Survival off of credit cards
No not us, we’ve played that game and now we use our money. A story on CNN Money, Barely surviving by using their credit cards has really got my head hurting. This story is so biased and at no point blames consumers for their actions. Then I read this:
Government and agency statistics illustrate this troubling trend. The Federal Reserve reported Wednesday that Americans’ credit card debt jumped 6.7% in the first quarter of this year to $957.2 billion, This spike comes despite the fact that nearly one in three banks is tightening guidelines for credit cards.
The US is near $1,000,000,000,000 dollars in credit card debt. According to the story racking up credit card debt isn’t a choice people want to make. They had to run up their credit cards because the costs of their basic needs were going up. The reason they have to use their credit cards is because their lines of credit and home equity has been used up. At no point have they acknowledged the fact that they are living beyond their income and going deeper into debt. The great expert says that they can’t increase their income, but their expenses are going up.
Why does a weak housing market all the sudden create a financial problem so people have to use their credit cards? They drained the equity they were getting out of their house to fund their frivolous lifestyle. The system of not being able to tap their house for cash like an ATM has caused them to run to their credit cards. Now their balances are increasing to the point they cannot make the minimum payment. You will never get out of a hole by digging out the bottom.
The best line was at the very end:
“A lot of people will quit going out to dinner if they see their balances rise,” Hampel said. “This will hurt the economy.”
NO!
You’re really not considering all angles. A weak housing market is hitting a lot of other job markets, like construction and lending for starters, very hard. That means even people who aren’t in foreclosure or who didn’t tap their housing equity are being affected–they’re losing their jobs or are getting hours cut back. Even if they have emergency funds, those don’t last forever. That’s how people end up living how credit cards. I know–I’ve been there. And if things don’t improve soon, I could be there again.
I’m not considering all angles? Did CNN Money consider all the angles in their coverage? I’ve said it before and I’ll say it again, today we are paid not what we do but what we know. Nobody is forcing these people to turn to credit cards, credit has become a security blanket when we run into trouble. It is very easy to wonder into debt and an uphill struggle to get back out. Sure an EF isn’t going to last forever, but neither will the credit cards. If I am put into a position where my job could be gone, I would be watching things closely and developing a plan before it happens.
AGREED. All of these efforts to “fix” the problem are temporary and only serve to mask the real problem which you have aptly pointed out: We are a debtor nation that lives beyond our means. The sub-prime mortgage fiasco is but one symptom of this problem…others will follow. Wake up!
Jim! Once you got the stimulus check you forgot about us..:)Looking forward to reading your posts.
Another angle you are not keeping in mind is how high of a lifestyle people try to live. Everyone wants that American dream of a house with a red door and white fence. However no one bothers to think of whether or not they can afford it or not. They jump into a loan thinking they will be able to afford it and then not be able to pay it off when they didn’t read the fine print about how the cost increases over the months of the loan. So then you have one along with hundreds of others who do the same thing not being able to pay back money that the banks handed to them to buy their dream home. The person then starts to use their credit cards as a means to pay off the loan but are then reminded that they still have to pay off the credit cards. It is a never ending circle of not thinking about what you can afford as to what you can’t. The market is not truly the problem, it is the people. You jump to what you can’t truly afford, it costs you in the end as well as everyone else. You jump the gun to soon and you don’t work out the math. My family has forever lived in an apartment until now. My dad has finally gotten himself into a budget where he can pay off all his debts within the next few years. But believe me, it took him forever!! Even at the cost of having two jobs, sometimes three while raising me and taking me to school. Times do get hard, do not get me wrong. I have gone without my car for a few weeks because I could not get the repairs needed, however I had a credit card that I could use! But I simply didn’t have the money in the bank to pay it off when the time came. So I worked, waited, and then when I knew it was possible, I fixed it. The whole term “Patiences is a Virtue” stands true. You just have to be willing to take a step bank in your life style to move forward. Me, I will never have money to flaunt or have fun anymore. I know this. But I know for a fact I will pull through and work my own ass off to give my child and my wife a future. Get what I am saying???