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

Re: How Americans Get Out of Credit Card Debt

#121

Post by yummyfajitas » Sat, Feb 05, 2011, 7:17 AM UTC

lutorm wrote: post #55

yummyfajitas wrote: post #46

Earlier quoted context omitted.

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.

International comparisons are hard to come by, but here is one which is US vs Sweden (one of the richer "other countries"):

http://super-economy.blogspot.com/2010/03/income-distributio...

This attempts to include the value of assorted government benefits (health care, education, etc), ignores deadweight losses (e.g., $1 in govt costs providing only $0.90 in benefits), and ignores the value of employer provided insurance (all of which favor Sweden).

Americans are still considerably richer (though the bottom of Sweden is better off than the bottom of the US). The gap gets even bigger if you restrict the comparison to Americans of Swedish descent.

http://super-economy.blogspot.com/2010/03/super-economy-in-o...

Re: How Americans Get Out of Credit Card Debt

#122

Post by yummyfajitas » Sat, Feb 05, 2011, 7:34 AM 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…

No, her study didn't show that. Her study does not address causality at all.

# bankruptcies caused by a medical emergency = # of bankruptcies x [P(bankruptcy | medical event) - P(bankruptcy | no medical event)] x P(medical event)

Warren's study only measures P(medical event | bankruptcy). A bunch of innumerate reporters drew the same conclusion you did (admittedly, with help from Warren's confusing language), but that just shows the media is stupid.

Here is the study: http://www.scribd.com/doc/16155232/Bankruptcy-2009

Re: How Americans Get Out of Credit Card Debt

#123

Post by arghnoname » Sat, Feb 05, 2011, 8:16 AM UTC

geuis wrote: post #22

So my question is what about people that aren't in debt, but need help improving their credit score? I had a lot of debt from about 5-10 years ago and it killed my credit score. The debt has all been paid off for a few years, I haven't had credit cards in years, and I still have a few notices from closed accounts that won't fall off for a few years. So I'm currently doing what I can to remove the closed notices and h…

I fell onto some hard times about ten years ago. Eventually I was able to pay the debt off but my credit was in the toilet for years. I went from a credit score of 530 to 600 and then it just sat there...and sat there..and sat there for a few years until the magic date passed where crap fell off and it jumped to 750.

The other lines of credit people are mentioning might be helpful, but in my case I just had to be patient. If I can manage to never take out a loan again in my life (it's been ~10 years) I'd love that. Debt sucks.

Re: How Americans Get Out of Credit Card Debt

#124

Post by arghnoname » Sat, Feb 05, 2011, 8:26 AM UTC

kevinpet wrote: post #49

They have a chart showing how people get out of debt, and the chart seriously does not include the option "pay your damn bills?" I'm reminded of statistics saying that the average wedding costs $28k or whatever. The reality turns out to be something like "among weddings arranged by a professional wedding planner, the average cost is 28k". I hope they aren't putting together a funding pitch equating the "1/3 of Americ…

I've been in a situation where life sucked and racked up some debt and fouled up my credit, so I can sympathize to some extent, but what I thought was pretty bad debt (including student loans) was less than that 'average' wedding figure.

After spending a year or two putting all my extra income toward successfully retiring the debt, my future wife and I looked at engagement rings and weddings and thought, "this is crazy." She has no engagement ring (wedding band though) and we eloped, and we're just as married as my brother and he spent $30k.

I have a friend whose parents offered to give them money for a down payment or to pay for their wedding. They chose wedding.

What the hell people? It's one day. The wedding madness is just nuts. "Hey, we might want to buy a house and have kids soon. Let's spend all of that money we might need entertaining a gaggle of family and friends, half of whom each one of us doesn't particularly like."

Re: How Americans Get Out of Credit Card Debt

#125

Post by dalore » Sat, Feb 05, 2011, 1:50 PM UTC

macov wrote: post #44

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

Or 5% cashback sometimes (look at Discover More etc).

Those 5% deals are generally time limited. Also not available in every country.

Re: How Americans Get Out of Credit Card Debt

#126

Post by ronp » Sat, Feb 05, 2011, 5:42 PM UTC

nostrademons wrote: post #71

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…

I remember a study on general aviation plane crashes. They found that very few plane crashes came about because the pilot made a single, obvious mistake. Instead, the common pattern was a series of missteps, each so small that you couldn't properly call it a "mistake" in and of itself, the pilot was just cutting corners on the recommended safety margin. And then something happened that was out of the pilot's control,…

I think your point about having financial reserves is relevant, and I also think that having the motivation to have a reserve requires financial sense that, unfortunately, is not wide spread. I am an attorney that does volunteer work by handling bankruptcies "pro bono" through a local non-profit. Every bankruptcy case has it's one unique set of circumstances but there is a consistent pattern. First, the debtors don't have a good understanding of money or personal finance. Usually that's a product of not having parental examples of good money handling. Second (and perhaps because of the lack of understanding) they don't pay attention to finances if there is a resource to pay for things (cash or credit). Third, there is a watershed event like a loss of a job or a major health crisis. Fourth and finally, they wait too long before getting help. If I were king for a day, I'd make sure that financial education was mandatory in high school and was spread out throughout the high school years rather than being taught in a single quarter or semester.

Re: How Americans Get Out of Credit Card Debt

#127

Post by Cadsby » Thu, Feb 10, 2011, 4:56 PM UTC

jerf wrote: post #110

Cadsby wrote: post #103

Earlier quoted context omitted.

It's easy to be judgmental. What would you have done if you didn't have parents to mooch off of for a year? What if you had a family to support? It's easy to tell yourself you succeeded all due to "self control" and "discipline". But the truth is like many judgmental types, you had considerable practical/emotional support as well.

"What would you have done if you didn't have parents to mooch off of for a year? What if you had a family to support?" What if a cow comes stomping into your front room and demands that you feed her shredded hundred dollar bills until she's full enough to tap dance her way to victory in the upcoming school competition? Hypothetical aren't arguments, they're just anchorless questions. You have to look around yourself,…

The difference is my hypothetical is a realistic one many people face. Yours is just pure fantasy with no connection to reality.

Yes personal motivation and attitude to succeed are large factors, ones we should encourage, but the empirical evidence heavily suggest your personal circumstances and level of support are equally as important, if not more so.

I'm a little tired of people with multiple advantges largely ignoring them in favor of the "I'm so great and awesome and all you need to do is be like me" mentality.