Economy Who's to blame for Americans being massively in debt and poor?

[Bobby00]

You’re not using your savings correctly if you are constantly dipping into it. Kinda defeats the meaning of the name as well.

But, everyone spends differently and everyone has different needs for purchases.

Like life, with credit cards it is up to the person to figure out what balance works for them.

I said i could not i do. If i really wanted something i could buy it or i could save up. Not hating on people who do its just not for me.

 

[fungi]

Federal Reserve owners.

 

[Bobby00]

Yea I used to think like you because I got screwed over by a CC when I was 18. I signed up for a bank account and BOA was like oh look you are eligible for a $3000 limit and I went crazy and never paid it off.

Once I started making enough money I realized I was just leaving money on the table by not getting cash back on my purchases. I'm easily pulling in like $2000 a year with my cash back.

You at 18 sound like my friend when he found out he had a limit of going 1000 in the minus. He said i earn 1000 more than i thought and i told him that is not how it works i think. He has crippling debt now but mostly due to gambling lol.

 

[Source]

But lets say you are unable to pay due to a emergency like i mentioned how far would that set you back? Obviously banks dont just gift money out of goodness and they need to recoup that money somehow. Lets say you lose your job and dont qualify for unemployment how much in the hole would that bring you if you got no savings?

It would put you in the hole whatever you spent that month plus the monthly finance charge on your balance. If you would be paying cash in the first place there shouldn’t be an emergency that would keep you from paying. That why as the other poster suggested it’s best to set up autopay. It’s not for everybody you have to be disciplined.

 

[djacobox372]

TS premise is bunk... the US has the 2nd highest median wealth in the world--double that of most other western nations.

 

[Fedor>Cain]

Im just happy no bank gave me a credit card in my 20s i was a massive idiot. Now early 30s never had a credit card and learned to be frugal.

Credit cards for daily purchases are the way to go. They offer an added layer of security over debit cards and you honestly get better rewards for using them. Pay off your balances before your statement comes and you will get a health dose of cash back rewards and boost your credit for when you need a loan to buy a house.

Even if you don't care about your credit score, they are still far superior to debit cards if you get something with 2+% cash back or with price protection benefits.

The added layer of security shouldn't be underestimated. If somebody gets a hold of your debit card info and runs up a bunch of unauthorized charges, it's a massive headache to deal with your bank and your account will most likely get frozen while they resolve the issue. If somebody gets a hold of your credit card info, it's pretty easy to dispute the charges with the credit company, easy to cancel the card and request a new one, and you don't have to deal with your bank account being frozen. It's honestly a no brainer.

I'll also suggest that you should have multiple cards. Should have something that gives a flat 2% back on every purchase, then get a couple more based on spending habits. Some cards offer 5% rewards on rotating categories every quarter. Might be restaurants one quarter, gas stations another quarter, I've had target/Amazon 5% back during Christmas season the last 3 years (which is pretty damn nice for Christmas shopping), etc. you can find cards that will give a straight 5% back on grocery purchases...hell Bilt has a MasterCard that lets you make rent payments with it that gives you bonus points for that.

I understand not wanting a credit card if you don't trust yourself, but if you have taught yourself good habits, you'll still have zero debt at the end of the month!

Edit: Also, for cards that offer points or cash back, you can often choose to spend them at checkout at the card terminal. Don't ever choose that option! Most credit card companies will do some funky math and reduce the value of your points if you don't choose a straight cash deposit into your account. It's different with every company.

 

[F1980]

You need 3 to 6 months worth of monthly expenses put in an emergency fund.

But after that, do not add any more into it. You're losing a lot of money if you are.

Put that money into something that gives you returns like a 401k or Roth IRA. If you put 1k every month into 401k, after 15 years, you will have $500k in your retirement. That's going with an average annual return rate of 10%.

 

[syct23]

I said i could not i do. If i really wanted something i could buy it or i could save up. Not hating on people who do its just not for me.

Nothing wrong with that,
Like I was saying if its not for you then you do what is good and works for you in life.

In America, yeah you can save up and purchases almost anything with lump sum cash payment. But for a lot of important things it may require a credit history, like a house or a new car.

Yes you can purchase those in full with money, but let’s be serious here. Maybe one or two people out of 1000 are actually walking into a car dealership and handing over a bag of $30,000 or $400,000 for a house. That just doesn’t happen in real life very much.

That is why in America you are pretty much forced at a young age to start developing credit history, to purchase the things you will need later in life, house, vehicles, etc.

If you can figure it out early and have good discipline, then you can coast through life a lot more easily.

And if you can’t,
Well enjoy them fancy clothes and new cars youngster because I will probably be giving you a few dollars well you stand at a stop light in the near future…

 

[James Eagle]

Im just happy no bank gave me a credit card in my 20s i was a massive idiot. Now early 30s never had a credit card and learned to be frugal.

Get a credit card but be smart. Only buy what you would have spent cash on anyway. Pay your bill off in full every month. Get yourself up to 800 pretty quick. You need a credit score

 

[PhitePhan]

From my own experience the top two things that contribute to people being broke is them buying brand new cars on credit and eating out almost every day. They don't cook at home, and what's even worse now is that they don't even drive out to pick up the food. They use UberEats or another type of delivery service where they upcharge you on the food, charge you delivery fee AND tip on top of all that.

When I was a kid in the 80s, if we dont finish our cereal, my grandma would put the bowl in the fridge to finish later.

A lot of people blame the top 1% and the politicians.

I blame the people themselves. Most people I know drive brand new or newer cars. Their cars have a little problem and their solution is to go out and buy a brand new car instead of getting it fixed.

They use their credit cards to buy things they cannot afford. They use them to pay their bills, to go on vacations they cannot afford.

Edward Bernays

 

[Bobby00]

Get a credit card but be smart. Only buy what you would have spent cash on anyway. Pay your bill off in full every month. Get yourself up to 800 pretty quick. You need a credit score

No thanks but thanks anyway. It works a bit different here you dont need credit score to buy or finance a house. What you need is some money upfront a income that is realistic to pay off the house and a clean sheet as far as debts. I dont need it thanks for looking out though.

 

[method115]

You at 18 sound like my friend when he found out he had a limit of going 1000 in the minus. He said i earn 1000 more than i thought and i told him that is not how it works i think. He has crippling debt now but mostly due to gambling lol.

Yea I kept thinking I'll just pay it off slowly. Didn't realize the way interest rates and all that.

 

[D 1 Wrestler]

American Credit score is basically asking you to open more cards and regularly be in debt. My friend from Australia said it's basically reverse of how they handle it there where large lines of available credit are seen as a bad thing

Also rent/mortgage to income ratios are completely out of wack

 

[Striderxdj]

You’re missing out on free money. You do have to be disciplined to pay off your card every month though.

This. I have 2 credit cards (one for my misc purchases, one for household joint stuff) I put everything on them and pay them off in full every month, my credit score is over 800 now and with cash back bonuses its basically free money.

 

[Bobby00]

Yea I kept thinking I'll just pay it off slowly. Didn't realize the way interest rates and all that.

I know what you mean i did have debt in my 20s not from credit cards but from unpaid invoices they have a system where it racks up with fees and then it goes to a goverment office dont know if you have something similar but with this debt your then on a list and renting or even buying things on installments is impossible basically your blackballed and lets say you want to rent a apartment the renter will ask for the sheet and he will be able to see what you owe and what you paid off. Took me a while to pay off and the worst was having to call the offices i owed money because even if you paid they could keep you on the list. It would be written its paid off but it was still a blemish. You needed to ask to be removed from the list and different offices had different procedure. Some a call was enough, others wanted it in writing or for example the tax man required you to fill out a form and have it paid off and declared.

 

[panamaican]

Consumerism. I also point out how the size of everything we buy has skyrocketed.

The size of the average house used to be 1000 sq. ft. It's 2500 sq. ft. now. This is while household sizes are shrinking.

Another example, related to cars, is how everyone drives an SUV now. So even though gas mileage is better, materials are lighter, etc. The vehicles themselves have grown. We have tv's in every room of the house. Cable is ubiquitous but now we also have internet packages and streaming. We have 4+ pairs of shoes. Enough clothes to justify "fast fashion" as a sustainable business model.

The list of expenses that we've just accepted as normal has far outpaced our earnings. And it's only going to get worse because social media is pushing the outcomes of consumerism into everyone's hands without any commentary on how much of our money is being lost.

 

[method115]

I know what you mean i did have debt in my 20s not from credit cards but from unpaid invoices they have a system where it racks up with fees and then it goes to a goverment office dont know if you have something similar but with this debt your then on a list and renting or even buying things on installments is impossible basically your blackballed and lets say you want to rent a apartment the renter will ask for the sheet and he will be able to see what you owe and what you paid off. Took me a while to pay off and the worst was having to call the offices i owed money because even if you paid they could keep you on the list. It would be written its paid off but it was still a blemish. You needed to ask to be removed from the list and different offices had different procedure. Some a call was enough, others wanted it in writing or for example the tax man required you to fill out a form and have it paid off and declared.

Damn yea it never got that bad for me. Renting was always separate in my area. So they would check if you had any evictions recently if not you were good to go. Well if you owed an apartment money that would also stop you from being able to rent from them.

My bad credit honestly never really affected me. In my late 20's I started working on getting it fixed. Luckily all the negative accounts I had were about to drop off in the next year or so. So I just waited for those to fall off and signed up for some $300 credit limit cards at local stores and slowly got my credit back up. I'd buy like 1 shirt with the CC and then pay it off as soon as it registered on their system.

 

[nostradumbass]

There's plenty of blame to go around.

Ultimately it's the person's fault for their choices, but people are left intentionally ignorant so they're easier to exploit. It's the reason marketing is aimed at "the demo" of younger people who have SOME money to spend and not the older people who actually have more money but have already learned the value of thrift.

How many people do you think could give you even a loose figure for how much they spend in a lifetime on fees and interest? Listening to most people, it actually seems like most people think billionaires is like their checking account balance from direct deposits.

If you're bombarded with advertising, and intentionally left ignorant and prevented from making informed decisions, you could easily make a ton of terrible financial decisions.

 

[boingyman]

American Credit score is basically asking you to open more cards and regularly be in debt.

This is false and if anything could drop your credit score depending on how you define “debt.” I have no idea why this misinformation is still being spread around. You don’t need to open more cards to maintain or increase your credit score unless your combined credit limit is too low compared to the amount you utilize (you typically don’t want to exceed 30% utilization), and you want to increase your overall limit to help reduce utilization (ideally <10%). Also as long as you pay your credit cards on time (all the time) your credit should not take a hit because if any statement balance is not paid in full your credit score could significantly reduce.

 

[Fedor>Cain]

This is false and if anything could drop your credit score depending on how you define “debt.” I have no idea why this misinformation is still being spread around. You don’t need to open more cards to maintain or increase your credit score unless your combined credit limit is too low compared to the amount you utilize (you typically don’t want to exceed 30% utilization), and you want to increase your overall limit to help reduce utilization (ideally <10%). Also as long as you pay your credit cards on time (all the time) your credit should not take a hit because if any statement balance is not paid in full your credit score could significantly reduce.

Yea, sounds like the other poster is equating a line of credit with debt.

Having a $20k credit limit doesn't mean you have to use it lol