Credit Cards
For decades, credit cards have been a means by which large banks have loaned money to poor people at interest rates approaching infinity.
A Brief History of Credit Cards
Incredibly, the above isn't an exaggeration. There are people in this situation right now where each payment to their credit card company leaves them owing more. Only in the last few years has the government moved to stop banks from putting people in this cycle of infinite repayment (where the interest and fees are more than the monthly payments).
How was this ever legal?
Well, in the late 70s, the US Supreme Court ended the federal predatory lending laws, and the credit card economy was born.
Banks issued cards to anyone and everyone, often charging 24.99% interest (or higher, cash advances often collect 29.99%) and adding on an assortment of fees hidden in the fine print. This appears to be a good deal for the card holder, as the monthly payment is very low. Specifically, it was often 2% of the balance, an amount that would either have the card holder paying back their debt many times over or, in the worst cases, never paying it back at all (especially once unexpected fees were thrown in).
As wages for middle and low income Americans stagnated in the 90's and manufacturing jobs went overseas, much of the growth in consumer spending came in the form of goods bought with credit cards. Thirty years after that Supreme Court decision, the average American card holder owes $10,679 on their cards. About 80% of American families have at least one card. Combined they owe about a trillion dollars, but will pay back far, far more.
In 2005 the government stepped in and "encouraged" credit cards companies to raise their minimum payments to something that would actually pay off the debt in the card holder's lifetime. They were not, however, actually required to comply.
More recently the Obama administration signed into law new regulations that will supposedly require credit card companies to operate in a less overtly evil way.
If you have a credit card, for the love of God, pay more than the freaking minimum.
Credit cards are for emergencies or to purchase important items that you can't immediately afford, like a vehicle or insulating your attic. If people used them properly instead of buying random s**t off amazon, the sob stories of credit card debt wouldn't exist.
ReplyWomen are sometimes fragile, want a real-man to protect you? Join in
Reply---uniformedkiss*c’o’m--, here you will meet lots of servicemen and find friendship, love, romance, marriage or even more with those armed forces, police, navy, security, medical, ambulance, prison, air crew and fire fighters! You will not regret for dating with military personnel. Just sign up and nothing will lose if you don't like it. Thanks….
i agree with the sentiment of the infographic and article, but since, as you mentioned, there are laws in place now to prevent the exact situation displayed, it's a bit disingenuous...
Reply[EDIT] nevermind.
credit cards are considered revolving debt and do not transfer to children, nice try though
ReplyIf only those poor descendants of the debtor would have realized that and decided not to pay the credit card company, then all traces of comedy could have been completely destroyed from this article. Such wasted potential.
I've always been told not to buy anything with a credit card unless I have the cash to pay for it
ReplyAnd that's wise. Credit cards are basically designed to make you spend more than you can afford to.
funny funny stuff
ReplyIf you can't afford it today, you can't afford it tomorrow when it's 17.99% more expensive.
ReplyI'm sorry never buy anything you can't pay for... how hard is that?
ReplyThe credit card companies would go bankrupt that way...
I have a debit card... i can get overdraft fees but wont ever have to pay intrest. Screw credit cards lol. I'm not rich enough to get one.
ReplyI love how liberals always try to blame the credit card companies.
Reply Hide All See All 3 RepliesIts not like anyones forcing you to use it. But of course, if you go into debt, its not YOUR fault why you're there.
Indeed. However, your argument is like an invitation for unethical abuse of people's stupidity or lack of information (read: interest) in understanding the consequences of their actions. Therefore I think it would be a better world if people who understand this concept better actually steps in and halts abuse rather than letting a group of assholes cash in on their advantage.
Nice way to feed the trolls. Prepare for flame wars?
I feel sorry for those who are against his view, just buy what you can pay for, it's not that damn hard!!!
Aaaand that is why I use my credit card like a debit card. I have a $100 daily limit on my debit card, so when I need to buy something more expensive than that, or online, I go online and transfer the amount I paid as soon as it shows up. I don't spend what I can't immediately repay.
Reply1. People are idiots.
Reply2. You don't inherit debt, it will be deducted from your wealth when you die before your heirs get anything, the credit-card company lost for allowing you to take a loan you couldn't pay back.
3. And yeah I realize it's a hypothetical illustration, but still...
In regards to #2... You are correct in that you are not responsible for the debts of your family (assuming of course you didn't cosign anything), but that often doesn't stop the collectors from trying to convince you otherwise, and many people foolishly believe that they DO owe on their family's debts and will actually make payments regardless of law.
Mmm how did the company lose when they have gained far more than the original "loan"
?
Uhhh, David, did you remember to take inflation into account?
ReplyThis is the first inadvertent piece of communist propaganda that i have ever seen
ReplyNahh
How about this: pay cash for everything except for your house and for your first car. Drive the car until the wheels fall off, and when the payments are done, keep paying for the car. Whatever you have left when the first car finally dies is what you pay cash for the second car.
ReplyDave Ramsey has a good article on how to make this work, and make it a nicer car than the one you just killed. I have managed to do exactly this - having had only one car with a payment on it in my lifetime.
Credit cards should be saved for emergencies, not plasma TVs, game consoles or that new computer. The same goes for house maintenance (non emergency - remember?) furniture or planned family events (Christmas is in December this year... WOW!)
Good luck ;)
Depending on the agreements with the institute issuing your credit card you can sometimes use it as a "split-payment" device for more expensive purchases you already have the capacity to pay for. For instance I have a credit card with up to 60 days of no interest (depending on the date of your purchase) which I use (very rarely) for purchases I want to pay for in 2 installments. Works fine and I've never paid a cent in interest on it.
Dave Ramsay is incredible and has SAVED my family's finances. We've paid off all our credit cards and buy in cash only (or we use a credit card then pay it off the next day with cash to reap the frequent flier miles...). All we have is student loans which we are very quickly paying down using his system, and our car. We can actually afford to purchase a house now!
Everyone should check him out. Seriously.
Honestly, this can be summed up in what was once common knowledge.
ReplyStay within budget
Save as much as you can
Pay back your debts quickly as possible
Try to keep a rainy day account for oh s**t situations
just with these few simple solutions, then you should be alright.
Okay, this chart bases its math on if you pay the MINIMUM payments. Pay $5 above the minimum payment, and this won't happen to you.
Replyoh, you mean like it says in the last sentence?
How about just buying within your budget, or better even, use a debit card? Bank of America, or any other bank for that matter, is allowing you to borrow and repay at your convenience. You, Mr. Self-righteous, take that for granted, be a moron, and keep paying just the minimum amount due, just so that you keep paying back all your life, and your heirs all of their lives. And you call pay(ing)back a bitch. WTF?
ReplyYour only supposed to pay the minimum if ur someone bad came up, which has made you unable to pay off anything more then the minimum. Once you get money again, you should start paying your debts off asap. If your life has gone too bad to pay off more then this for this many years, then its unlikely you could afford the minimum in month 1
Reply@Svogarian,
ReplyWhen my brother died in Texas his estate went into probate, and debts were paid to the extent that there were available assets that could be liquidated to satisfy them. There was still a substantial amount of debt after full liquidation of the estate. Neither I nor any other member of his family was forced to assume the debt balance. His creditors wrote it off.
Precisely what states obligate one to assume a debt that one did not personally incur ?