Your next video should be about the horrendous data security and issues around these companies selling your DNA. Thanks to the 23&me breach you can now buy the genetic information on any number of groups, correlated with names, addresses, SSNs, and more! 🎉
"Here's video about why you might be in debt but before it thanks for our sponsor that take your money (after 14 days) that you either earned or borrowed."
A little reductive. Rarely used my cc and paid it off at the end of every month for 20 years. Only thing was I always used every penny of my spending money every month. Every penny of my grocery money every month. If I budgeted for it, I spent all the cash, nothing leftover. Staying at home, I've since switched to just using my cc with emergency cash for back up. I'm better with a cc. Keeping a running tally in my head over the month, I'm more cautious. I saw cash as money I'd as good as already spent once taken out of my bank account. More often than not, we have money left over from our budget every month that we can put towards retirement or kids college. I'm just a lot more cautious with a credit card than I am with cash and it has improved our long term savings. I can see how this might not work if you have a very tight budget to start with. But if you have a more generous budget to work with, it can be it's own game.
That is why they still make it super easy to get a credit card and they do absolutely nothing to verify your identity. This is why we have laws that says a bank cannot hold a customer responsible for more than 50 dollars in a case of fraud. Banks purposely make it easy to open fraudulent accounts and fraudulently bill legit accounts. They do the math and decided eating fraud still makes them more money than having stronger checks that slow down getting a new credit card or make it harder to fraudulently bill.
We use our credit cards to purchase pretty much everything. But we do it because 1) We only purchase what we have money for, and pay off our balances each month, and 2) We only use credit cards that offer cashback for purchases. Literally all of the credit card companies we are members with are paying us money to use their card, because we never keep a balance - so we never pay interest on what we buy. But I know that most folks do not operate this way.
I do this too, except the difference is I pay off my credit cards whenever I get paid, so every two weeks. Because I never carry a balance, their very high interest rates are never applied, so the effective interest rates are zero. Actually, this is not quite accurate, since because they are rewards cards, and the companies pay me for using them, the interest rates are technically slightly negative.
My biggest complaint with this video is it makes it sound like it was all caused by the Supreme Court. That's simply not true. It was federal law - legislation passed by congress and signed by a president - that did this. The Supreme Court merely said "yes, federal law applies as written."
@@unsignedmusic What about them? Congress passes laws all the time that step on states rights. If the Senate was appointed by state legislatures, as the original intent was (before the 17th amendment), perhaps there's be more pushback against stepping on states rights, but that ship has sailed. Federal laws overrule state laws - see Article VI, Section 2 - and the federal legislature said they wanted these laws. Now, anything the federal legislature does, the federal legislature can undo, if you can only get enough politicians to vote to return that power to the states (because politicians giving up power is POSSIBLE, even if I can't site any real-world examples). There was nothing stopping Congress from stepping in just after the Supreme Court decision cited here was released - or at ANY time since then - to say this is stupid and they want to pass a law to change it, or to set their own usury limits, or whatever else. All you have to do is convince them to do it. I would argue it makes some sense to have national standards rather than state standards, as it makes it easier - but it's not like big banks can't manage 50 separate sets of laws if they had to. I would also argue that some usury limitations are a good and healthy thing - but then you cost low-income/high-risk people access to credit and up encouraging illegal loan sharks, so even good laws can have negative consequences.
Correct. The Supreme Court enforced federal banking laws which concentrated federal authority over state authority and was enacted by a Republican party controlled legislative session by a Republican president. So much for Republican claims of wanting smaller government. I’m not even American and I know these historical facts. How come Republican voters don’t know their country’s own history?
This is something that irks me about anything blamed on the supreme court. Any decision they make is basically telling the legislative branch they need to write or change a law so it's clear what the law states. But congress has done such a great job of abdicating all responsibility to govern they're just like "awe shucks that's too bad....., OK onto the next meaningless hot button non issue that will help me get reelected or earn some sweet sweet campaign contributions."
I’m Gen Z & so many of my friends use credit cards for fast food & vacations. My friend, Ivy League finance graduate, was having an issue where they couldn’t pay rent after months of traveling abroad… I suggested using a credit card in this emergency, but he already maxed it out traveling…. Caleb Hammer’s financial audit shows what is really being spent on credit cards. Junk, fast food, clothing & fun vacations. Very rarely is it for needs
@@adamv242 Cut expenses down to barely anything. Only essential foods, no alcohol, no tobacco, no new phone, no new clothes, no new car. Etc. That and more education to get a better paying job. How is it life changing? Paying 20-30% interest means that buying anything is going to cost 20-30% more than you pay. Fees can be as much or more than interest. So put all cards on autopay. Look up the avalanche method to pay off debt.
@@adamv242 War economy. Live as if the world had ended. Stop consumption of everything non-essential. Sell everything you have which costs money to upkeep and you don't need to use to work. I lived like this for 2 years, it was quite bad but I'm never again going into debt for anything.
@@adamv242 Figure what you owe, what it will take to pay it off, and live below your means for as long as it takes (no going out to eat (or having food delivered)), no ordering unnecessary crap from Amazon, etc. Very important: Let your family/friends know you are concentrating on this so they won't expect much out of you financially- they won't be ashamed, they will be proud that you are tackling this. Pay off the smaller balances first, freeing up available cash as you go so you can apply it toward the larger bills. If I can do it (and I did), anyone can...
@@adamv242 Get bank to freeze credit card and interest paid on what is owed so you can pay it off completely without interest then close credit card. Pay as much as physically possible each month off credit card debt till credit card debit is paid off as quickly as possible with zero balance. Sign up for a debit card instead and save money to purchase rather than use credit. It is a different way but much safer with very low fees of about 1.6% per transaction. You will save thousands once credit card debt is completely paid off as you will no longer have any interest to pay. Never get a credit card again.
It just so happens that the vast majority of currency is directly produced via the creation of new debt instruments. Though one does wonder, say people were to demand their bank deposits (loans to the bank) be paid in the form of physical currency, I wonder how this would change the debt and currency landscape of the United States.
I'm amused, that everytime someone complains of ads while viewing youtube, it turns out that they have not a clue about ad-blockers. I never see ads. uBlock, Ghostery, Ad-block plus.
Same here. I got one at the beginning and one in the middle. I also received a preapproved credit card offer in the mail this week. I don’t need another, thank you
I hate consumer credit because it inflates prices. Those consumers who are willing to go in debt and pay usurious interest rates are the customers who set the prices for the rest of us.
You are correct. Every industry explodes in price after easy & large credit becomes available. College wouldn't be $25k/yr if banks couldn't lend that to 18 year olds, cars wouldn't be $50k if 84/96 month auto loans weren't a thing, and homes wouldn't be what they are if people couldn't mortgage half their gross income. Hell, you even see it with crap like lawn tractors and furniture.
I started out as a responsible user of my credit card. But ran into trouble and maxed it out at $7000. Took me a long time to pay it off. Once I did i took a pair of scissors and cut it up. Never to use one again that was 18 years ago.
My story is similar. I hated the feeling of having that high-interest debt hanging over me. Lesson learned. I now use my two credit cards as tools of convenience, and haven't paid interest on any credit card for 3+ decades.
Then you never learned your lesson. Self control has nothing to do with cutting up your cards. I have close to $50k in available credit. However, I only use one card to pay for daily stuff which I pay in full each month. In return, I get hundreds or more in rewards each year and pay zero interest. At the same time, I build a better credit score. Been doing this for many years without issue. The problem isn't the cards.
My second husband maxed out my card at $14,000 ... I got rid of the husband, but it took a lot longer to get rid of the debt. I still have my card, but I'm a lot more careful with how it's used.
@@MrSupernova111 I do that too. But we still are, of course, adding to the relative inflation rate via the credit card merchant fees that are baked into prices. It's a prisoner's dilemma. If we all stopped using credit cards we would get back more than our points in lower prices. But if just a few of us stop, we give up the rewards and the prices stay high anyway. After a Supreme court ruling it looks like most states are now allowing dual pricing, but it's a hodgepodge of different rules, really can't apply to internet transactions, varies with varying interchange fees, and outside of gas stations doesn't seem to be used by many merchants.
My issue is that institutions realized they can charge far more than what they're worth because they know people can pay it with debt. Just look at how expensive college and housing has gotten. If people were paying out of pocket these prices would have to be lowered because no one could afford them.
Short of a couple utilities, rent, and payments to the gov't that charge an extra fee way higher than reward points using a credit card, I legitimately cannot remember the last time I paid for something not using a credit card. Over 15 years and have not once paid so much as a penny in interest, pay off in full every month.
Same. I even do the whole credit card shuffle thing where I get 4% for gas, 5% for groceries, etc. Credit cards are great for those who are intelligent.
Around here (Belgium) people mostly use their debit card. And I only use my credit card for online purchases or when abroad. And even then, I use it as a debit card. Every month the bill is settled. Some people don't seem to realise that a maxed out credit card (and only paying back partly) means they give a fifth of their salary to the bank...
Same here as well. I don't use cash at all...nor checks either. Pay EVERYTHING with plastic, then pay the plastic completely off at the end of the month. Been doing so for over 20 years. If money gets tight...I stop it at the source...the register...so I don't ever run into issues or carry a balance. The connection of my money through the card is NEVER lost and I treat it the same as cash in my wallet. If it ain't there it ain't spent. Perks of doing it this way also have many many benefits that afford the frivolous things I normally wouldn't buy but will because they are now basically free.
@@reubenmorris487 I spend less using a card since I have a record of it that I have to review. Cash flows through my fingers like water and leaves no trace.
Credit standards for a credit card at the time was extremely high. The reason being was that the electronic systems we have now didn't exist at the time. The threshold for calling for authorization was $25 dollars or more. A rogue customer could do a lot of damage to a bank with small purchases. There was also a problem with fraud and altered cards where the numbers were flattened and a new number stamped in its place. Women weren't allowed to open accounts and if they had an account then their husband's name was on the card.
An absurd idea, isn't it? You have good credit because you take personal loans to buy items you should be able to handle without loans? This is how to establish creditworthiness? No. If loans are taken, surely these should be for capital-like items and creditworthiness shown by how well these capital-related loans are contractually adhered to. Very clearly, this "lesson" is to encourage people to not use tools like physical currency or their savings to handle purchases. This "lesson" also means payment processors get to collect a very handsome amount of information about customers. This "lesson" does not appear to benefit you very much at all.
@@MisguidedPolicyIsBurdensome No, showing your ability to handle credit responsibly does make sense that it builds your credit. Not having any credit indicates nothing of your ability to responsibly handle credit/money because no lending institution has any insight into whether you're responsible or not, it just means they have no data. Even before formal credit scores existed, that is how it worked at the individual bank level because they weren't stupid and only wanted to give money to people they trusted to pay it back. Credit score could doubtlessly be improved to include things like rent (some landlords have started doing this) and utilities (I think some have started) to build a track record of showing you're responsible with money without needing credit, but regardless it's fundamentally logical that credit score can only include traceable data and, no, "just trust me bro" does not suffice when lending $10,000's or $100,000's or $1+ million.
Good thing to teach, along with budgeting. That score is like gold when buying a house or anytime a load is needed. In fact, for the best score, you need a bit of utilization. My banker some years ago said about 4 or 5 lines of credit and about 4% utilization is ideal. I usually bounce between 840 and 850 and that's probably from the utilization at the moment they crunch the score. That doesn't mean carrying a balance either. If you need a long-term loan work with a bank.
@@antilogismWe paid off our house in 2011. The only debt we have is using credit cards that are paid in full every month. Zero actual debt. Pay cash for cars. Saved money for kids college. Almost 5 million in retirement savings. 490k income. Credit score is 750. Yet we are very very good credit risks. This is my biggest complaint of how FICO is used.
Once you learn the lesson that buying more stuff does NOT make you happier you can then start to build a more meaningful life. Treat the advertising industry and online influencers as your enemy not your ally. If you have to use a credit card or debt to buy it, you cannot afford it.
@@blade86ca This it incorrect, it is not ok. The reason is psychological. Once you have extra credit, you spend more and pay more than without credit. Even if you pay it off on time. you end up buying more than if you have to wait, i.e it leads to overconsumption. You also pay full price rather than waiting until the price drops (as often happens with lack of sales). So overall, having available credit is bad for your wealth even if you pay off the credit on time.
@@COOLARUL "Once you have extra credit, you spend more and pay more than without credit" , your statement is illogical. The price of an item does not go up just because you have credit. That why I said it is fine as long as it is paid off asap that is why there is the 0% interest Grace period all Credit cards offer. Price Inflation occured due to Gouvernment terrible decision making and poor decision making by people with credit but that does not mean credit is bad for your wealth.
@@blade86ca We humans are irrational. It may seem illogical but that is exactly what we do. Our cognitive bias at work. 2 books I recommend, Predictably irrational by Daniel Ariely and Thinking fast and slow by Daniel Kahneman.
As a European, i have never even seen a credit card. We use debit cards here, and if we want a loan, we'd have to apply for it, and it takes time, allowing us to sleep over whatever financial decision we're making.
It’s not the high interest rate alone that resulted in huge CC debt. It’s the minimum allowed payment that some guy suggested that sucked people in, also. And a lack of financial literacy.
I recently had a statement close with a $500 balance. Paying the minimum payment would take 5 years to pay off. 5 years! That’s the trap of credit cards
If you slowly creep the interest rate up you can charge whatever you like, especially if you are paying politicians to keep the laws that way they are.
"Most economists are against interest rate caps." Interestingly, Adam Smith, the granddaddy of free-market economics, was in favor of capping interest somewhere in the range of 6-10%, depending on market factors. He argued that allowing higher interest rates would lead to loans being taken for consumption, squandering the nation's wealth. He wanted capital to be focused on investments with a long-term payoff.
The reason I got into credit card debt is because despite working full-time, I was only paid minimum wage, had working roommate and a working husband but we could barely afford rent, utilities, and food, and had nowhere else to go cheaper. So I had to use my credit card to afford food and the like. was able to make the payments at first, but then was unable to after while due to poverty, disability, etc. So I then defaulted on the loan. If not being homeless and starving is "living outside my means" then I guess you're right.
Good video. The 1.2T of CC debit numbers don't include the various buy now pay later schemes that have grown significantly in the last few years. I don't think there is good data yet on how big that number is, but if I am wrong it would make for an excellent video :)
Oh no, the poorest people might lose access to almost the worst type of debt, that would be awful! 🙄 If people lost access to credit, they'd probably start thinking about their purchases. Sure, some of them are going to get payday loans to pay their rent, but a lot of people would benefit from not being able to use credit cards.
The worst type of debt are loan sharks - and pawn shops almost match their interest rates. The only endearing feature of both is that they are too labor intensive to be practical at the volume covered by credit cards.
Hmmm.. nanny state! The state should not allow people do things that MAY be dangerous if used wrongly. Thy should ban parachuting, skydiving, car racing - actually ban cars totally, as this is the most dangerous activity most people do. They should walk, much healthier,.... Really? Really?
@@dannydaw59 I don't like them, either... but they're labor intensive and not really risk-free. If they were a terribly profitable business model, they'd attract competition which would drive rates down.
@@notroll1279 There's lots of payday lenders out there. If there was a cap on interest rates then there would be less risk because the high risk borrowers couldn't qualify.
the problem with these graphs - not adjusted for inflation, growing population/household size. The value of dollar has depreciated, everything costs more. so, it seems natural to have a "larger" debt in non-normalized terms.
High schools teach children about isosceles triangles and ancient wars, but should be teaching about credit cards debt and financial well being and health well being.
This is one area where Brazil has the US beat. Everyone has credit here, and practically everywhere you go allows you to make large purchases in installments without a credit card and with no interest. Companies try to work around this by offering lower prices for items purchased outright, but the cost difference is usually negligible.
That sort of thing used to be common in Australia, too... we call it "lay-by". To the best of my knowledge, all department stores here still offer the service on request. It's losing ground to credit schemes like Afterpay, because when you lay-by an item, it stays in the retailer's stock room until fully paid for.
@@damonroberts7372 That used to be really common in the US as well but has gone by the wayside for the most part. We called it layaway and same as you mentioned, you couldn't take the item home until it was fully paid for.
You don't say. Where I live, we have a service where every transaction can be paid as a long term loan. Such services are just so bad that encourages horrible spending limits. I can't believe how people fall into all of this. No wonder people seem to have way better everything in terms of luxury, and they earn less than us.
@rustler160: "credit cards have ruined..." Correction don't blame the credit card companies for the stupidity of those who can't manage their money. I use my credit card for all online purchases and payoff the balance in full every month. I also pay more than the balance when I expect to buy extra stuff I occasionally need online, sort of keeping my payments level and predictable each month. I can't understand those who say they can't afford not to use credit cards because they don't have the money to buy stuff, but they can afford to pay the high interest rate charges every month. That's total idiocy! If you can't manage the money you are getting, why the hell are you trying to spend more than you make? As I said, don't blame others for your stupidity about managing your money. As Shakespeare said it so correctly "The fault dear Brutus lies not in the stars (or credit system), but in ourselves".
And thus, 1978 began the "new decadence" of the 1980s and shopping-mall culture... My friends and I all had new credit-cards back then and racked up huge balances buying clothes, dinners out, and music. My best friend filed for bankruptcy at age 22... as his debt was higher than his annual income. I let mine go into collections and worked out deals with them to somewhat save my credit rating. We all entered our 30s a little wiser.
It isn't just people who have bad credit who pay extremely high interest rates. One widow I know replaced her heating/cooling system and the company set her up with a credit card at over 30%. She has a high credit score. When she told me that I got her to go to a credit union and she got the interest rate lowered to under 10%. That over $100 a month savings makes a big difference in her life. A lot of people just are not financially sophisticated. People who are pay interest on credit cards and car loans should check the rates against what their local bank/credit union would charge.
@jamesodell3064 I was deep in the doo but qualified for a personal loan at a fraction of the interest I had been paying. All you have to do is miss a couple of payments, and you may never be able to get out.
@@Constantineopulos She is saving the money but sadly many others continue to pay predatory rates on credit cards and auto loans when they could get much better rates with just a little effort .
There was a book that stated the following question " who would a credit card give money to, "someone who pays off their balance every month or someone one doesn't" the answer is simple, those who pay off the debt are not profitable, those who can't are much more profitable, high interest and fees mean more profit. American Express used too insist balances were cleared every month but now credit card companies will do everything to keep the credit bubble going.
The other thing that started to take hold back then is how people aren't responsible for their actions. I would also add the education system started to fail in teaching students about debt. Usury laws had their own negative effects, namely preventing people from getting access to credit used for good purposes. A 12% interest rate cap back at the time was also problematical given inflation rate was in double digits and even got higher than 12% meaning loans would lose money. I been there myself with credit cards at one time carrying just about 100K in credit card debt. Working out of that wasn't easy and I am quite aware of the abuses, but taking away agency of individuals, limiting their choices to protect them is a bigger problem in my opinion.
That's the point of regulations. If it is a net bad, get rid of it. If it's 50/50, regulate the thing to make it more good than bad. If it's good, no need to regulate. By your logic, all drugs should be legal. No need for drivers licenses. No need for certifications to build skyscrapers. No school for doctors. Etc etc.
You know what, there is this concept called self discipline. My wife and I had a debt problem but we pulled back and paid it off and were very careful about using credit cards going forward.
"tricked" 😂😂😂 I have debt, it was my choice, nobody has a right to stop me from making peaceful choices in my life, or anyone else. Its insane the lengths ppl will go to to avoid taking responsibility for their actions, its ALWAYS someone else's fault. Only after you stop blaming others & take responsibility are you able to make good choices.
@@Marty234 One correction: Your family and your dependents have the moral right to stop you from making certain choices. And your employer (if you work for someone else) has the legal right to do so. Even screwups can occasionally make a good choice.
The record credit card debt has multiple reasons behind it: - Our education system no longer teaches kids about money/debt, and its consequences (especially when it comes to student loans). - Social media impose the need for luxury goods/lifestyle's on more impressionable kids. - The banks themselves who will literally throw credit cards your way regardless of your financial situation. I have been automatically approved on multiple occasions by my bank and am repeatedly notified of how much credit I can access, which is tempting for the vulnerable person. - Lack of willingness to take personal responsibility in modern generations. - Inflation and subsequent wage stagnation created by our governments/federal bank monetary policy.
Fantastic comment I had to explain to a 22yo woman that loan interest rates compound each year. Your rate isn't 30% for every $ you owe, your rate is 30% of every $ you owe * years it takes to pay it off. She's got a credit card, student loans, and a car on finance This girl is one year away from graduating college and didn't realize that interest compounds each year.
I remember way back my parents couldn't get a credit card as they were not credit worthy enough. Later (much later, moving on from the late 70s to the late 90s) it was kind of obvious that the main target of credit cards were the people who can just barely pay them off but might not, carrying that balance over and paying the interest. They won't default but can't clear the debt. People need to realise that once your balance hits a magic number (based on the interest rate) that minimum payment will never clear the debt. Added to all this is the fee charged by the payment provider (VISA etc) for the transaction. It's no wonder it has exploded, it is worth a lot of money.
Like, seriously yeah? Are people THAT short minded where you are like "I'll wait a month, that will come next decade" I can't even buy eggs without thinking why am I overpaying for these, could've gone there and got it for cheaper
@@thebes118 That's a great use for them and I've done that---but then I'll also shop for a deal on renting cash to pay them back. A personal loan is like half the cost. Secured loans are even cheaper. Usually no reason to carry a balance except for the convenience.
For the same reason people take out mortgages or small business loans. You do this when you're trying to ratchet yourself up to a point where you can pay it all off. The alternative is that you stay debt free, but you don't build the skills or base you need to work your way up.
@@throckwoddle Mortgages are secured so the rate is comparatively better. Business loans can be OK too. I've used a personal loan from my credit union to pay my card before being assulted by interest. That loan was less than half the card rate. There are SO many cheaper places to rent cash from.
Interest on debt just feels so wrong. Higher interest on lower credit feels scummy. You're charging more over time to people who are less likely to pay you back?
The interest rates do apply if you can’t afford to pay the balance in full by the end of the month and have to roll some of it over to the next month. Given how many people have to use credit cards for daily living expenses, they probably wouldn’t be able to pay it off at the end of the month.
Its gross how many ppl blame others for "allowing them" them to make bad decisions. As if anyone has the responsibility, or even the right, to force another person to not make a peaceful choice. It's ALWAYS someone elses fault.
That was necessary and helpful for divorced or single women to create the credit score needed, NEEDED, so they could buy a house, or rent a home, or buy a car…. Only men had credit and only their wives maybe had a card that could be taken away.
My mom and dad built a house in 1976. At one point, a payment was needed. Dad was out of the country on a business trip, and Mom went to the bank to arrange the payment. Despite having her name on the account and the cash in the bank, the bank would not accept Mom's signature and demanded that Dad had to come to the bank. I don't remember how it was resolved, but Mom still talks about how bad that bank was today.
for about 3 years i was responsible with a credit card. using it then paying it back in a day, thus getting ample rewards. But as soon as I hit financial difficulty, that credit card became a crutch, and sent me on a downward spiral (I got out of that spiral by consolidating and negotiating with banks, plus changing spending habits) Credit cards are like a tiger... it is completely safe as long as it is small. but if it grows even slightly large, it bites your head off.
Great piece! Can you source your graph showing the history of credit card debt? What happened in 2010 that caused the balances to spike so aggressively? Was that just the GFC, or was there a policy change?
I treat my credit cards like a luxury. I did recently game the system a bit and got a new card to benefit from zero percent interest in order to update my furniture. But I am quickly paying it off before it ends
Nice! I put the down on my F150 using a MC, then used an AMEX balance transfer check at 0% for a while. This was years ago and I was surprised that the dealership accepted it.
Credit cards aren’t all that bad if you’re responsible. For ten years now I’ve paid everything I can with my credit cards. I will take a cash back card with a 12 to 15 months interest free introduction rate and will use it until the introductory rate is about to expire, get another card with a 0% introductory rate and close the old card out. I keep two cards that I use sparingly that have large amounts so as to keep my borrowing power high and to keep my credit age reasonable. I make approximately $1500 each year in cash back and pay absolutely no interest. If you pay your bills on time and make sure the card is paid off before the interest rates kick in, you come out the winner. It all comes down to being responsible.
Usury laws are needed to protect consumers, and protect the financial system from default. The immediate effect might hit the economy but long term it'll be beneficial as the interest the banks pocket goes to consumer purchasing power.
Here’s some education. Total US consumer debt, credit cards, mortgages, loans total 17 and a half trillion. Our national debt is 35 trillion and growing daily. Not counting our unfunded liabilities which total about 200 trillion. We are screwed as a country,
The problem in some places is that you need a "credit history" to even rent a home. So, even if you are responsible adult, who lives without debts, you are punished and forced into taking debt. I am glad to live in Europe, where _debit_ cards are much more common. These allow you to spend only the money that you have in your account.
I wish the US would go this route. There has been talk of a law that would effectively lower transaction fees which would get rid of most of the credit card rewards. I think that would be good for the consumer long term but people are really mad about the potential of losing their "miles." There needs to be a cultural shift here on debt normalization to see any real change.
We have debit cards in the US. We've had them for decades. People rarely use cash for purchases. Who would want to carry $200 to the grocery store? I don't use credit cards at all. If I don't have the money for something, I have to wait or go without. Our house is 90% furnished from 2ndhand shops. Most of my clothes come from thrift shops. We only use credit when we need to, like a car purchase.
@@madison_kr The part of the proposal to cap transaction fees is probably necessary even though I'd lose a lot of the rewards. I support that. Some of the rest of the proposal to require payment networks to process payments from their competitors seems poorly thought out and may not be the way to go. I wouldn't want to use my debit card though. Even without the rewards, I would still use the credit cards: - There's a layer of separation from my checking account, which minimizes risk of theft. - There's a layer of separation from the bank my checking account is with, which means if my account is frozen or flagged, I can still access money while resolving it. - I pay my cards once at the end of each month, which gives me a few dollars more in savings each month and minimizes the work I have to do to keep track of things. - Debit cards are notoriously harder to get your money returned to in cases of fraud than credit cards.
@@freethebirds3578 My best pieces of furniture are some that were won in a sweepstakes decades ago and others that I picked up for less than $100 at an estate sale. I have a full wardrobe of dress clothes that I picked up from thrift shops.
An interest rate cap would be a good start. The sooner we can largely eliminate credit card use, the better. The people using credit cards are usually the ones who can least afford it.
Are people too stupid to just not apply for a card they don't think they can afford? Maybe they are, but that's an education issue, not an access to credit problem.
@johngaltline9933 Yes they are, and not allowing unethical credit card companies to exploit them is a reasonable measure. It's no different from shutting down pyramid schemes, loan sharks, or any other scams.
I found it surprisingly high. It's probably artificially inflated too if it's just total debt, not revolving debt. Because total debt also includes everyone who pays credit cards off in full every month. So for me, it'd count for like $600-1000 in an average month, despite never having not paid a credit card off in full every month for the entire 15+ years I've had a credit card. Total credit available to people drowning in credit card debt is likely not super high on a per person basis.
If your interest rate were 10%, even if you carried a balance you could still make a payment on your account and have some of it apply to principal. When the interest rate is nearly 30%, even if you make a payment, little or none of it is applied to principal.
@ - paying the bill off every month is the best thing to do, but honestly charging people interest rates close to 30% is really disturbing. It won’t stop poor people from using credit (as the credit companies wish it), but it will make it impossible for them to pay it off. I think Shakespeare had it right “Neither a borrower nor a lender be”.
You might want to actually read your credit card statement, as it's been federal law to tell you, right there, how long it will take to pay off, and to tell you a payment that will pay it off in a reasonable time. in 2006 the law was changed to make minimum payments about double what just the interest added was, so as long as you are paying minimums you will eventually pay the card down. Prior to 2006 it was possible to just pay minimum payment and be paying just the last month's interest.
I do the same thing using my bank-issued credit card. It doesn't matter what the interest rate is or who issues your credit card if you are diligent about paying the balance off every month.
I applied for my Amex after getting my 1st apartment in 1991, and was always responsible with it. It never occurred to me to spent money I couldn’t repaid by due date. Growing up poor was the reason.
Surprisingly, I side with Trump on this one. I would go even further than he does. Credit availability contributes to positive feedback loops in the economy, making it inherently unstable and leading to boom/bust cycles. Not to mention that it leads to exploitation of human weaknesses. Historically, the (social) cost of these exploited weaknesses will be distributed over the many, while the exploitation itself will only benefit the few. Risk taking is for entrepreneurs, not for consumers, consumer credit should be strongly discouraged.
Initially it sounds good but I am against it. First it makes no sense to be temporary, either permanent until a new law is passed or not do it at all. I agree with the disclaimers afterwards would say it would likely be replaced with high fees or some other mechanism for the banks to get their money. I think a better solution would be education of how credit cards, debt, and interest bankrupt individuals. The American education system did not teach that at all much less to people who dropped out of school. I think the town should advertise and have a counselor or something for free to teach this amongst other important things. I say this with an open mind not just as a Trump hater. Trump has legitimately bankrupted every company he attempted except land/real estate and even those are riddled with fraud or crazy lawsuits.
@@MyExcellentOpinion I'm afraid that you overestimate the effect of education. As Western Europeans, we do receive such education. However, this doesn't change the distribution of intelligence amongst our population. Nor does it fix the low impulse control in certain individuals. Now take a guess which characteristics set apart the group with problematic debts from the general population... Isn't there an English saying like: "You can't fix stupid."? In some (maybe even all?) EU member states, the interest rates on creditcards are already capped below 15% without it leading to extra fees. I don't see why a law limiting rates wouldn't be able to forbid extra fees at the same time. This seems like a non-issue. I'd still rather see the consumer credit card industry perish altogether. They serve no real economic purpose.
I am almost always on the side of open markets. Interest rates are, however, the area where I deviate. I really like the point brought up in a recent comment though that this makes no sense being temporary. I would add to that. I think we need a permanent rate cap, tied to the fed funds rate. It needs to be introduced slowly, however. If we go cold turkey, the very groups that we’re trying to protect are going to be hurt the most. I don’t agree with the idea that education is enough of an answer. It’s not an education issue. These people are, very often, brilliant and fully aware. The problem is self control and desperation. My parents are a great example. To this day, I can not convince them to cut up the damn things. They went into credit card debt shortly after moving across the country when they caught a bad short term break. That was 27 years ago. They both have their masters in mathematics. It’s always been too easy to push off getting off these leeches until next year to get them out for good. I refuse to touch these. Too dangerous! (At least for going on a balance)
Once upon a time, there was store credit or "layaway" with the alternative being some form of "Shylock". From there to here in time, the poorest are still the most exploited.
Two entities are strangely left out of the predatory lender conversation are universities and credit card companies. The high interest rates should be illegal. They exist not only for greed, but to cover the costs of defaults. I remember my first charge card in 1985. It was at Sears and the only way I could get one was to commit to a piece of merchandise. I needed a washing machine at the time. A few ears later they were handing out cards to college students like candy. The uncapped rates, made it more attractive to extend credit to higher risk customers.
I disagree totally with you. There should be usury laws. High interest makes it much harder to pay off any loan. Despite education, human nature is what they prey on.
I partially agree, they are providing a service and deserve a reward.... however theres a line beyond helping via service and abuse. Not sure where that line is exactly but certainly credit card rates are well into the immoral side of the spectrum
I'm 60, when I was in High School we had a one term required sociology class that taught you about credit, bank accounts and budgeting ( as well as other things). By the time my kids were in High School that class didn't exist.
This isn't about personal badges, it's about structural issues that encourage bad behavior. Bad behavior which has serious effects on our entire country. Saying you don't have the problem is like an adult in Eswatini (Swaziland) going around saying they don't have HIV. Good for you? It's still a serious national problem.
That $6,300 average balance is interesting. Out of all the friends I know, only one has credit card debt, but he carries a lot. So, once his $80-90K in balances is spread out amongst everyone else, I suppose we’re averaging right at the national rate. I’ve been using credit cards for over 30 years and have never carried a balance.
I can't imagine carrying a balance. The interest on my one and only is around 22% and I pay my balance off every month. It really is criminal. There should be a cap.
My younger brother was working as a internal auditor for a major oil company and traveled for work over 40 weeks a year. He accumulated hundred of thousand of free airline miles and hotel points enough to took our widowed mother to your both South America & Germany.
When you balance the benefit of responsible credit card use against "ruining your life" in a debt spiral, clearly the potential benefit is less than the possible harm. So a reasonable cap on interest rates should be your logical conclusion. Only if you don't think your life could be "ruined", would it make sense not to have a cap. I think your argument makes no sense.
The whole idea of teaching people to use credit cards responsible always comes from people, who are educated and able to understand the system, but that doesn't work for everybody. Not everybody is able to make responsible decisions and these are the most vulnerable people, when it comes to these issues. Yes, you have to save some people from their own stupidity, as hard as this sounds. Because they are not able to understand complex issues and are easy to dilute, but they can't help - they lack the capability. But these people have a right of not being abused by the system as well.
It's not stupidity for most. I know a PhD who's a pro at making bad financial decisions. My boss has all sorts of debt and he has several degrees and >$200k coming in. Over-spending seems more like a bad habit. Much like smokes. What starts out as a touch of consumer greed turns into a way of life. I've felt the draw of it myself at times. That rush I get when that toolup order comes in is like a drug!
I'm always unsure about quotes detailing "credit card debt." When people use the term "balance" that can be interpreted two ways. Are we talking about the average owed at the end of the month or the average not paid off at the end of the month? My bank just paid itself $8,400 (I made an unusually large purchase and I had both my banks sending me emails about it) on my credit card leaving me with a $0 balance. So if I was included in the average would it be $8,400 or $0?
The worst part is you can do everything right, but the best scenario most can be in is debtless. In order to truly ride out downturns, you have to be debtless and rich. To be debtless and little savings… eventually the decline in money reaching your account will take its toll all the same.
The biggest issue is that there needs to be some sort of cap where interest cannot accrue past a specific percentage of the principle after a company has made their investment back from interest there must come a time when the borrower should be allowed to halt interest and pay down the principle but its eaisly possible to get into a situation at least in America where interest exceeds the ability to repay and it becomes theoretically impossible to pay down a debt. Bankruptcy is not really a good or valid solution.
One thing I think you left out about why people are doing credit card debt isn't because they are trying to keep their heads above water. There are a significant number of people who use credit cards to live a lifestyle they would not be able to without it. I would love to see more stats on that.
Point is even with a 780 credit score all my cards are over 30% interest wean advertising 19.99 to 30% now how dose that work they show a range to make you feel safe and then give the highest number anyway
Call your card's bank to see what's up and what they can do. My MC was 18.74% on the last statement, though that's still way higher than a normal loan. My penalty APR would be 29.99%! Personal loans are more like 12 or 13% and secured loans are even better at around 6 or 7% at credit unions.
its so strange to me that people are comfortable actually spending money on their credit card and not just using it like a debit card that you pay off each month. It stresses me out when charges dont hit on the card and carry a balance each month.
People choose to get into debt. No one is forced into debt. A financial education, self-control, and long-term perspective prevents getting buried in debt.
"interest rate caps can limit access [to credit cards]" I say… GOOD. I learned how damaging credit cards could be in the very early 90s and again in the late 90s. If you get into financial trouble, you WILL abuse them, out of desperation, and it will only make things worse.
I use my credit card exclusively for my monthly purchases, but that card gets paid off, never gets charged interest, and I get cash back on all my purchases.
I have $12,000 in cred card credit limits over three cards. I owe NOTHING. Some montly bills are auto billed to one and when they are all are charged for the month I pay all of it off.
Don't spend money you don't have. Isn't it that simple? The fact that you have a high credit limit doesn't mean you need to use that limit. I hope the word 'limit' is clear enough.
In the 1980s and 90s, you did not receive preapproved offers in the mail, you received actual cards and all you needed to do was activate it. I remember my father had a whole drawer of them in his office. They stopped that and just moved to offer letters by 2000 though.
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Can I pay for it with a credit card
@@isocarboxazid 😅
Your next video should be about the horrendous data security and issues around these companies selling your DNA. Thanks to the 23&me breach you can now buy the genetic information on any number of groups, correlated with names, addresses, SSNs, and more! 🎉
"Here's video about why you might be in debt but before it thanks for our sponsor that take your money (after 14 days) that you either earned or borrowed."
Instant gratification is a good friend of credit cards.
In other words, human nature is a good friend of credit cards?
A little reductive. Rarely used my cc and paid it off at the end of every month for 20 years. Only thing was I always used every penny of my spending money every month. Every penny of my grocery money every month. If I budgeted for it, I spent all the cash, nothing leftover.
Staying at home, I've since switched to just using my cc with emergency cash for back up. I'm better with a cc. Keeping a running tally in my head over the month, I'm more cautious. I saw cash as money I'd as good as already spent once taken out of my bank account. More often than not, we have money left over from our budget every month that we can put towards retirement or kids college.
I'm just a lot more cautious with a credit card than I am with cash and it has improved our long term savings. I can see how this might not work if you have a very tight budget to start with. But if you have a more generous budget to work with, it can be it's own game.
That is why they still make it super easy to get a credit card and they do absolutely nothing to verify your identity. This is why we have laws that says a bank cannot hold a customer responsible for more than 50 dollars in a case of fraud. Banks purposely make it easy to open fraudulent accounts and fraudulently bill legit accounts. They do the math and decided eating fraud still makes them more money than having stronger checks that slow down getting a new credit card or make it harder to fraudulently bill.
@@afonsodeportugal human stupidity, yes. Total impossibility to predict the neares grim future, result of own dumb actions.
Deregulation and Oligopolies that force people into poverty are also good friends of credit cards. Thanks Reagan
We use our credit cards to purchase pretty much everything. But we do it because 1) We only purchase what we have money for, and pay off our balances each month, and 2) We only use credit cards that offer cashback for purchases. Literally all of the credit card companies we are members with are paying us money to use their card, because we never keep a balance - so we never pay interest on what we buy. But I know that most folks do not operate this way.
Same
Same. I stopped carrying change a few months ago, and I've had a few lonely singles in my wallet for the last month. Never need either.
We do that as well. In fact I have Bank of America do it all for me. I just watch the emails go by at the end of every month.
@@frequentlycynical642wish I could, cant in mexico
I do this too, except the difference is I pay off my credit cards whenever I get paid, so every two weeks.
Because I never carry a balance, their very high interest rates are never applied, so the effective interest rates are zero. Actually, this is not quite accurate, since because they are rewards cards, and the companies pay me for using them, the interest rates are technically slightly negative.
My biggest complaint with this video is it makes it sound like it was all caused by the Supreme Court. That's simply not true. It was federal law - legislation passed by congress and signed by a president - that did this. The Supreme Court merely said "yes, federal law applies as written."
What about State’s rights?
@@unsignedmusic What about them?
Congress passes laws all the time that step on states rights. If the Senate was appointed by state legislatures, as the original intent was (before the 17th amendment), perhaps there's be more pushback against stepping on states rights, but that ship has sailed. Federal laws overrule state laws - see Article VI, Section 2 - and the federal legislature said they wanted these laws.
Now, anything the federal legislature does, the federal legislature can undo, if you can only get enough politicians to vote to return that power to the states (because politicians giving up power is POSSIBLE, even if I can't site any real-world examples). There was nothing stopping Congress from stepping in just after the Supreme Court decision cited here was released - or at ANY time since then - to say this is stupid and they want to pass a law to change it, or to set their own usury limits, or whatever else. All you have to do is convince them to do it.
I would argue it makes some sense to have national standards rather than state standards, as it makes it easier - but it's not like big banks can't manage 50 separate sets of laws if they had to. I would also argue that some usury limitations are a good and healthy thing - but then you cost low-income/high-risk people access to credit and up encouraging illegal loan sharks, so even good laws can have negative consequences.
Correct. The Supreme Court enforced federal banking laws which concentrated federal authority over state authority and was enacted by a Republican party controlled legislative session by a Republican president.
So much for Republican claims of wanting smaller government.
I’m not even American and I know these historical facts. How come Republican voters don’t know their country’s own history?
This is something that irks me about anything blamed on the supreme court. Any decision they make is basically telling the legislative branch they need to write or change a law so it's clear what the law states. But congress has done such a great job of abdicating all responsibility to govern they're just like "awe shucks that's too bad....., OK onto the next meaningless hot button non issue that will help me get reelected or earn some sweet sweet campaign contributions."
@@unsignedmusic States are explicitly barred from regulating interstate commerce. This is a right reserved solely to the Federal government.
I’m Gen Z & so many of my friends use credit cards for fast food & vacations. My friend, Ivy League finance graduate, was having an issue where they couldn’t pay rent after months of traveling abroad… I suggested using a credit card in this emergency, but he already maxed it out traveling…. Caleb Hammer’s financial audit shows what is really being spent on credit cards. Junk, fast food, clothing & fun vacations. Very rarely is it for needs
Getting out of CC debt and not paying CC interest or fees was life changing.
Just tell me how
@@adamv242 Cut expenses down to barely anything. Only essential foods, no alcohol, no tobacco, no new phone, no new clothes, no new car. Etc. That and more education to get a better paying job.
How is it life changing? Paying 20-30% interest means that buying anything is going to cost 20-30% more than you pay. Fees can be as much or more than interest. So put all cards on autopay. Look up the avalanche method to pay off debt.
@@adamv242 War economy. Live as if the world had ended. Stop consumption of everything non-essential. Sell everything you have which costs money to upkeep and you don't need to use to work. I lived like this for 2 years, it was quite bad but I'm never again going into debt for anything.
@@adamv242 Figure what you owe, what it will take to pay it off, and live below your means for as long as it takes (no going out to eat (or having food delivered)), no ordering unnecessary crap from Amazon, etc. Very important: Let your family/friends know you are concentrating on this so they won't expect much out of you financially- they won't be ashamed, they will be proud that you are tackling this. Pay off the smaller balances first, freeing up available cash as you go so you can apply it toward the larger bills. If I can do it (and I did), anyone can...
@@adamv242 Get bank to freeze credit card and interest paid on what is owed so you can pay it off completely without interest then close credit card. Pay as much as physically possible each month off credit card debt till credit card debit is paid off as quickly as possible with zero balance. Sign up for a debit card instead and save money to purchase rather than use credit. It is a different way but much safer with very low fees of about 1.6% per transaction. You will save thousands once credit card debt is completely paid off as you will no longer have any interest to pay. Never get a credit card again.
"Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants, but debt is the money of slaves" Norm Franz.
Great quote!
It just so happens that the vast majority of currency is directly produced via the creation of new debt instruments. Though one does wonder, say people were to demand their bank deposits (loans to the bank) be paid in the form of physical currency, I wonder how this would change the debt and currency landscape of the United States.
TH-cam comments are the ocean of conversations.
@@MisguidedPolicyIsBurdensomeToday's currency will make wonderful toilet paper when the system collapses.
That's a lie, and historically inaccurate throughout human history.
I have to love the irony that before I could watch this video, I had to watch a commercial for a credit card.
I'm amused, that everytime someone complains of ads while viewing youtube, it turns out that they have not a clue about ad-blockers. I never see ads. uBlock, Ghostery, Ad-block plus.
Yeah, the ad break in the middle should scream, "What's in your wallet?" out of the blue.
Same here. I got one at the beginning and one in the middle. I also received a preapproved credit card offer in the mail this week. I don’t need another, thank you
Thanks AmEx!
@@winterwierdo I love the letters that tell me "You already won!" For some contest I never even entered.
I hate consumer credit because it inflates prices. Those consumers who are willing to go in debt and pay usurious interest rates are the customers who set the prices for the rest of us.
I would agree
Yep if people weren't so comfortable with debt, houses wouldn't be 700k+
This has been happening with car prices ever since 2020.
You are correct. Every industry explodes in price after easy & large credit becomes available. College wouldn't be $25k/yr if banks couldn't lend that to 18 year olds, cars wouldn't be $50k if 84/96 month auto loans weren't a thing, and homes wouldn't be what they are if people couldn't mortgage half their gross income.
Hell, you even see it with crap like lawn tractors and furniture.
Retailers pay a fee for that credit card usage, which is built into the price. If someone pays cash, they still pay the 3%.
I started out as a responsible user of my credit card. But ran into trouble and maxed it out at $7000. Took me a long time to pay it off. Once I did i took a pair of scissors and cut it up. Never to use one again that was 18 years ago.
My story is similar. I hated the feeling of having that high-interest debt hanging over me. Lesson learned. I now use my two credit cards as tools of convenience, and haven't paid interest on any credit card for 3+ decades.
Credit cards can be used and paid off immediately. You can use it for points or air miles while never holding a balance.
Then you never learned your lesson. Self control has nothing to do with cutting up your cards. I have close to $50k in available credit. However, I only use one card to pay for daily stuff which I pay in full each month. In return, I get hundreds or more in rewards each year and pay zero interest. At the same time, I build a better credit score. Been doing this for many years without issue. The problem isn't the cards.
My second husband maxed out my card at $14,000 ... I got rid of the husband, but it took a lot longer to get rid of the debt. I still have my card, but I'm a lot more careful with how it's used.
@@MrSupernova111 I do that too. But we still are, of course, adding to the relative inflation rate via the credit card merchant fees that are baked into prices. It's a prisoner's dilemma. If we all stopped using credit cards we would get back more than our points in lower prices. But if just a few of us stop, we give up the rewards and the prices stay high anyway.
After a Supreme court ruling it looks like most states are now allowing dual pricing, but it's a hodgepodge of different rules, really can't apply to internet transactions, varies with varying interchange fees, and outside of gas stations doesn't seem to be used by many merchants.
My issue is that institutions realized they can charge far more than what they're worth because they know people can pay it with debt. Just look at how expensive college and housing has gotten. If people were paying out of pocket these prices would have to be lowered because no one could afford them.
Housing,Education, and transportation has risen more than 50x in 50 years. Compared to general interest being closer to 8-10x.
Accidentally started a debt nightmare? No. It wasn't accidental.
Short of a couple utilities, rent, and payments to the gov't that charge an extra fee way higher than reward points using a credit card, I legitimately cannot remember the last time I paid for something not using a credit card. Over 15 years and have not once paid so much as a penny in interest, pay off in full every month.
Same. I even do the whole credit card shuffle thing where I get 4% for gas, 5% for groceries, etc. Credit cards are great for those who are intelligent.
I spend LESS with credit cards because I don't end up with $hundreds of pocket change sitting around. I hate pocket change...
Around here (Belgium) people mostly use their debit card. And I only use my credit card for online purchases or when abroad. And even then, I use it as a debit card. Every month the bill is settled. Some people don't seem to realise that a maxed out credit card (and only paying back partly) means they give a fifth of their salary to the bank...
Same here as well. I don't use cash at all...nor checks either. Pay EVERYTHING with plastic, then pay the plastic completely off at the end of the month. Been doing so for over 20 years. If money gets tight...I stop it at the source...the register...so I don't ever run into issues or carry a balance.
The connection of my money through the card is NEVER lost and I treat it the same as cash in my wallet. If it ain't there it ain't spent.
Perks of doing it this way also have many many benefits that afford the frivolous things I normally wouldn't buy but will because they are now basically free.
@@reubenmorris487 I spend less using a card since I have a record of it that I have to review. Cash flows through my fingers like water and leaves no trace.
Credit standards for a credit card at the time was extremely high. The reason being was that the electronic systems we have now didn't exist at the time. The threshold for calling for authorization was $25 dollars or more. A rogue customer could do a lot of damage to a bank with small purchases. There was also a problem with fraud and altered cards where the numbers were flattened and a new number stamped in its place. Women weren't allowed to open accounts and if they had an account then their husband's name was on the card.
The last one makes sense.
I think another issue is that you are taught to get a couple cards/lines of credit with different kinds of payments to get a good credit score
Taught completely correctly, but having a good score necessitates paying it properly.
An absurd idea, isn't it? You have good credit because you take personal loans to buy items you should be able to handle without loans? This is how to establish creditworthiness? No. If loans are taken, surely these should be for capital-like items and creditworthiness shown by how well these capital-related loans are contractually adhered to.
Very clearly, this "lesson" is to encourage people to not use tools like physical currency or their savings to handle purchases. This "lesson" also means payment processors get to collect a very handsome amount of information about customers. This "lesson" does not appear to benefit you very much at all.
@@MisguidedPolicyIsBurdensome No, showing your ability to handle credit responsibly does make sense that it builds your credit. Not having any credit indicates nothing of your ability to responsibly handle credit/money because no lending institution has any insight into whether you're responsible or not, it just means they have no data.
Even before formal credit scores existed, that is how it worked at the individual bank level because they weren't stupid and only wanted to give money to people they trusted to pay it back.
Credit score could doubtlessly be improved to include things like rent (some landlords have started doing this) and utilities (I think some have started) to build a track record of showing you're responsible with money without needing credit, but regardless it's fundamentally logical that credit score can only include traceable data and, no, "just trust me bro" does not suffice when lending $10,000's or $100,000's or $1+ million.
Good thing to teach, along with budgeting. That score is like gold when buying a house or anytime a load is needed. In fact, for the best score, you need a bit of utilization. My banker some years ago said about 4 or 5 lines of credit and about 4% utilization is ideal. I usually bounce between 840 and 850 and that's probably from the utilization at the moment they crunch the score. That doesn't mean carrying a balance either. If you need a long-term loan work with a bank.
@@antilogismWe paid off our house in 2011. The only debt we have is using credit cards that are paid in full every month. Zero actual debt. Pay cash for cars. Saved money for kids college. Almost 5 million in retirement savings. 490k income. Credit score is 750. Yet we are very very good credit risks. This is my biggest complaint of how FICO is used.
Once you learn the lesson that buying more stuff does NOT make you happier you can then start to build a more meaningful life.
Treat the advertising industry and online influencers as your enemy not your ally.
If you have to use a credit card or debt to buy it, you cannot afford it.
Using Credit card or debt is fine AS LONG AS one can pay it off asap or within a very short amount of time.
@@blade86ca This it incorrect, it is not ok. The reason is psychological. Once you have extra credit, you spend more and pay more than without credit. Even if you pay it off on time. you end up buying more than if you have to wait, i.e it leads to overconsumption. You also pay full price rather than waiting until the price drops (as often happens with lack of sales). So overall, having available credit is bad for your wealth even if you pay off the credit on time.
@@COOLARUL "Once you have extra credit, you spend more and pay more than without credit" , your statement is illogical. The price of an item does not go up just because you have credit. That why I said it is fine as long as it is paid off asap that is why there is the 0% interest Grace period all Credit cards offer. Price Inflation occured due to Gouvernment terrible decision making and poor decision making by people with credit but that does not mean credit is bad for your wealth.
@@blade86ca We humans are irrational. It may seem illogical but that is exactly what we do. Our cognitive bias at work. 2 books I recommend, Predictably irrational by Daniel Ariely and Thinking fast and slow by Daniel Kahneman.
@@COOLARUL What are you talking about??
As a European, i have never even seen a credit card. We use debit cards here, and if we want a loan, we'd have to apply for it, and it takes time, allowing us to sleep over whatever financial decision we're making.
It’s not the high interest rate alone that resulted in huge CC debt. It’s the minimum allowed payment that some guy suggested that sucked people in, also.
And a lack of financial literacy.
I recently had a statement close with a $500 balance. Paying the minimum payment would take 5 years to pay off. 5 years! That’s the trap of credit cards
Its a difficult lesson I needed to learn years ago: Use you debit card ONLY. Don't buy something if you don't have the money.
So why are interest rates not below 18% even if you have good credit? That used to be high interest. The mafia was the only ones charging that high.
People with good credit usually don't pay it
@@raiden031 Well I have excellent credit and the interest rate on my credit card is 19%. It didn’t used to be that way.
If you slowly creep the interest rate up you can charge whatever you like, especially if you are paying politicians to keep the laws that way they are.
I know of cards that charge much less.
If you are the type to have good credit, you are rarely going to be carrying over a debt on your cards and thus don't pay that 18% interest.
"Most economists are against interest rate caps." Interestingly, Adam Smith, the granddaddy of free-market economics, was in favor of capping interest somewhere in the range of 6-10%, depending on market factors. He argued that allowing higher interest rates would lead to loans being taken for consumption, squandering the nation's wealth. He wanted capital to be focused on investments with a long-term payoff.
The reason I got into credit card debt is because despite working full-time, I was only paid minimum wage, had working roommate and a working husband but we could barely afford rent, utilities, and food, and had nowhere else to go cheaper.
So I had to use my credit card to afford food and the like. was able to make the payments at first, but then was unable to after while due to poverty, disability, etc.
So I then defaulted on the loan.
If not being homeless and starving is "living outside my means" then I guess you're right.
Good video.
The 1.2T of CC debit numbers don't include the various buy now pay later schemes that have grown significantly in the last few years. I don't think there is good data yet on how big that number is, but if I am wrong it would make for an excellent video :)
Oh no, the poorest people might lose access to almost the worst type of debt, that would be awful! 🙄 If people lost access to credit, they'd probably start thinking about their purchases. Sure, some of them are going to get payday loans to pay their rent, but a lot of people would benefit from not being able to use credit cards.
The worst type of debt are loan sharks - and pawn shops almost match their interest rates.
The only endearing feature of both is that they are too labor intensive to be practical at the volume covered by credit cards.
Hmmm.. nanny state! The state should not allow people do things that MAY be dangerous if used wrongly. Thy should ban parachuting, skydiving, car racing - actually ban cars totally, as this is the most dangerous activity most people do. They should walk, much healthier,....
Really? Really?
Payday loans need interest rate caps too.
@@dannydaw59
I don't like them, either... but they're labor intensive and not really risk-free.
If they were a terribly profitable business model, they'd attract competition which would drive rates down.
@@notroll1279 There's lots of payday lenders out there. If there was a cap on interest rates then there would be less risk because the high risk borrowers couldn't qualify.
the problem with these graphs - not adjusted for inflation, growing population/household size. The value of dollar has depreciated, everything costs more. so, it seems natural to have a "larger" debt in non-normalized terms.
High schools teach children about isosceles triangles and ancient wars, but should be teaching about credit cards debt and financial well being and health well being.
This is one area where Brazil has the US beat. Everyone has credit here, and practically everywhere you go allows you to make large purchases in installments without a credit card and with no interest. Companies try to work around this by offering lower prices for items purchased outright, but the cost difference is usually negligible.
That sort of thing used to be common in Australia, too... we call it "lay-by". To the best of my knowledge, all department stores here still offer the service on request. It's losing ground to credit schemes like Afterpay, because when you lay-by an item, it stays in the retailer's stock room until fully paid for.
@@damonroberts7372 That used to be really common in the US as well but has gone by the wayside for the most part. We called it layaway and same as you mentioned, you couldn't take the item home until it was fully paid for.
credit cards have ruined many respectable households
sadly yes
Then they weren't very respectful to begin with. Respect your future self so much that you say NO, I'm not buying this.
You don't say. Where I live, we have a service where every transaction can be paid as a long term loan. Such services are just so bad that encourages horrible spending limits. I can't believe how people fall into all of this. No wonder people seem to have way better everything in terms of luxury, and they earn less than us.
Their bad habits and relationship with "money" ruined them long before credit cards came across their path...
@rustler160: "credit cards have ruined..." Correction don't blame the credit card companies for the stupidity of those who can't manage their money.
I use my credit card for all online purchases and payoff the balance in full every month. I also pay more than the balance when I expect to buy extra stuff I occasionally need online, sort of keeping my payments level and predictable each month.
I can't understand those who say they can't afford not to use credit cards because they don't have the money to buy stuff, but they can afford to pay the high interest rate charges every month.
That's total idiocy! If you can't manage the money you are getting, why the hell are you trying to spend more than you make?
As I said, don't blame others for your stupidity about managing your money.
As Shakespeare said it so correctly "The fault dear Brutus lies not in the stars (or credit system), but in ourselves".
And thus, 1978 began the "new decadence" of the 1980s and shopping-mall culture... My friends and I all had new credit-cards back then and racked up huge balances buying clothes, dinners out, and music. My best friend filed for bankruptcy at age 22... as his debt was higher than his annual income. I let mine go into collections and worked out deals with them to somewhat save my credit rating. We all entered our 30s a little wiser.
It isn't just people who have bad credit who pay extremely high interest rates. One widow I know replaced her heating/cooling system and the company set her up with a credit card at over 30%. She has a high credit score. When she told me that I got her to go to a credit union and she got the interest rate lowered to under 10%. That over $100 a month savings makes a big difference in her life. A lot of people just are not financially sophisticated.
People who are pay interest on credit cards and car loans should check the rates against what their local bank/credit union would charge.
@jamesodell3064 I was deep in the doo but qualified for a personal loan at a fraction of the interest I had been paying.
All you have to do is miss a couple of payments, and you may never be able to get out.
That is insanely predatory. Glad to hear she got it sorted better.
@@Constantineopulos She is saving the money but sadly many others continue to pay predatory rates on credit cards and auto loans when they could get much better rates with just a little effort
.
30%??? Ouch! I had never worked with a credit union. But just paid off my wife's car through one. Good interest rate and no problems.
She was living beyond her means if she didn't have enough liquidity for emergencies/bad luck.
There was a book that stated the following question " who would a credit card give money to, "someone who pays off their balance every month or someone one doesn't" the answer is simple, those who pay off the debt are not profitable, those who can't are much more profitable, high interest and fees mean more profit. American Express used too insist balances were cleared every month but now credit card companies will do everything to keep the credit bubble going.
😮😮Unfortunately, the minimum amount is so small and the interest rate is so high that people can easily drown.
The other thing that started to take hold back then is how people aren't responsible for their actions. I would also add the education system started to fail in teaching students about debt. Usury laws had their own negative effects, namely preventing people from getting access to credit used for good purposes. A 12% interest rate cap back at the time was also problematical given inflation rate was in double digits and even got higher than 12% meaning loans would lose money. I been there myself with credit cards at one time carrying just about 100K in credit card debt. Working out of that wasn't easy and I am quite aware of the abuses, but taking away agency of individuals, limiting their choices to protect them is a bigger problem in my opinion.
I remember in school knowing how to write a check and balance a checkbook was required to pass to the next grade
That's the point of regulations. If it is a net bad, get rid of it. If it's 50/50, regulate the thing to make it more good than bad. If it's good, no need to regulate.
By your logic, all drugs should be legal. No need for drivers licenses. No need for certifications to build skyscrapers. No school for doctors. Etc etc.
You know what, there is this concept called self discipline.
My wife and I had a debt problem but we pulled back and paid it off and were very careful about using credit cards going forward.
There's also a concept called temptation. It's why entrapment is illegal, and is an affirmative defense against civil or criminal prosecution.
But you did have a debt problem, so even you were tricked. And the tricking will continue for everyone
You're so close to connecting the dots and achieving empathy, but you swerved at the last moment
"tricked" 😂😂😂
I have debt, it was my choice, nobody has a right to stop me from making peaceful choices in my life, or anyone else.
Its insane the lengths ppl will go to to avoid taking responsibility for their actions, its ALWAYS someone else's fault.
Only after you stop blaming others & take responsibility are you able to make good choices.
@@Marty234 One correction: Your family and your dependents have the moral right to stop you from making certain choices. And your employer (if you work for someone else) has the legal right to do so.
Even screwups can occasionally make a good choice.
The record credit card debt has multiple reasons behind it:
- Our education system no longer teaches kids about money/debt, and its consequences (especially when it comes to student loans).
- Social media impose the need for luxury goods/lifestyle's on more impressionable kids.
- The banks themselves who will literally throw credit cards your way regardless of your financial situation. I have been automatically approved on multiple occasions by my bank and am repeatedly notified of how much credit I can access, which is tempting for the vulnerable person.
- Lack of willingness to take personal responsibility in modern generations.
- Inflation and subsequent wage stagnation created by our governments/federal bank monetary policy.
And low salaries
@@Al-yu6bq
No.
That's commie nonsense.
Productivity failure.
If you add value. You get paid.
A good list of reasons!
I went to school in the 70s and they didn’t teach it to us then. How far back are you going?
Fantastic comment
I had to explain to a 22yo woman that loan interest rates compound each year. Your rate isn't 30% for every $ you owe, your rate is 30% of every $ you owe * years it takes to pay it off. She's got a credit card, student loans, and a car on finance
This girl is one year away from graduating college and didn't realize that interest compounds each year.
I remember way back my parents couldn't get a credit card as they were not credit worthy enough.
Later (much later, moving on from the late 70s to the late 90s) it was kind of obvious that the main target of credit cards were the people who can just barely pay them off but might not, carrying that balance over and paying the interest. They won't default but can't clear the debt.
People need to realise that once your balance hits a magic number (based on the interest rate) that minimum payment will never clear the debt.
Added to all this is the fee charged by the payment provider (VISA etc) for the transaction. It's no wonder it has exploded, it is worth a lot of money.
I dont get using a credit card without repaying it a month later. Why would you even do it.
Like, seriously yeah? Are people THAT short minded where you are like "I'll wait a month, that will come next decade"
I can't even buy eggs without thinking why am I overpaying for these, could've gone there and got it for cheaper
Some people use them for emergencies. Many do not save for an emergency fund, or cannot because they are scraping buy.
@@thebes118 That's a great use for them and I've done that---but then I'll also shop for a deal on renting cash to pay them back. A personal loan is like half the cost. Secured loans are even cheaper. Usually no reason to carry a balance except for the convenience.
For the same reason people take out mortgages or small business loans.
You do this when you're trying to ratchet yourself up to a point where you can pay it all off. The alternative is that you stay debt free, but you don't build the skills or base you need to work your way up.
@@throckwoddle Mortgages are secured so the rate is comparatively better. Business loans can be OK too. I've used a personal loan from my credit union to pay my card before being assulted by interest. That loan was less than half the card rate. There are SO many cheaper places to rent cash from.
Interest on debt just feels so wrong. Higher interest on lower credit feels scummy. You're charging more over time to people who are less likely to pay you back?
The fun fact about interest rates is that they don't matter if you just pay what you own
The interest rates do apply if you can’t afford to pay the balance in full by the end of the month and have to roll some of it over to the next month. Given how many people have to use credit cards for daily living expenses, they probably wouldn’t be able to pay it off at the end of the month.
@@davidroddini1512so the OP is correct then?
Except when you can't.
@@phann860 then don't buy it.
Its gross how many ppl blame others for "allowing them" them to make bad decisions.
As if anyone has the responsibility, or even the right, to force another person to not make a peaceful choice.
It's ALWAYS someone elses fault.
The Equal Credit Opportunity Act of 1974 required banks to issue credit cards to women. Doubled the customer base.
That was necessary and helpful for divorced or single women to create the credit score needed, NEEDED, so they could buy a house, or rent a home, or buy a car…. Only men had credit and only their wives maybe had a card that could be taken away.
My mom and dad built a house in 1976. At one point, a payment was needed. Dad was out of the country on a business trip, and Mom went to the bank to arrange the payment. Despite having her name on the account and the cash in the bank, the bank would not accept Mom's signature and demanded that Dad had to come to the bank. I don't remember how it was resolved, but Mom still talks about how bad that bank was today.
for about 3 years i was responsible with a credit card. using it then paying it back in a day, thus getting ample rewards. But as soon as I hit financial difficulty, that credit card became a crutch, and sent me on a downward spiral (I got out of that spiral by consolidating and negotiating with banks, plus changing spending habits)
Credit cards are like a tiger... it is completely safe as long as it is small. but if it grows even slightly large, it bites your head off.
I was born on the 18th December 1978 and had no idea it was such a significant date
Great piece! Can you source your graph showing the history of credit card debt? What happened in 2010 that caused the balances to spike so aggressively? Was that just the GFC, or was there a policy change?
The older I get, the more I see money as a twisted sickness rather than a means of product and service exchange.
*there are still too many selfish greedy people*
I treat my credit cards like a luxury. I did recently game the system a bit and got a new card to benefit from zero percent interest in order to update my furniture. But I am quickly paying it off before it ends
Nice! I put the down on my F150 using a MC, then used an AMEX balance transfer check at 0% for a while. This was years ago and I was surprised that the dealership accepted it.
Credit cards aren’t all that bad if you’re responsible. For ten years now I’ve paid everything I can with my credit cards. I will take a cash back card with a 12 to 15 months interest free introduction rate and will use it until the introductory rate is about to expire, get another card with a 0% introductory rate and close the old card out. I keep two cards that I use sparingly that have large amounts so as to keep my borrowing power high and to keep my credit age reasonable. I make approximately $1500 each year in cash back and pay absolutely no interest. If you pay your bills on time and make sure the card is paid off before the interest rates kick in, you come out the winner. It all comes down to being responsible.
Ha, only 5 years after the end of the gold standard, they started printing tons of money, imagine that!
Debt slavery. I wonder who's behind it.
Usury laws are needed to protect consumers, and protect the financial system from default. The immediate effect might hit the economy but long term it'll be beneficial as the interest the banks pocket goes to consumer purchasing power.
"Accidentally"? The purpose of a system is what it does. There is no accident.
Here’s some education. Total US consumer debt, credit cards, mortgages, loans total 17 and a half trillion. Our national debt is 35 trillion and growing daily. Not counting our unfunded liabilities which total about 200 trillion. We are screwed as a country,
But 40 trillion of dollars are in the billionaire hands and they won't Psy fair taxes so bs
@ that is 100% totally not true.
"Using as an extension of income" - Can't get a raise, but can always get another credit card😵
The problem in some places is that you need a "credit history" to even rent a home. So, even if you are responsible adult, who lives without debts, you are punished and forced into taking debt.
I am glad to live in Europe, where _debit_ cards are much more common. These allow you to spend only the money that you have in your account.
I wish the US would go this route. There has been talk of a law that would effectively lower transaction fees which would get rid of most of the credit card rewards. I think that would be good for the consumer long term but people are really mad about the potential of losing their "miles." There needs to be a cultural shift here on debt normalization to see any real change.
We have debit cards in the US. We've had them for decades. People rarely use cash for purchases. Who would want to carry $200 to the grocery store?
I don't use credit cards at all. If I don't have the money for something, I have to wait or go without. Our house is 90% furnished from 2ndhand shops. Most of my clothes come from thrift shops. We only use credit when we need to, like a car purchase.
@@madison_kr The part of the proposal to cap transaction fees is probably necessary even though I'd lose a lot of the rewards. I support that.
Some of the rest of the proposal to require payment networks to process payments from their competitors seems poorly thought out and may not be the way to go.
I wouldn't want to use my debit card though. Even without the rewards, I would still use the credit cards:
- There's a layer of separation from my checking account, which minimizes risk of theft.
- There's a layer of separation from the bank my checking account is with, which means if my account is frozen or flagged, I can still access money while resolving it.
- I pay my cards once at the end of each month, which gives me a few dollars more in savings each month and minimizes the work I have to do to keep track of things.
- Debit cards are notoriously harder to get your money returned to in cases of fraud than credit cards.
@@freethebirds3578 My best pieces of furniture are some that were won in a sweepstakes decades ago and others that I picked up for less than $100 at an estate sale. I have a full wardrobe of dress clothes that I picked up from thrift shops.
An interest rate cap would be a good start. The sooner we can largely eliminate credit card use, the better. The people using credit cards are usually the ones who can least afford it.
Are people too stupid to just not apply for a card they don't think they can afford? Maybe they are, but that's an education issue, not an access to credit problem.
@johngaltline9933 Yes they are, and not allowing unethical credit card companies to exploit them is a reasonable measure. It's no different from shutting down pyramid schemes, loan sharks, or any other scams.
Glad to be one of the few with 0 credit cards
They carry a lot if protections for purchases. We use one regularly and pay zero fees and zero interest
Wild that there are Capital One and Amex credit card ads on this video
Awesome video, mate! Really well-researched.
Approximately $7,500 for each adult in the country. I'm surprised the figure is that low.
It is an average. Some people have 0 debt. Others will have 30000 CC debt.
@@Ferdinand208 Yes, average.
I found it surprisingly high. It's probably artificially inflated too if it's just total debt, not revolving debt. Because total debt also includes everyone who pays credit cards off in full every month. So for me, it'd count for like $600-1000 in an average month, despite never having not paid a credit card off in full every month for the entire 15+ years I've had a credit card.
Total credit available to people drowning in credit card debt is likely not super high on a per person basis.
I have zero. My bother has zero. My wife has zero. Both my parents have zero… that’s a lot of zeros to average in.
@@jonathantaylor6926 I have zero!!!
22% interest is criminal.
If your interest rate were 10%, even if you carried a balance you could still make a payment on your account and have some of it apply to principal. When the interest rate is nearly 30%, even if you make a payment, little or none of it is applied to principal.
Capping interest rates is a bandaid for those who are carrying a balance. Don’t have a balance? Keep it that way. That’s the real solution.
@ - paying the bill off every month is the best thing to do, but honestly charging people interest rates close to 30% is really disturbing. It won’t stop poor people from using credit (as the credit companies wish it), but it will make it impossible for them to pay it off. I think Shakespeare had it right “Neither a borrower nor a lender be”.
You might want to actually read your credit card statement, as it's been federal law to tell you, right there, how long it will take to pay off, and to tell you a payment that will pay it off in a reasonable time. in 2006 the law was changed to make minimum payments about double what just the interest added was, so as long as you are paying minimums you will eventually pay the card down. Prior to 2006 it was possible to just pay minimum payment and be paying just the last month's interest.
My local credit union charges 13%. But I have never paid a dime in interest. I pay the balance off each month. Stay away from banks.
I do the same thing using my bank-issued credit card. It doesn't matter what the interest rate is or who issues your credit card if you are diligent about paying the balance off every month.
I applied for my Amex after getting my 1st apartment in 1991, and was always responsible with it. It never occurred to me to spent money I couldn’t repaid by due date. Growing up poor was the reason.
Surprisingly, I side with Trump on this one. I would go even further than he does. Credit availability contributes to positive feedback loops in the economy, making it inherently unstable and leading to boom/bust cycles. Not to mention that it leads to exploitation of human weaknesses. Historically, the (social) cost of these exploited weaknesses will be distributed over the many, while the exploitation itself will only benefit the few. Risk taking is for entrepreneurs, not for consumers, consumer credit should be strongly discouraged.
Initially it sounds good but I am against it. First it makes no sense to be temporary, either permanent until a new law is passed or not do it at all. I agree with the disclaimers afterwards would say it would likely be replaced with high fees or some other mechanism for the banks to get their money. I think a better solution would be education of how credit cards, debt, and interest bankrupt individuals. The American education system did not teach that at all much less to people who dropped out of school. I think the town should advertise and have a counselor or something for free to teach this amongst other important things. I say this with an open mind not just as a Trump hater. Trump has legitimately bankrupted every company he attempted except land/real estate and even those are riddled with fraud or crazy lawsuits.
I pausedt the video when I replied. Cool that he mentioned financial education is being part of a solution.
@@MyExcellentOpinion I'm afraid that you overestimate the effect of education. As Western Europeans, we do receive such education. However, this doesn't change the distribution of intelligence amongst our population. Nor does it fix the low impulse control in certain individuals. Now take a guess which characteristics set apart the group with problematic debts from the general population... Isn't there an English saying like: "You can't fix stupid."?
In some (maybe even all?) EU member states, the interest rates on creditcards are already capped below 15% without it leading to extra fees. I don't see why a law limiting rates wouldn't be able to forbid extra fees at the same time. This seems like a non-issue.
I'd still rather see the consumer credit card industry perish altogether. They serve no real economic purpose.
I am almost always on the side of open markets. Interest rates are, however, the area where I deviate.
I really like the point brought up in a recent comment though that this makes no sense being temporary. I would add to that.
I think we need a permanent rate cap, tied to the fed funds rate. It needs to be introduced slowly, however. If we go cold turkey, the very groups that we’re trying to protect are going to be hurt the most.
I don’t agree with the idea that education is enough of an answer. It’s not an education issue. These people are, very often, brilliant and fully aware. The problem is self control and desperation.
My parents are a great example. To this day, I can not convince them to cut up the damn things. They went into credit card debt shortly after moving across the country when they caught a bad short term break. That was 27 years ago. They both have their masters in mathematics. It’s always been too easy to push off getting off these leeches until next year to get them out for good. I refuse to touch these. Too dangerous! (At least for going on a balance)
Trump wants to limit his interest rates to 10%. Maybe they see him as a high risk, and his credit rating in JNK...
Once upon a time, there was store credit or "layaway" with the alternative being some form of "Shylock". From there to here in time, the poorest are still the most exploited.
Two entities are strangely left out of the predatory lender conversation are universities and credit card companies. The high interest rates should be illegal. They exist not only for greed, but to cover the costs of defaults. I remember my first charge card in 1985. It was at Sears and the only way I could get one was to commit to a piece of merchandise. I needed a washing machine at the time. A few ears later they were handing out cards to college students like candy. The uncapped rates, made it more attractive to extend credit to higher risk customers.
I disagree totally with you. There should be usury laws. High interest makes it much harder to pay off any loan. Despite education, human nature is what they prey on.
I don't think any organization should be able to create value out of nothing then charge you for doing it.
I partially agree, they are providing a service and deserve a reward.... however theres a line beyond helping via service and abuse. Not sure where that line is exactly but certainly credit card rates are well into the immoral side of the spectrum
I'm 60, when I was in High School we had a one term required sociology class that taught you about credit, bank accounts and budgeting ( as well as other things). By the time my kids were in High School that class didn't exist.
My outstanding credit card debt: $0
My outstanding mortgage debt: $0
My total outstanding debt of any type: $0
This isn't about personal badges, it's about structural issues that encourage bad behavior. Bad behavior which has serious effects on our entire country. Saying you don't have the problem is like an adult in Eswatini (Swaziland) going around saying they don't have HIV. Good for you? It's still a serious national problem.
That $6,300 average balance is interesting. Out of all the friends I know, only one has credit card debt, but he carries a lot. So, once his $80-90K in balances is spread out amongst everyone else, I suppose we’re averaging right at the national rate.
I’ve been using credit cards for over 30 years and have never carried a balance.
Credit cards have destroyed many people's lives. However people also need to be accountable for their actions and do their research and homework first
I can't imagine carrying a balance. The interest on my one and only is around 22% and I pay my balance off every month. It really is criminal. There should be a cap.
My younger brother was working as a internal auditor for a major oil company and traveled for work over 40 weeks a year.
He accumulated hundred of thousand of free airline miles and hotel points enough to took our widowed mother to your both South America & Germany.
When you balance the benefit of responsible credit card use against "ruining your life" in a debt spiral, clearly the potential benefit is less than the possible harm. So a reasonable cap on interest rates should be your logical conclusion. Only if you don't think your life could be "ruined", would it make sense not to have a cap. I think your argument makes no sense.
The whole idea of teaching people to use credit cards responsible always comes from people, who are educated and able to understand the system, but that doesn't work for everybody. Not everybody is able to make responsible decisions and these are the most vulnerable people, when it comes to these issues. Yes, you have to save some people from their own stupidity, as hard as this sounds. Because they are not able to understand complex issues and are easy to dilute, but they can't help - they lack the capability. But these people have a right of not being abused by the system as well.
Nailed it.
It's not stupidity for most. I know a PhD who's a pro at making bad financial decisions. My boss has all sorts of debt and he has several degrees and >$200k coming in. Over-spending seems more like a bad habit. Much like smokes. What starts out as a touch of consumer greed turns into a way of life. I've felt the draw of it myself at times. That rush I get when that toolup order comes in is like a drug!
I'm always unsure about quotes detailing "credit card debt." When people use the term "balance" that can be interpreted two ways. Are we talking about the average owed at the end of the month or the average not paid off at the end of the month? My bank just paid itself $8,400 (I made an unusually large purchase and I had both my banks sending me emails about it) on my credit card leaving me with a $0 balance. So if I was included in the average would it be $8,400 or $0?
The worst part is you can do everything right, but the best scenario most can be in is debtless. In order to truly ride out downturns, you have to be debtless and rich. To be debtless and little savings… eventually the decline in money reaching your account will take its toll all the same.
The biggest issue is that there needs to be some sort of cap where interest cannot accrue past a specific percentage of the principle after a company has made their investment back from interest there must come a time when the borrower should be allowed to halt interest and pay down the principle but its eaisly possible to get into a situation at least in America where interest exceeds the ability to repay and it becomes theoretically impossible to pay down a debt. Bankruptcy is not really a good or valid solution.
0:08 that spike every year at christmas is WILD
One thing I think you left out about why people are doing credit card debt isn't because they are trying to keep their heads above water. There are a significant number of people who use credit cards to live a lifestyle they would not be able to without it. I would love to see more stats on that.
Fantastic, informative video. Thank you for creating this!
Point is even with a 780 credit score all my cards are over 30% interest wean advertising 19.99 to 30% now how dose that work they show a range to make you feel safe and then give the highest number anyway
Call your card's bank to see what's up and what they can do. My MC was 18.74% on the last statement, though that's still way higher than a normal loan. My penalty APR would be 29.99%! Personal loans are more like 12 or 13% and secured loans are even better at around 6 or 7% at credit unions.
Debt Collectors and Credit Bureaus
are definitely happy about this
And making credit repair illegal and banning them
Now, it seems it doesn't matter what your credit history is. You pay massive interest regardless.
its so strange to me that people are comfortable actually spending money on their credit card and not just using it like a debit card that you pay off each month. It stresses me out when charges dont hit on the card and carry a balance each month.
People choose to get into debt. No one is forced into debt. A financial education, self-control, and long-term perspective prevents getting buried in debt.
"interest rate caps can limit access [to credit cards]"
I say… GOOD. I learned how damaging credit cards could be in the very early 90s and again in the late 90s. If you get into financial trouble, you WILL abuse them, out of desperation, and it will only make things worse.
The ad for Capitol One directly under the video is so funny.
I use my credit card exclusively for my monthly purchases, but that card gets paid off, never gets charged interest, and I get cash back on all my purchases.
I have $12,000 in cred card credit limits over three cards. I owe NOTHING. Some montly bills are auto billed to one and when they are all are charged for the month I pay all of it off.
Don't spend money you don't have. Isn't it that simple? The fact that you have a high credit limit doesn't mean you need to use that limit. I hope the word 'limit' is clear enough.
I'm not sure if I'm angrier at credit card firms charging 20% APR or at the suckers opening their doors to high interest debt.
Interesting video, thanks!
Those who understand interest, earn it, those who don’t, pay it
Payday loans make credit card companies look like charities
The worst thing is that whatever happens with the economy in the USA, it heavily affects the rest of the world, too…
Waiting for the "bubble " to burst like the housing disaster.
In the 1980s and 90s, you did not receive preapproved offers in the mail, you received actual cards and all you needed to do was activate it. I remember my father had a whole drawer of them in his office. They stopped that and just moved to offer letters by 2000 though.
Corporate Greed and inflation is why people flock to credit
Consumer greed.
I'd say consumer greed or just greed. Lack of discipline in others. Maybe necessity in quite a few