Author Topic: The typical American is always in credit-card debt  (Read 17071 times)

FireLane

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The typical American is always in credit-card debt
« on: February 10, 2016, 08:24:12 PM »
I knew a lot of people have credit-card debt, but I was shocked by just how many carry it around like a ball and chain their whole lives. Mustachianism has a long way to go before it breaks into the mainstream. From Bloomberg News:

http://www.bloomberg.com/news/articles/2016-02-09/americans-can-t-help-themselves-from-borrowing-more-on-credit-cards

Quote
About 35 percent of those aged 25 to 50 with credit cards are “convenience users,” who pay off their balances each month. The majority, whom researchers call “revolvers,” carry debt forward from month to month and usually pay high interest charges in the process.

I've never carried a balance on my credit cards, does that make me the freak? Is it that hard to not spend money you don't have?

LeRainDrop

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Re: The typical American is always in credit-card debt
« Reply #1 on: February 10, 2016, 09:08:42 PM »
I've never carried a balance on my credit cards, does that make me the freak? Is it that hard to not spend money you don't have?

My first credit card was as joint holder with my dad when I was 14 years old.  From the beginning, he explained to me that a credit card is just a convenient way to pay for things without having to carry cash, and it also lets you postpone really paying for the item for around 30ish days (depending on how soon the monthly closing date is).  I didn't even take it as a rule, but just as the way these things worked, that I could use it to buy what I needed, but I also needed to review the statement and give my dad the cash (or check) covering all of my charges before the payment due date every month.  Ironically, that account was closed by the lender a dozen years later, when I no longer used it, because my dad charged around $40 to it and just never paid the bill.

KodeBlue

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Re: The typical American is always in credit-card debt
« Reply #2 on: February 10, 2016, 09:10:17 PM »


 as joint holder with my dad when I was 14 years old...

I never held a joint with my dad!

SomedayStache

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Re: The typical American is always in credit-card debt
« Reply #3 on: February 10, 2016, 09:13:41 PM »
I would have actually expected the percentage of revolvers to be higher.  I wonder if this is per person or per card.  Someone who pays off five cards each month in full while carrying a balance on another card should still be classified a revolver.

...and I just realized I'm a revolver right now.  I have debt on a home depot credit card, 0% apr for another year or so, and technically have cash in hand to pay off at any time.  But I'm still carrying this debt from month to month.

Travis

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Re: The typical American is always in credit-card debt
« Reply #4 on: February 10, 2016, 09:22:37 PM »
I still run into people who insist they're supposed to carry a balance in order to have a good credit score.  One of them recently was one of my employees who is looking to close on a house soon.

faramund

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Re: The typical American is always in credit-card debt
« Reply #5 on: February 10, 2016, 09:30:38 PM »
What does carry a balance mean, I do, and I think its smart.

So month 1: spend money, get 1% cash-back from bank.
month2 : spend money, get 1% cash-back from bank. Automatically pay off month1 when needed to pay interest.

REPEAT forever... never pay a cent in interest, everything's 1% cheaper.

LeRainDrop

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Re: The typical American is always in credit-card debt
« Reply #6 on: February 10, 2016, 09:34:37 PM »
What does carry a balance mean, I do, and I think its smart.

So month 1: spend money, get 1% cash-back from bank.
month2 : spend money, get 1% cash-back from bank. Automatically pay off month1 when needed to pay interest.

REPEAT forever... never pay a cent in interest, everything's 1% cheaper.

Huh?  I'm not sure what you're saying, but if you mean that you charge your purchases and then pay off the balance after the closing date but by the payment due date, then that is not carrying a balance.  That is what is referred to in the article as "convenience use."

faramund

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Re: The typical American is always in credit-card debt
« Reply #7 on: February 10, 2016, 09:39:32 PM »
What does carry a balance mean, I do, and I think its smart.

So month 1: spend money, get 1% cash-back from bank.
month2 : spend money, get 1% cash-back from bank. Automatically pay off month1 when needed to pay interest.

REPEAT forever... never pay a cent in interest, everything's 1% cheaper.

Huh?  I'm not sure what you're saying, but if you mean that you charge your purchases and then pay off the balance after the closing date but by the payment due date, then that is not carrying a balance.  That is what is referred to in the article as "convenience use."
Yup, that was what my first comment about what carrying a balance is, I was thinking the balance of my credit card is always greater than 0, so I thought that counted, but thinking about it.. I was wrong.

Hmm, that's the second time I've had to admit to being wrong on this forum today.. can I claim that I feel sick?

LeRainDrop

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Re: The typical American is always in credit-card debt
« Reply #8 on: February 10, 2016, 09:43:49 PM »
What does carry a balance mean, I do, and I think its smart.

So month 1: spend money, get 1% cash-back from bank.
month2 : spend money, get 1% cash-back from bank. Automatically pay off month1 when needed to pay interest.

REPEAT forever... never pay a cent in interest, everything's 1% cheaper.

Huh?  I'm not sure what you're saying, but if you mean that you charge your purchases and then pay off the balance after the closing date but by the payment due date, then that is not carrying a balance.  That is what is referred to in the article as "convenience use."
Yup, that was what my first comment about what carrying a balance is, I was thinking the balance of my credit card is always greater than 0, so I thought that counted, but thinking about it.. I was wrong.

Hmm, that's the second time I've had to admit to being wrong on this forum today.. can I claim that I feel sick?

LOL, sure :-)  In that case, I fully agree with you that convenience use -- racking up the credit card rewards but never paying interest -- is very smart!

Travis

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Re: The typical American is always in credit-card debt
« Reply #9 on: February 10, 2016, 09:50:58 PM »
What does carry a balance mean, I do, and I think its smart.

So month 1: spend money, get 1% cash-back from bank.
month2 : spend money, get 1% cash-back from bank. Automatically pay off month1 when needed to pay interest.

REPEAT forever... never pay a cent in interest, everything's 1% cheaper.

Huh?  I'm not sure what you're saying, but if you mean that you charge your purchases and then pay off the balance after the closing date but by the payment due date, then that is not carrying a balance.  That is what is referred to in the article as "convenience use."
Yup, that was what my first comment about what carrying a balance is, I was thinking the balance of my credit card is always greater than 0, so I thought that counted, but thinking about it.. I was wrong.

Hmm, that's the second time I've had to admit to being wrong on this forum today.. can I claim that I feel sick?

LOL, sure :-)  In that case, I fully agree with you that convenience use -- racking up the credit card rewards but never paying interest -- is very smart!

I've never paid interest on a credit card in my life.  I was also very late in getting into the cash back/points game with credit cards.  I'd only use it when a debit card wasn't accepted or the item/service was too expensive for the debit card limit.  I was always nervous about using them.  Now it feels like I'm leaving free money on the table if I don't pay with a credit card.

RocketSurgeon

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Re: The typical American is always in credit-card debt
« Reply #10 on: February 11, 2016, 06:41:24 AM »
I have a friend who is convinced that a great way to build credit is to get a new card, ring up a few thousand on it, cut the card up, and then auto-pay the minimum balance forever (or however long it takes to actually pay off.) I tried to convince him otherwise, w/o success. Oh well. He's really poor and lives paycheck to paycheck as well. :(

golden1

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Re: The typical American is always in credit-card debt
« Reply #11 on: February 11, 2016, 07:04:43 AM »
I think a lot of people start out using cards for convenience use and then it slowly drifts into revolving debt.  Once people live with revolving debt for awhile it becomes more comfortable, so they let the debt get a little larger and larger until they realize they are paying minimum balances in the $100's and their debt isn't really shrinking.  I think it is really important to track your cc balance just like you would cash and when it reaches a certain level, that's it.  It is just a mental shift that you need to make. 

KodeBlue

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Re: The typical American is always in credit-card debt
« Reply #12 on: February 11, 2016, 07:09:01 AM »
I think a lot of people start out using cards for convenience use and then it slowly drifts into revolving debt.  Once people live with revolving debt for awhile it becomes more comfortable, so they let the debt get a little larger and larger until they realize they are paying minimum balances in the $100's and their debt isn't really shrinking.  I think it is really important to track your cc balance just like you would cash and when it reaches a certain level, that's it.  It is just a mental shift that you need to make.

Yep, that's where I was a few years ago...glad I woke up!

meg_shannon

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Re: The typical American is always in credit-card debt
« Reply #13 on: February 11, 2016, 07:11:30 AM »
According to the Federal Reserve Bank in Boston about 72% of adult Americans have at least one credit card. The 65% who carry revolving credit card debt is a subset of the credit card carrying population, therefore just under half (46%) of Americans carry a revolving debt.

That seems really high. When I was young, and married to a spendthrift, we had revolving debt occasionally. Now I never do unless it's financially prudent (0% rate for money we were already planning on spending for example).

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Re: The typical American is always in credit-card debt
« Reply #14 on: February 11, 2016, 07:21:50 AM »
I have never paid a cent of interest on a credit card.

I once missed my payment in college by a few days (when we had to send in *gasp* checks), and I called to apologize and they took the interest off.

I have carried a balance month to month, but it was on a 0% card, so that was part of the plan of using a credit card as a tool.

Mostly I charge to high heavens and then pay it off.  Cash doesn't come with rewards. I don't understand why anyone who is responsible with money would use it.

golden1

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Re: The typical American is always in credit-card debt
« Reply #15 on: February 11, 2016, 08:11:54 AM »
Most of my younger friends carry revolving debt and it just seems normal to them, like part of life as an adult.  I fell into the trap myself when I was at the tail end of being a SAHM and had one too many unexpected emergencies that we didn't budget for.  When I first paid it off I was scared of CC, but felt bad that I was missing out on the free money, so I have learned to use them responsibly.  But I need something like Mint to keep daily track of the balance. 

andy85

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Re: The typical American is always in credit-card debt
« Reply #16 on: February 11, 2016, 08:13:59 AM »
posted this in another thread as well....


Just think about it...from my actual numbers
Gross around 43k, 10% to 401k, less medical and taxes, my take home is 1060 bi-weekly or about $27,500 annually, which is about $2300/month

so...2300/month
mortgage 557
electric/gas 120
cable internet 120
water 50
cell 40
car insurance 70
car payment 300
groceries 300
gas 60
gym 10
alcohol 20
dining 40
netflix 8

Leaves about 600/month on paper to save or spend. In reality, most people's budgets for mortgage, groceries, dining, alcohol, and cell phone are probably higher. Add additional expenses with shopping and entertainment and you're probably spending every dime you make. A live concert here, a movie there, a little vacation over here, a couple of weekend roadtrips here....boom...you have nickel and dimed your way to carrying $3k+ in credit card debt at the end of the year, every year, which just adds another monthly bill to your list and the cycle continues. I really believe that most people don't know how to live within their means and not spend more than they make.

One Noisy Cat

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Re: The typical American is always in credit-card debt
« Reply #17 on: February 11, 2016, 08:33:10 AM »
   I am ashamed to admit I had 15 years of constant credit card debt. Fortunately 12 years ago I got serious and paid it off, only slipping once when I accidentally underpaid a bill by $20.

   So I am surprised that as many as 35% of the population do pay it off completely each month. I would have thought it is closer to 10%.

rubybeth

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Re: The typical American is always in credit-card debt
« Reply #18 on: February 11, 2016, 08:38:33 AM »
I believe it, and it's upsetting to me, and there's not much to be done about it other than just educating people that it's a bad deal. I am glad that the rules about credit card statements changed within the last few years to require that they show how long it will take to pay off a balance when just paying the minimum, and that the minimum payment must now actually result in paying off the debt in a (somewhat) reasonable time.

DH and I were both raised to only use credit cards for convenience use (rack up points, miles, whatever, then pay off in full when the bill comes).

Now, how can we get rid of predatory lenders and payday loan shops? I hate those things with a passion...

zephyr911

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Re: The typical American is always in credit-card debt
« Reply #19 on: February 11, 2016, 09:07:46 AM »
I've carried balances most of my adult life, and only flirted with that magical 0 number for brief periods in the last couple of years when I started getting my shit together. Investing always took priority over being debt-free, especially after I managed to squeeze everything down into the 0-3% range. Ex: just parked $4K on a new card ($0 fee, 0% APR for 15mos) rather than pay it off, because I perceived compelling opportunities to front-load this year's investments. Not everyone's favored approach, but works OK for me. I keep my SR high by keeping cash out of reach, and sometimes that means using credit to level out the bumps. As long as the math works out, I'm happy, and overall returns have justified it so far.

I do anticipate a full payoff in the next 3-4 months, and since I'm looking at an overall deleveraging as I coast in toward quasi-FIRE, I'll probably stay at least near 0 for the next year. Then, when my income drops, I'll go to a strict monthly payoff policy.

All that said, I remember how much it sucked to be on the wrong side of compound interest and I can genuinely empathize with people in that boat. It's easy to fall into the trap of "needing" things that you can't afford, and running up balances just to feel happy and comfortable, doing your best to ignore the eventual pain. All I can say is, the more people hear about MMM/LBYM/etc, the more of them might have a chance of revising their strategy and escaping the hole. There but for (whatever made me finally say "enough") go I, you know... I'm no better, I think, but I got here, and I think that means anyone can.

I believe it, and it's upsetting to me, and there's not much to be done about it other than just educating people that it's a bad deal.
edited to affirm this
Hear, hear. I do believe that's the main solution.

mm1970

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Re: The typical American is always in credit-card debt
« Reply #20 on: February 11, 2016, 09:12:27 AM »
I have never paid a cent of interest on a credit card.

I once missed my payment in college by a few days (when we had to send in *gasp* checks), and I called to apologize and they took the interest off.

I have carried a balance month to month, but it was on a 0% card, so that was part of the plan of using a credit card as a tool.

Mostly I charge to high heavens and then pay it off.  Cash doesn't come with rewards. I don't understand why anyone who is responsible with money would use it.
Simplicity
Control

Even if you are good with money, using cash systems can force you to spend less.
Studies show that people spend more with credit than cash, and I assume that means even responsible people.

It's a lot simpler.  Even with cash-back cards, or mileage cards (we have both) where you get a benefit, occasionally the bank screws up the auto-payment, then you have to call the CC company, call the bank, resubmit the forms on line or in person, get the interest charge taken off. 

I mean, that sort of thing has happened at least a few times in the last 5 years.

zephyr911

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Re: The typical American is always in credit-card debt
« Reply #21 on: February 11, 2016, 09:41:18 AM »
Simplicity
Control

Even if you are good with money, using cash systems can force you to spend less.
Studies show that people spend more with credit than cash, and I assume that means even responsible people.
Probabilistic and deterministic statements are fundamentally different things, so be careful about conflating the two.
The average person has been shown to spend more when using credit. This does not mean everyone helplessly slides into consumasuckarism the second they put plastic in their wallet, least of all a mindful and goal-oriented accumulator with his/her eye on a 'Stache target.
It is also true that less cash in the bank and more in the stock market means tangible gains over time. If, and only if, the cost of the above (mistakes, added spending, etc) exceeds those gains, can it be said that credit is a net negative.
Is it so for many people? Yeah. Am I guaranteed to be one of them? Not by any means.

astvilla

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Re: The typical American is always in credit-card debt
« Reply #22 on: February 11, 2016, 09:59:10 AM »
I use credit cards more than debit because of the security, if something happens, it's their money first before mine.

It's also a good way to track spending versus using cash, keeping receipts, I can see my behavior.

The only interest I had was some $2-10 payment for a late payment or something many years ago. That was because I didn't set up auto-pay.  Now it's automatic, never a missed payment.

In my mid-20s and never had credit card debt.  I honestly don't even know what credit card debt really is or like. 

Articles like these just make me think they're trying to scare people.  News articles/findings are always trying to find ways to grab attention, and those statistics aren't (usually...) accurate.  I don't think it's that bad...or maybe I don't find myself surrounded by people with uncontrolled spending habits.

Chris22

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Re: The typical American is always in credit-card debt
« Reply #23 on: February 11, 2016, 10:01:13 AM »
Studies show that people spend more with credit than cash, and I assume that means even responsible people.

That always has struck me as odd.  I rarely whip out the CC or debit card for anything except stuff I need (groceries, gas, home improvement project stuff), but once cash hits my wallet it flows out like water, usually on stupid incidental purchases.  In general, I grab myself a $20 when grocery shopping on the weekend and that's my "allowance" for the week for grabbing a drink out of the vending machine, lunch out 1x a week, etc.  To my mind, cash is already out of the bank balance, whereas anything else comes out of that money.  Silly, maybe, but just how I've always been. 

rockstache

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Re: The typical American is always in credit-card debt
« Reply #24 on: February 11, 2016, 10:14:13 AM »
Studies show that people spend more with credit than cash, and I assume that means even responsible people.

That always has struck me as odd.  I rarely whip out the CC or debit card for anything except stuff I need (groceries, gas, home improvement project stuff), but once cash hits my wallet it flows out like water, usually on stupid incidental purchases. 

+1 for me. If they took a closer look at this behavior between generations, I wonder if they would see a discrepancy. I became an adult in the age of CCs being common, things like Mint, YNAB being popular etc... and I find that cash is easier to 'lose.'

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Re: The typical American is always in credit-card debt
« Reply #25 on: February 11, 2016, 10:27:56 AM »
Studies show that people spend more with credit than cash, and I assume that means even responsible people.

That always has struck me as odd.  I rarely whip out the CC or debit card for anything except stuff I need (groceries, gas, home improvement project stuff), but once cash hits my wallet it flows out like water, usually on stupid incidental purchases.  In general, I grab myself a $20 when grocery shopping on the weekend and that's my "allowance" for the week for grabbing a drink out of the vending machine, lunch out 1x a week, etc.  To my mind, cash is already out of the bank balance, whereas anything else comes out of that money.  Silly, maybe, but just how I've always been. 

Same here.  I'm a bit of a garage sale addict, so cash is way easier for me to blow through than credit.  I go to stores and I'm like "look at all this overpriced crap, I guess I'll just go home with the groceries i really need".  Then I go to garage sales and I'm like "shit, I've got 2 leatherman tools, but here is another one for only a dollar so I've go to get it before someone else does!"

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Re: The typical American is always in credit-card debt
« Reply #26 on: February 11, 2016, 10:42:36 AM »
Studies show that people spend more with credit than cash, and I assume that means even responsible people.

That always has struck me as odd.  I rarely whip out the CC or debit card for anything except stuff I need (groceries, gas, home improvement project stuff), but once cash hits my wallet it flows out like water, usually on stupid incidental purchases. 

+1 for me. If they took a closer look at this behavior between generations, I wonder if they would see a discrepancy. I became an adult in the age of CCs being common, things like Mint, YNAB being popular etc... and I find that cash is easier to 'lose.'

Me too. If I have $100 in cash, it disappears so fast and I have no idea where it went.
But a CC it comes back in a giant list of shame.

I'm 34...

cats

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Re: The typical American is always in credit-card debt
« Reply #27 on: February 11, 2016, 10:45:31 AM »
Studies show that people spend more with credit than cash, and I assume that means even responsible people.

That always has struck me as odd.  I rarely whip out the CC or debit card for anything except stuff I need (groceries, gas, home improvement project stuff), but once cash hits my wallet it flows out like water, usually on stupid incidental purchases. 

+1 for me. If they took a closer look at this behavior between generations, I wonder if they would see a discrepancy. I became an adult in the age of CCs being common, things like Mint, YNAB being popular etc... and I find that cash is easier to 'lose.'

I find this also.  If there is cash in my wallet, I tend to spend it.  With a credit card, I'm definitely more thoughtful.

I grew up with the idea that a CC balance was to be paid in full, every month.  My first CC was a joint with my dad and I remember him telling me as we were filling out the paperwork at the credit union "if you miss a payment on this, you will be messing up MY credit as well as your own, SO DON'T MISS A PAYMENT."  I got into the habit of not missing payments and I guess never really regarded credit cards as free money or a loan (which I think are the viewpoints that get some people in trouble), just a different version of cash (that is, you have to have the money on hand to spend it).

I had a surprise moment in grad school when another student in my program said she would be amazed to learn than any of the grad students in our department did NOT carry credit card debt.  I wasn't quite sure what to say to that as not only did I not have credit card debt, I had also paid off my student loans from undergrad the previous year, was on track to max out my IRA contributions for the year (and had been doing so for a couple years at that point), and had never really felt that CC debt was something I was in any danger of incurring.  Sure, my savings rate was not super high and I had to live pretty frugally, but I had all the basic necessities of life and could think of a few areas where I could trim expenses further if I really needed to.  I had sort of assumed most of us were in a similar boat but her comment got me thinking that maybe that was not the case.  I will say after she said that I sort of started scrutinizing the lifestyles of students that were always complaining about being broke/not having enough money and sure enough, they tended to travel more, go out for dinner/drinks more, and live in slightly fancier apartments.  So I guess that's where their potential CC debt was coming from.

Another (frugal) friend and I once tried to help a mutual friend who was having funding problems figure out a budget.  It was atrocious.  First, he hadn't been in the habit of tracking expenses much.  We finally got some numbers written out for current expenses and the other frugal friend and I were making sensible (to us) suggestions like "gee, you are spending $600 a month on groceries, perhaps you should cut back on steak a little, or at least only buy it on sale?", or "hey, you know we can ride the bus for free, right?  How about doing that instead of driving to campus every day, then you can stop paying for parking and save yourself gas money?".  Every suggestion we made, he had some reason why that was not going to work or why he did not want to live like a "poor person".  Of course, of the three of us, he WAS the poor person, as he was something like $50k in debt while the other frugal friend and I both had a positive net worth.  And hello, we were in grad school, one of the few times in your life when it is 100% socially acceptable to be poor!  I haven't kept up with him a whole lot since we finished school, but from what I have heard he is basically still on the same track...he has at least moved to a lower COL area so perhaps that has slowed the unsustainability somewhat.

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Re: The typical American is always in credit-card debt
« Reply #28 on: February 11, 2016, 11:01:20 AM »
Studies show that people spend more with credit than cash, and I assume that means even responsible people.

That always has struck me as odd.  I rarely whip out the CC or debit card for anything except stuff I need (groceries, gas, home improvement project stuff), but once cash hits my wallet it flows out like water, usually on stupid incidental purchases.  In general, I grab myself a $20 when grocery shopping on the weekend and that's my "allowance" for the week for grabbing a drink out of the vending machine, lunch out 1x a week, etc.  To my mind, cash is already out of the bank balance, whereas anything else comes out of that money.  Silly, maybe, but just how I've always been.

Same here. I find those studies suspicious. I don't believe it. I also don't see how it would work, logistically. When I'm in a store I pick out what I'm buying, then go to the checkout and pay. That's when I decide how to pay. How would the payment method affect what I pick up, when that happens before? Would I see the wad of cash and go put the chocolate back, but not if it was a card? Or would I have to be thinking that I was paying with cash before I walked in, and that would make me pick up less stuff?

Chris22

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Re: The typical American is always in credit-card debt
« Reply #29 on: February 11, 2016, 11:11:16 AM »
Studies show that people spend more with credit than cash, and I assume that means even responsible people.

That always has struck me as odd.  I rarely whip out the CC or debit card for anything except stuff I need (groceries, gas, home improvement project stuff), but once cash hits my wallet it flows out like water, usually on stupid incidental purchases.  In general, I grab myself a $20 when grocery shopping on the weekend and that's my "allowance" for the week for grabbing a drink out of the vending machine, lunch out 1x a week, etc.  To my mind, cash is already out of the bank balance, whereas anything else comes out of that money.  Silly, maybe, but just how I've always been.

Same here. I find those studies suspicious. I don't believe it. I also don't see how it would work, logistically. When I'm in a store I pick out what I'm buying, then go to the checkout and pay. That's when I decide how to pay. How would the payment method affect what I pick up, when that happens before? Would I see the wad of cash and go put the chocolate back, but not if it was a card? Or would I have to be thinking that I was paying with cash before I walked in, and that would make me pick up less stuff?

For me it's stuff like "oh, I'll go get a drink from the vending machine....no cash...ooops, no I won't."  Or pull into gas station, "I'm hungry, maybe I'll get a snack...oops, no cash, not running a card through for a bag of chips."  Hence, I try not to carry a lot of cash, for financial and waistline reasons.

mm1970

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Re: The typical American is always in credit-card debt
« Reply #30 on: February 11, 2016, 11:12:39 AM »
Studies show that people spend more with credit than cash, and I assume that means even responsible people.

That always has struck me as odd.  I rarely whip out the CC or debit card for anything except stuff I need (groceries, gas, home improvement project stuff), but once cash hits my wallet it flows out like water, usually on stupid incidental purchases.  In general, I grab myself a $20 when grocery shopping on the weekend and that's my "allowance" for the week for grabbing a drink out of the vending machine, lunch out 1x a week, etc.  To my mind, cash is already out of the bank balance, whereas anything else comes out of that money.  Silly, maybe, but just how I've always been.
I think this is where personality is the key -

I have cash, and I keep it forever.  I am slow to spend cash.  If I go to the grocery store with $70, then I carefully spend less than $70. 

If I use credit or debit, I'm more likely to spend more.  (I get around this with a list, or just by not shopping.)

Everyone is different, but I was explaining why many people would use cash instead, even people who are "good with money" - using credit to get rewards doesn't always make sense.  It's a personality thing.

Jack

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Re: The typical American is always in credit-card debt
« Reply #31 on: February 11, 2016, 11:14:25 AM »
Cash doesn't come with rewards. I don't understand why anyone who is responsible with money would use it.
Simplicity
Control

Another big one: privacy. Those credit card rewards aren't free; they come at the cost of letting marketers, the government, etc. pry into your spending habits.

Chris22

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Re: The typical American is always in credit-card debt
« Reply #32 on: February 11, 2016, 11:19:30 AM »
Cash doesn't come with rewards. I don't understand why anyone who is responsible with money would use it.
Simplicity
Control

Another big one: privacy. Those credit card rewards aren't free; they come at the cost of letting marketers, the government, etc. pry into your spending habits.

"Hey Bob, look at this guy: grocery, home depot, Shell.  Grocery, home depot, Shell.  Oh, a restaurant.  Then...Grocery, home depot, Shell.  What a loser!"

Scandium

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Re: The typical American is always in credit-card debt
« Reply #33 on: February 11, 2016, 11:21:19 AM »

I have cash, and I keep it forever.  I am slow to spend cash.  If I go to the grocery store with $70, then I carefully spend less than $70. 

If I use credit or debit, I'm more likely to spend more.  (I get around this with a list, or just by not shopping.)

I suppose that's a natural limit on it, but also don't see the point. If I need milk, bananas and eggs for the week, but I don't have enough cash on me to buy it all then what have I gained? I go hungry because I didn't carry enough cash? Yes I guess I'd spend less, but I don't see much value in that, I'm not that poor. I buy what I need, how I pay for it doesn't much affect what I decide I need.

On the other hand I never get soda or vending machine snacks. And never feel much need to.

Scandium

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Re: The typical American is always in credit-card debt
« Reply #34 on: February 11, 2016, 11:22:49 AM »
Cash doesn't come with rewards. I don't understand why anyone who is responsible with money would use it.
Simplicity
Control

Another big one: privacy. Those credit card rewards aren't free; they come at the cost of letting marketers, the government, etc. pry into your spending habits.

"Hey Bob, look at this guy: grocery, home depot, Shell.  Grocery, home depot, Shell.  Oh, a restaurant.  Then...Grocery, home depot, Shell.  What a loser!"

"hmm, it appears he eats food. We must be able to use that against him somehow..."

I'm a red panda

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Re: The typical American is always in credit-card debt
« Reply #35 on: February 11, 2016, 11:38:41 AM »

Another big one: privacy. Those credit card rewards aren't free; they come at the cost of letting marketers, the government, etc. pry into your spending habits.

I figure they are spying on me anyway. Might as well benefit from it.


galliver

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Re: The typical American is always in credit-card debt
« Reply #36 on: February 11, 2016, 11:45:07 AM »
Some things about this article don't quite sit well. For example, "the majority, whom researchers call “revolvers,” carry debt forward from month to month", but the median balance is <$3k for all age groups. Not entirely clear if this is lowered by including "convenience users" (which would make up the bottom 35% of balances). Not that this isn't significant, but that doesn't quite fit the "use every cent available" narrative that is being made. It doesn't amount to minimum payments in the $100's. And the "average consumer's CC debt" is in the $4-5k range. ~10% of a median household income...it's just hard for me to see that as overwhelming.

Not to say it can't be hard to pay off. That happens to be about the balance my bf and I carried for a while right after we moved, on a 0% card. I feel like that was good inoculation against running up a balance in the future. I did NOT like seeing balance on the card I couldn't pay off any minute. Not that I regret the decision, I rather enjoyed living with a bed and chairs and a lamp and food/spices/sauces in my pantry. But I definitely wouldn't put a vacation, etc. on credit. I did pay interest, once, on a different occasion. I traveled to a conference and my reimbursement got held up for stupid bureaucratic reasons. Decided I'd rather pay $5-10 interest (about the cost of a lunch out or 2-3 lattes) than drain my savings below my desired minimum.

JZinCO

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Re: The typical American is always in credit-card debt
« Reply #37 on: February 11, 2016, 12:09:51 PM »
I've never carried a balance on my credit cards, does that make me the freak? Is it that hard to not spend money you don't have?

My first credit card was as joint holder with my dad when I was 14 years old.  From the beginning, he explained to me that a credit card is just a convenient way to pay for things without having to carry cash, and it also lets you postpone really paying for the item for around 30ish days (depending on how soon the monthly closing date is).  I didn't even take it as a rule, but just as the way these things worked, that I could use it to buy what I needed, but I also needed to review the statement and give my dad the cash (or check) covering all of my charges before the payment due date every month.  Ironically, that account was closed by the lender a dozen years later, when I no longer used it, because my dad charged around $40 to it and just never paid the bill.
I love this. Carrying a balance incurs a penalty. For some reason, people see interest not as a penalty but as a term of use...

TheGrimSqueaker

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Re: The typical American is always in credit-card debt
« Reply #38 on: February 11, 2016, 12:59:22 PM »
I love this. Carrying a balance incurs a penalty. For some reason, people see interest not as a penalty but as a term of use...

It's marketed that way.

MgoSam

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Re: The typical American is always in credit-card debt
« Reply #39 on: February 11, 2016, 01:17:11 PM »

Another big one: privacy. Those credit card rewards aren't free; they come at the cost of letting marketers, the government, etc. pry into your spending habits.

I figure they are spying on me anyway. Might as well benefit from it.

Yup! Each time I look at an item on Amazon, it appears on my FB feed and elsewhere.

Chris22

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Re: The typical American is always in credit-card debt
« Reply #40 on: February 11, 2016, 01:20:19 PM »

Another big one: privacy. Those credit card rewards aren't free; they come at the cost of letting marketers, the government, etc. pry into your spending habits.

I figure they are spying on me anyway. Might as well benefit from it.

Yup! Each time I look at an item on Amazon, it appears on my FB feed and elsewhere.

And really the only thing that annoys me about that is it still does it when I've already bought it.  I bought some nice LL Bean boots a few years ago, read about it online, looked at the reviews, etc etc, then went and bought them in the LL Bean store.  I still get frickin' ads about them.  They need a "thanks, bought it already" option.

slugline

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Re: The typical American is always in credit-card debt
« Reply #41 on: February 11, 2016, 01:49:16 PM »
Mostly I charge to high heavens and then pay it off.  Cash doesn't come with rewards. I don't understand why anyone who is responsible with money would use it.

I'm mostly in agreement with this. Cash sort of has a "reward" at retailers that try to pass on the CC transaction fees. We have gas stations and liquor stores that will charge you less if you pay with cash.

The only way I could see myself becoming as responsible with cash as I am with credit is if I would force myself to track transactions in a cash account in my recordkeeping. Otherwise, I can easily treat the stuff as if there are no lingering consequences if I spend it.

FireLane

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Re: The typical American is always in credit-card debt
« Reply #42 on: February 14, 2016, 05:32:08 PM »
I also don't see how it would work, logistically. When I'm in a store I pick out what I'm buying, then go to the checkout and pay. That's when I decide how to pay. How would the payment method affect what I pick up, when that happens before? Would I see the wad of cash and go put the chocolate back, but not if it was a card? Or would I have to be thinking that I was paying with cash before I walked in, and that would make me pick up less stuff?

I've heard it called "pain of payment." Paying for stuff with cash is psychologically hard, because you have to give the money away. When you pay with a credit card, you "still have" the card afterward, so it's less stressful to make big purchases, and that might tip someone over the edge into buying something extra that they were going back and forth about whether they could afford. Put that way, I know it doesn't make any sense, but marketers have learned all about these little quirks of human irrationality and how to exploit them.

JZinCO

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Re: The typical American is always in credit-card debt
« Reply #43 on: February 14, 2016, 07:33:23 PM »
I also don't see how it would work, logistically. When I'm in a store I pick out what I'm buying, then go to the checkout and pay. That's when I decide how to pay. How would the payment method affect what I pick up, when that happens before? Would I see the wad of cash and go put the chocolate back, but not if it was a card? Or would I have to be thinking that I was paying with cash before I walked in, and that would make me pick up less stuff?

I've heard it called "pain of payment." Paying for stuff with cash is psychologically hard, because you have to give the money away. When you pay with a credit card, you "still have" the card afterward, so it's less stressful to make big purchases, and that might tip someone over the edge into buying something extra that they were going back and forth about whether they could afford. Put that way, I know it doesn't make any sense, but marketers have learned all about these little quirks of human irrationality and how to exploit them.
So Dave Ramsey says. Snark aside, I could understand that some people view money this way. It's definitely not universal. In fact, I don't track spending if I were to use cash because that would involve keeping every receipt and manually running the numbers to see where my dollars flow.

bacchi

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Re: The typical American is always in credit-card debt
« Reply #44 on: February 14, 2016, 09:20:14 PM »
Related to this, I received a recruiter email for a startup:

Quote
Our product is a unique platform that enables retailers to instantly offer a range of alternative credit options for their customers whose credit rating limits their ability to purchase the products/services they need. It's a disruptive technology approach that is truly changing the consumer credit landscape - empowering customers with the ability to purchase what they need, when they need it, and simultaneously solving one of the biggest challenges faced by retailers whose products or services cost more than the average consumer can afford to pay, out-of-pocket.

Yes, that's what we need -- more ways for people to buy shit that they don't need (not to mention that the paragraph is a Buzzword Bingo dream).

Scandium

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Re: The typical American is always in credit-card debt
« Reply #45 on: February 15, 2016, 11:51:34 AM »
I also don't see how it would work, logistically. When I'm in a store I pick out what I'm buying, then go to the checkout and pay. That's when I decide how to pay. How would the payment method affect what I pick up, when that happens before? Would I see the wad of cash and go put the chocolate back, but not if it was a card? Or would I have to be thinking that I was paying with cash before I walked in, and that would make me pick up less stuff?

I've heard it called "pain of payment." Paying for stuff with cash is psychologically hard, because you have to give the money away. When you pay with a credit card, you "still have" the card afterward, so it's less stressful to make big purchases, and that might tip someone over the edge into buying something extra that they were going back and forth about whether they could afford. Put that way, I know it doesn't make any sense, but marketers have learned all about these little quirks of human irrationality and how to exploit them.

I'm sure that's true, but like I said I don't understand it in practice. Most places I pick my purchase before I pay. So how would this pain keep me from picking up, say a bag of chips? I don't walk around the store thinking "cash, cash, cash!". Although maybe this would change if I did? I pick up stuff, then go ring it up and feel "the pain". But then i've already made the purchase decision. Will it influence me next time, is that it?

So do you need to think about cash the whole time? Maybe visualize a pile of bills? Or carry a stack around in the store and put away some bills every time you pick up an item? I'm sure this might work, but it's hardly the norm.

Davids

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Re: The typical American is always in credit-card debt
« Reply #46 on: February 15, 2016, 12:13:40 PM »
I always pay my balance in full each month but if you want to get very technical the moment you make a purchase on your credit card you are in credit card debt the only way to never be in credit card debt is to never make a purchase with a credit card.

JZinCO

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Re: The typical American is always in credit-card debt
« Reply #47 on: February 15, 2016, 01:19:34 PM »
I always pay my balance in full each month but if you want to get very technical the moment you make a purchase on your credit card you are in credit card debt the only way to never be in credit card debt is to never make a purchase with a credit card.
If you want to get really technical money is debt given that upwards of 97% of money is created by banks. But that doesn't move the conversation.
« Last Edit: February 15, 2016, 01:21:19 PM by JZinCO »

Goldielocks

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Re: The typical American is always in credit-card debt
« Reply #48 on: February 15, 2016, 01:49:27 PM »
Weird...

I had thought it was only 50% carry CC debt.   Canada is very different for some reason:
Why do you think there is a big difference?  More canadians have Credit cards as a percentage, is that it?    Is it a regional difference ?-- e.g., southern US states are dramatically different from other states?  Marketing or Regulation?

Nearly half of all Canadian credit card holders (46 per cent) are carrying credit card debt, according to a report released Tuesday.

http://globalnews.ca/news/1822207/nearly-half-of-canadians-have-credit-card-debt-report-shows-heres-how-to-get-rid-of-it/  Feb 2015 (1 year ago)

Canadian Bankers Association - July 2015; 
A 2014 survey by the Abacus Data found that 60% of Canadians pay their balance off in full every month..
Of those who do not pay off their card balances each month, 15% pay it off most months and 48% pay a lot more than the minimum payment requirement.

Canadian adults with at least one credit card in 2014: 89%.


Here is the actual report....
http://www.cba.ca/contents/files/statistics/stat_cc_db038_en.pdf

Versus USA Stats:
http://www.creditcards.com/credit-card-news/ownership-statistics-charts-1276.php

1.  71% of american (adults) have credit cards
The percentage of Americans who have no credit cards rose to 29 percent in 2014, up from 22 percent in 2008.

2. in 2012 self-reporting for USA survey indicated a lot more people pay the balance in full.  58 percent pay in full, according to this survey, instead of the 35 percent in Bloomberg article..
Cardholders 18 and older surveyed in February 2012 who said they paid the full balance on their credit cards each month: 58 percent.

Read more: http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php#ixzz40GrIgPUP

3. The average american household that carries cc debt has just over $15k in debt. 

Nerd Wallet has a great article, with 2015 study data...
http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/

For example, it states:  "Ask yourself: Do I really still need my cable subscription now that I’m on Netflix? Do I still need to have a landline phone? Do I still need that car I hardly drive? There are basic things consumers at any income level can do to increase their wealth — even if that just means being able to pay off their credit card balances faster.”
« Last Edit: February 15, 2016, 02:16:54 PM by goldielocks »

Goldielocks

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Re: The typical American is always in credit-card debt
« Reply #49 on: February 15, 2016, 01:58:43 PM »
Studies show that people spend more with credit than cash, and I assume that means even responsible people.

That always has struck me as odd.  I rarely whip out the CC or debit card for anything except stuff I need (groceries, gas, home improvement project stuff), but once cash hits my wallet it flows out like water, usually on stupid incidental purchases. 

+1 for me. If they took a closer look at this behavior between generations, I wonder if they would see a discrepancy. I became an adult in the age of CCs being common, things like Mint, YNAB being popular etc... and I find that cash is easier to 'lose.'

Me too. If I have $100 in cash, it disappears so fast and I have no idea where it went.
But a CC it comes back in a giant list of shame.

I'm 34...

Two very different behaviours are being compared here.

I think the statement that people spend less when they use cash means:

When you are going grocery shopping, if you use cash you spend less than Credit Card.  Why?  Because the cash on hand is generally close to the value of goods you intend to buy...
e.g., that it is easy to throw in a few more expensive items into the cart when you have a Credit Card without a limit worry...  if your grocery bill is going to be close to the amount of cash on hand, you will limit yourself, even if you see something else you want.

That is a different behaviour than comparing "walking around money" used to by gum, drinks and convenience items to the use of a credit card.  For those transactions, you have already decided to buy, and $5 covers it easily. Using a CC over cash would not influence you...    The only difference then, is if the cash in your wallet is earmarked in your mind as "fee spending allowance for any little thing I want".  And of course, it liquefies and disappears quickly.