" hardly seems adequate.

(and I am personally happy to be debt-free but I can see why my indebted friends made the choices they did, however badly they may have worked out).

Re: How Americans Get Out of Credit Card Debt

#65

Post by [deleted] »

joe_the_user wrote: post #64
randrews wrote: post #8

Earlier quoted context omitted.

You can buy things you don't need, and you can buy things with money you don't have, but doing both at the same time is a really bad idea.

By say, taking out student loans? Considering that this is pretty much the primary way that education is paid for these days, simply repeating "debt is a bad idea" hardly seems adequate. (and I am personally happy to be debt-free but I can see why my indebted friends made the choices they did, however badly they may have worked out).

[deleted]

Re: How Americans Get Out of Credit Card Debt

#66

Post by gcheong »

Retric wrote: post #19
randrews wrote: post #8

Earlier quoted context omitted.

You can buy things you don't need, and you can buy things with money you don't have, but doing both at the same time is a really bad idea.

The most useful way of thinking of CC debt is how much it INCREASES THE PRICE of what you buy. That nice lunch might cost 20$ if you paid cash, but use your CC and it's really 20$ + the interest you are going to pay. If it's going to take you 4 years to pay off your 20% APR CC debt then that 20$ lunch is really 41$ 50c. PS: That is not to say paying cash for lunch changes the numbers when you are in debt; CC increase…

It helps to know that but the problem is that you don't really feel the weight of the extra cost as we tend to discount the importance of things we see as being off in the future. Sure that dinner is going to ultimately cost me $41 but that's spread out between next month and 4 years from now whereas getting that dinner now gives you an immediate reward and our brains are wired to weight immediate rewards more heavily.

Re: How Americans Get Out of Credit Card Debt

#67

Post by joubert »

joe_the_user wrote: post #63
joubert wrote: post #57

Earlier quoted context omitted.

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

And a "medical emergency" can have unlimited costs today...

The parent wrote: "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."

So, they overextended themselves and THEN lost a job or had a medical emergency. The problem is people choose to live on the edge financially, which I think is irresponsible, especially if you have others who depend on you for their life.

Re: How Americans Get Out of Credit Card Debt

#68

Post by dalore »

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…

I'm the opposite, when I withdraw cash and spend it, I have no idea where it went. When it is electronic, then my weekly accounting will show me where I've been spending money and I'm more careful with it.

The best thing I ever did to save money was to track where I'm spending it.

Re: How Americans Get Out of Credit Card Debt

#69

Post by Teckla »

ams6110 wrote: post #56
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 nex…

The fastest way to pay off debt is to pay off the highest interest rate debt first, then the next highest interest rate debt, then the next highest interest rate debt, etc.

The debt snowball approach isn't the fastest approach, but the theory is that it has a strong psychological impact: By paying off your smallest debts first, you see forward progress more clearly, which motivates and energizes you to keep going.

Another good psychological trick is to have only one credit card. Then, when you get the bill each month, you can clearly see how much you've spent. The single big statement is scarier than having lots of little statements, and leads people to spend less money unnecessarily.

Re: How Americans Get Out of Credit Card Debt

#70

Post by sixtofour »

TheAmazingIdiot wrote: post #62
thompo wrote: post #39

i rang up about 5k in credit card debt. six months ago, i decided to put my nose to the grindstone and get it done. i paid my last $600 off this morning. i stopped buying unnecessary shit, stopped eating out all the time, and most importantly, made payments -every- time i possibly could. if i opened my bank account online and had $400 left in checking, i'd put $250 into the card. if i had $200 left, i'd put $100. the…

I'm sure you're up there with those who think that people who owe large sums of money should "just work harder" or "lay off alcohol and cigs". I had a medical injury that has royally screwed up my life. I also HAD insurance, but starbucks switched insurance and I was now in preexisting condition hell. I had no money for a lawsuit, so I'm now 12k in the hole, along with basic living expenses that I had to cover while…

"Quite many people in USA are just 1 accident away from ruin."

I am without health insurance, and I find that I am very careful moving about in the world, for exactly that reason.

If I ever get in a major accident, I almost hope they can't revive me.

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