Well no one ever taught me that either, as it is simple enough to understand on it’s own. (Don’t spend more than you can pay.) If you can’t understand that basic idea, then yeah there’s a bit of stupidity involved.
A: “Woohoo, my credit limit is $30,000! I can spend $30,000 on toys!”
B: “Uh, you know you have to *pay *for that right?”
A: “What? Pay for stuff I buy? Whoever thought that would be the case!”
More than once, I’ve heard children say, “Use your credit card (or write a check) so we don’t have to pay for it!” Sad thing is, so many adults don’t realize that it just doesn’t work that way.
:smack:
At the time there were quite a few stories about how the card companies were doing data mining to determine which cardholders were risks, and cutting their credit limits. IIRC they even looked at things like going to cheaper restaurants.
I also have more no fee cards than I really need, never carry a balance, get cash back on my most used one, and never have had anyone wish to cancel me. The optimal customer is the one with just enough balance so the risk of default is very low, but those of us who always pay the balance are very safe for the banks, and still make them money.
In a similar vein, the ads for home equity loans have returned. Those really play to people who don’t get it, since they mention all that money sitting idle in your house and nothing about having to pay it back. They are still suggesting them for home improvements, which might even make sense, but I suspect they’ll be on to vacations with the money soon.
People never learn.
We really need practical math in the schools to drill the points mentioned here home.
Remember, we’re talking about the median credit card user’s debt, not the median debt. Since 46% of households have a debt of zero, the median debt is only at the 4/54, or about the 8th percentile, of households with debt.
But rampant spending isn’t the problem for Aanamika. Her parents practiced “abstinence only” financial education and told her never to spend money ever; this left her just as ignorant as if her parents constantly spent money irresponsibly.
I knew I was going to get contradicted.
Look. Ignorance is not the same as stupidity, and the persistence in thinking so is one of the biggest things that prevents people from learning.
You need practical math in schools. Yes, you do. I have always believed that. And I don’t know how else to describe it to you, that no, finance is not intuitive. You believe it is because you currently know how to balance your checkbook and take care of yourself. Maybe you always did, but I don’t believe that for a second.
If you came out of your home with good financial habits, it’s probably for one of two reasons. Either your parents had good financial habits and taught you, or you were smart enough to pick it up on your own. You were NOT born with good financial habits. When you were little, you wanted everything! Somewhere along the line you learned you can’t have everything…but you can have some things.
Do you understand not everyone is smart enough to pick it up on their own? Do you really understand that, that some people need to have the lesson smack into their face? I don’t think you do.
Some people make mistakes, like criminal mistakes. Other people make financial mistakes. Both are difficult to recover from.
If you grew up in a household where your parents indulged in rampant spending, overspent their credit cards, etc., you might think it’s OK for you to do so too. My coworker has this problem. She always lived beyond her means. Her husband was bringing in a lot of money and they were living high on the hog. Suddenly his business fell through, and badly, and now they are in severe straits and just pulling themselves out of poverty and debt. These are not stupid people - he is a wonderful, savvy businessman, she’s a smart cookie…but they just lived beyond their means. OK, they can learn. But their kid? Still thinks they are rich. Still wants way beyond their means. It was only when he went to work and started earning money that he even began to understand it. These people bought him a car on his 16th day, brand new, free and clear, and when he wrecked it a week later, bought him another one!
Then there’s my case. As I said, my parents never splurged on anything, ever. My mother was incredibly tight-fisted. I was not allowed to get a job, so I had no money, and no way to learn sense. I wasn’t allowed to buy the smallest thing for myself. Couldn’t go out to dinner with my friends, because I couldn’t pay for my share. If I wanted to go to a movie, I had to list out all the expenses, and my mom would hand me exactly that much money. So I was a case of “you can’t have anything”, despite the fact that my mom clearly was making good money.
So when I got out and got my credit cards, yes, I went a little crazy. I thankfully never went too crazy, but even just ordering food and takeout and stuff like that I was a couple thousand dollars in debt when I left school. And now, I just bought a car free and clear, after patiently saving up for it, I have money in my 401K and steady savings, etc.
No one had given me any financial training other than “don’t spend it”! No idea of what was right to spend on, or when. I learned all this on my own.
It’s cruel to believe that everyone who makes financial mistakes is stupid. Now if they make the mistake repeatedly that’s another thing. My coworker has become savvy now, and tbh, it’s made her a better, wiser person - she’s learned how to budget. So have I. It takes time to learn these things and when no one takes you in hand, you have to learn them on your own, and sometimes, it takes harsh experience.
Even you, Amatuer Barbarian, say, a “lot of teaching” is not needed. I’m not saying a lot is needed. I’m saying a lot of people never got ANY teaching. And then they get thrown out into the world and it is taboo in our society to say “I can’t afford that” so they almost never hear anyone saying it, so they think people can afford it, so they think they must be able too. Credit is easily gotten and obtainable everywhere. I have one credit card right now, and I get offers in the mail every week! Every place I go asks me to get a credit card. People are bombarded with it every minute, and there just isn’t enough fiscal responsibility messages out there.
It really does feel that way, though - buying stuff online with a credit card feels like magic - you take a minute, hit a few links, and stuff magically shows up at your doorstep. The ordering and the stuff magically showing up and the charge showing up on your credit card a month later are so separated from each other that it is really, really easy to get it wrong in your head.
Once I had a surplus balance on my card (paid twice, or something) and didn’t use it quickly. Soon I got a check for it, and they cancelled the card. A few decades ago a bank in farm country sent all its accounts credit cards. Many were indignant and some cancelled their accounts over the insult.
Ouch. I feel for you, grude. My wife and I battle over financial responsibility, but nothing to that degree. She understands that keeping a balance is bad for you, long-term.
In order to get a better handle on spending, we started a new system: we have a separate checking account for all discretionary expenses, and a debit card linked to that account. A certain amount from each paycheck gets put into the discretionary account and all discretionary spending comes from there. If the money’s not there, you can’t spend it. Essentially, it’s like cancelling your credit card and living exclusively off your cash, but we still have the credit card available for emergency/non-discretionary use.
I used to think keeping a budget and using the credit card for spending was enough, but I realized there are always ways to cheat the system. Living off the cash is much harder to cheat.
I don’t disagree, I just think you have cause and effect and rationalization all mixed up.
It *should not *take a lot of education to give people the basics of financial responsibility… but in a world that screams at them to spend every dime they have, as far in advance of making it as possible, while NOT giving most people even that smidgen of sensible advice and knowledge… well, you pretty much end up where we are. People exist to spend every dime they can make or can convince someone they might make, someday. And the notion that there might be another way to look at life is marginalized and all but forgotten.
I had my bad year with credit around 20 or so, too. That’s not rare. What’s rare is someone who actually does learn that they don’t have to eat every piece of candy they can reach (use every dollar, real and borrowed, to buy things they don’t need). That majority gorges and gorges because everyone around them is doing it and the consumer goods industry has convinced us it’s a *good *thing.
Time to wake up. I’m doing my part.
My daughter claims she learned from someone that they don’t hate us. They like that about half their clients pay off their balance (nearly) every month as it improves their cash flow. They even allowed me to arrange that every month on the due date (and not a day earlier) the CC balance is paid in full. They wouldn’t do that if they hated the idea. Luckily, my wife understands all this without my having to explain. I charge, on average, $3000 every month, incidentally.
She self learns programming languages for fun, she recently got fairly proficient in Android programming in a week(if I hear one more time about signing conflicts with .apk files I’m gonna puke).
Anyway after further discussion she just doesn’t see the interest as a big issue, turns out she understands the math. She suggested sinking a large chunk of income into paying off the credit card monthly, and then using it exclusively for groceries and such. Rinse repeat.
I once tried to talk a relative out of buying a three thousand dollar car with a loan that had such outrageous terms, like they couldn’t pay the loan off early and avoid interest! The loan had to paid in full, as if they made the monthly payments even if they won the lottery a day after signing. Just because it was no money down they ended up spending almost ten times the car’s worth.
Yes, I don’t have any disagreements with the points you make here. I’m remembering the freakout that occurs every year after Black Friday “People didn’t buy enough shit! Our economy is in the shitter!” It’s like Lewis Black says - when did our economy get tied to Santa’s ass?
That sounds like a happy ending, to me. Cool.
Funny, this is exactly the sort of thing I was going to suggest she might be thinking. Why assume that she didn’t do a cost evaluation and decide that getting the TV now was worth what it would actually cost? Heck, why assume she plans on actually making the minimum payment, and wasn’t just arguing that as the absolute minimum you would have to pay, rather than the maximum?
There are a lot of people who use credit cards rationally who do not pay off everything at the end of the month. I’m actually surprised that none of them apparently post here.
The difference between rationality and idiocy is always paying off routine purchases you put on the card. If you nickel-and-dime your way through the month buying gas, groceries, meals and trinkets with the card, fine… but those purchases should never be allowed to roll over month to month. Using the card (separately or simultaneously) for budgeted large purchases you will pay off at some fair rate (no less than 10% each month) is fine, too, and the real purpose of small consumer credit.
The slide into hell starts when you are paying only minimums, allowing monthly spending to pile up and roll over, or fooling yourself by some combination - such as letting the $100 towards the television count for your $200 in spending, too.
The language she used and the way she worded just didn’t sound like she was “getting it”. I mean I know she didn’t think the magic credit pixie was paying our bill, but there also seemed to be a disconnect.(English is her first language).
The maximum is paying off the entire thing. She obviously did not intend to do that. Have you ever even had a credit card in your name. You don’t seem to fully grasp the concept either.
No there aren’t because that’s not rational at all. That should only be done in an emergency. You, again, seem to be admonishing us about something where you are woefully lacking in experience.
Not true - at least, not in all situations. To restate what I just said above - a spending card should be/must be paid off each month. Allowing routine purchases to pile up as debt is madness.
Using credit to buy selected items you truly need, with a plan to repay them in reasonable stages, is not wrong - just risky and a road to financial troubles if you’re not rigid about making the payments. It’s also too easy to use credit to buy crap you really don’t need and wouldn’t likely buy if you had to save to buy it.
But not paying off such balances is not necessarily bad or irrational.