I have been reading all your posts for the past day and a half, identifying with and sympathizing with everyone on the board. I love you all and I don't even know you. I, too, have been in deep with credit card debt - not as deeply as many, but pretty deep. I can finally say there's a light at the end of the tunnel: I can honestly say my debt is almost paid off. I had to charge off a few accounts, granted. But I am almost free. I came here to find people who understand and who are going through the same thing. What I've found is a bunch of desperate people who are willing to do anything to be a part of the status quo again, and the status quo is the creation of the very agencies who have almost destroyed our lives in the first place! The current status quo is this: strive for the highest, best credit score in the world in order to, well, succeed at life! Don't you see? Credit scores are a new invention used to control the masses and steal our money from us. Stop worrying about your credit score! Take the power back! I mean, look, I get it: we all want to have a decent credit score. I hate to break the news to you, though: the only way to do that is to pay off all your debts and NOT USE CREDIT CARDS ANYMORE!!! Even in an emergency, my friends! If you don't have the money, you don't have it. If you're worried about emergencies, save and have an emergency fund, instead of giving all your money to credit cards: even if your accounts are not delinquent, you're still giving money to the bank, instead of giving it to yourself. So stop! Save your money! Save it! Worrying about fixing your credit score is just another example of our national addiction to credit!! You don't need to open another card in order to "prove" to banks that you can handle a credit card. You obviously CANNOT handle a credit card if you've gotten yourself into this mess: EVEN, yes, EVEN if you incurred the debt 15 years ago. You let it go until now, so obviously not much has changed. That's it. And anyway, even if you ARE somehow more responsible and able to use a credit card appropriately and pay off all your bills: why do you want to? Why give money to lenders who are trying to fleece you? Your credit score is just another tool the banks are using to manipulate you. Pay your bills, save your money, don't act wealthy if you're not. THAT will improve your score. Getting new cards and going deeper into debt will most certainly not. If you have gone bankrupt at ANY point in your life, if you have been in such debt that you are terrified of losing everything, if you can't sleep at night because of your credit card debt: YOU ARE NOT CAPABLE OF HAVING A CREDIT CARD. Chop them up. Close your accounts. WHO CARES ABOUT YOUR CREDIT SCORE? If your excuse is that you want to buy a house and your credit is bad, I have news for you: You won't be buying a house right now. Them's the breaks. If you're so concerned about your score because you want to get more cards, YOU DON'T NEED THE CARDS. Pay off your debts, close the accounts and save the money. Then you'll have money for emergencies if you need it, and you won't be owned by the banks. Eventually, once some time has passed and your debts have been paid, your credit score will go up and you'll be able to buy that home. OR, most enticingly, perhaps the credit score obsession will diminish so much that the power will be taken away from the banks. I don't understand how no one is seeing this: the banks are playing us like a violin. Don't let them! They WANT us to obsess about our credit scores! It keeps us indebted to them! I say all this out of love. I am in the same boat. I am closing my credit cards. I am not responsible enough to have them. Neither are you.
I'm sorry to hear about all the problems you've had with credit, but I'm happy you've been able to overcome them and move forward with your life. The reality is credit scores aren't going anywhere. Lenders need a way to assess risk when providing loans, and credit scores will always play a large role in that process. For me, the financially smart move is to just take the time to understand how credit works, and then use it to your advantage to leverage "good debt" (eg home or student loans) to increase your net worth. Credit card debt is "bad debt." I would never advocate carrying a balance on a credit card - ever! However, closing all your cards is not the answer. That will do the exact opposite of what you're suggesting. Close all your cards, and your credit score will not improve. It will plummet. Use a no annual fee credit card, live within your means, and pay your balance in full and on time each month. That's what will give you good credit.
But aren't you forgetting a crucial piece of information? Most people cannot handle credit cards. They start off meaning well, but eventually they put themselves in the hole again. It's just too tempting. They prove it again and again. Open account. Promise to pay on time. Don't pay on time. Financial devastation. It's human to want more than we can afford. If we know this, we should change our behaviors to accommodate our addictions, much like alcoholism. We need to quit credit. And also, banks don't need a credit score to give a loan! It's all a tool of manipulation. Keep your score high, say the banks! It's the only way we'll service you! If you close your account, your score will plummet and you're done for!! It's all so controlling and so obvious, if you ask me. The banks will do anything to get our money, and in the end, credit scores mean nothing. They change with the wind. If they had a voice they'd sound like Heidi Klum: One day you are in, the next day, you are out. Credit is the bane of our society, and credit scores are the scourge that follows.
No, I'm not forgetting that crucial piece of information because it's not true. The truth is the vast majority of credit card holders carry either no debt or a small amount of debt on their credit cards and have proven they can responsibly handle credit. There's plenty of data out there to support that point. But I do agree, there are some who simply don't have the financial understanding or willpower to manage credit cards or any other personal financial decisions in their lives. For those people, perhaps it's best that they rent an apartment the rest of their lives or live somewhere where you can actually buy a home in cash without being a millionaire. But as I said, these people are not the majority.
Actually the correct answer is "all of the above". Build a good cash cushion first then go for good credit and manage it well. That way you get the best of both worlds. I often find that for one reason or another I must borrow from myself. I went into a Wal-mart store the other evening and bought about $45.00 worth of stuff, went to the checkout stand where my Chase debit card was denied. I had to borrow from my corporate account so I'll have to repay that with 30% interest which will go into my corporate savings account. That way I'm building a good cash cushion over time. I also have another BOA personal account accompanied with a savings account. I like that too because as I spend money the bank rounds the amount off to the nearest dollar and puts the difference into my savings account automatically. I'm also testing out Joshua's suggestions about Ally Bank. I put $100 in it about 2 1/2 months ago and got my first real statement a day or so ago and that $100.00 had earned a whopping 26 cents. WOW! Like that I could go broke in a heartbeat because of inflation. Prices at the store probably increase by much more than the 26 cents over 2 months time but what the heck. Its still better than a poke in the eye with a dirty stick. (LOL)
Joshua, Could you possibly include a few links with data showing that most people in this country are responsible with their credit accounts? I'm not being snippity, I'd just really like to see the proof. I find it very, very difficult to believe, given the state of our economy and, well, the state of our society, to be frank!
These numbers look pretty high to me The below list is from Bankrate.com. Just one source, of course, and also I think it may be from a few years ago. But it could only have gotten worse, my friends. With all the people posting on this site alone every day, Joshua, I don't quite understand how you can perpetuate the idea that most people do not carry debt. 1.Some 1.6 million U.S. households -- 1 of every 73 -- filed for bankruptcy in 2003. 2.There are roughly 1.2 billion credit cards in use in the United States. 3.The original Diners Club card was issued in 1950 to let businessmen charge meals. It was pasteboard with a list of the 27 restaurants that accepted it printed on the back. The first plastic card came out in 1955. Today, there are about 20,000 different cards available in the U.S. 4.Studies show the average consumer is exposed to more than 3,000 marketing messages every day. In the last decade, solicitations jumped from 1.52 billion annually to 4.29 billion. 5.Today roughly 24 percent of personal expenditures in this country are made with credit and debit cards. 6.Average per household debt in the U.S., not counting mortgage debt, is about $14,500 -- especially noteworthy because before the 1930s, most middle and working class people had NO major debts. Banks would not lend to them; they rented their homes and if they did own a house, it was paid for as it was being built. 7.A typical credit card purchase ends up costing 112 percent more than if cash were used. 8.A $1,000 charge on an average credit card will take almost 22 years to pay, and will cost more than $2,300 in interest ($3,300 total) -- if only 2 percent minimum payments are made. 9.Some 40% of American families annually spend more than they earn. 10.About 60% of active credit card accounts are not paid off monthly. 11.Average credit card debt among all American households is $8,400. 12.Average card debt among people who have at least one card is $9,205 -- triple what it was in 1990. 13.Average personal wealth of a 50-year-old American, including home equity: less than $40,000. 14.A typical American family today pays about $1,200 annually in credit card interest. 15.The average interest rate on credit cards is 18.9%. 16.Last year the credit card industry took in $43 billion in card fees. 17.9 of 10 Americans claim credit card debt has never been a source of worry. 18.But 47% would refuse to tell a friend how much they owe. 19.23% of Americans admit to maxing out a credit card. 20.11% of Americans admit card debts went to collection. 21.13% of Americans have been 30 days late paying credit card bills in the past year. 22.The average graduate student has 6 credit cards and 1 in 7 owes more than $15,000. 23.People using credit cards in fast food restaurants spend up to 50% more than when they pay cash. 24.The personal savings rate in the United States has dropped from 8% in the 1980s to just under 2% since 2000. 25.Medical debts sink the ship in 1 of every 20 bankruptcies. Typical health care debt: $25,000. Typical victim: a senior on a fixed income. Typical scenario: pricey prescriptions bought on high-interest credit cards.
Most of what you posted proves Joshua's point: 1.Some 1.6 million U.S. households -- 1 of every 73 -- filed for bankruptcy in 2003. So 72 of every 73 did not. That's clearly "most" in my understanding of the word. 2.There are roughly 1.2 billion credit cards in use in the United States. That just says there are a lot of cards, not that there are alot of irresponsible cardholders. Conclusion assumes facts not in evidence. 3.The original Diners Club card was issued in 1950 to let businessmen charge meals. It was pasteboard with a list of the 27 restaurants that accepted it printed on the back. The first plastic card came out in 1955. Today, there are about 20,000 different cards available in the U.S. As above, that just says there are a lot of cards, not that there are alot of irresponsible cardholders. Conclusion assumes facts not in evidence. 4.Studies show the average consumer is exposed to more than 3,000 marketing messages every day. In the last decade, solicitations jumped from 1.52 billion annually to 4.29 billion. That illustrates aggressive marketing, not irresponsible consumers. 5.Today roughly 24 percent of personal expenditures in this country are made with credit and debit cards. That illustrates how popular or convenient the cards are not how irresponsible the cardholders are. 6.Average per household debt in the U.S., not counting mortgage debt, is about $14,500 -- especially noteworthy because before the 1930s, most middle and working class people had NO major debts. Banks would not lend to them; they rented their homes and if they did own a house, it was paid for as it was being built. Yes things were different 80 years ago. So? 7.A typical credit card purchase ends up costing 112 percent more than if cash were used. That illustrates how people are willing to pay a premium to have something sooner than later. Is that irresponsible? maybe it is and maybe it's not. It depends on the individual circumstance. This statistic doesn't illustrate any moral value. 8.A $1,000 charge on an average credit card will take almost 22 years to pay, and will cost more than $2,300 in interest ($3,300 total) -- if only 2 percent minimum payments are made. What does that have to do with an irresponsible consumer? 9.Some 40% of American families annually spend more than they earn. Spending more than you earn is irresponsible, unless you're including the house purchase in that statistic which typically costs more than the annual salary of the purhcaser. 10.About 60% of active credit card accounts are not paid off monthly. That may or may not be irresponsible or it could be smart budgeting depending on the individual circumstance. 11.Average credit card debt among all American households is $8,400. That number is tossed around as often as it is disputed. I'd dig deeper before quoting it. 12.Average card debt among people who have at least one card is $9,205 -- triple what it was in 1990. clearly people have been charging more then they used to. That doesn't, in and of itself, illustrate irresponsible behavior. 13.Average personal wealth of a 50-year-old American, including home equity: less than $40,000. While more would be better, it's not clear that this is necessarily bad. Had you taken this survey 3 yrs ago, I'd bet that the number would easily be 3-4x what it is today. Again, that doesn't, in and of itself, illustrate irresponsible behavior. It does reflect a difficult economic climate. 14.A typical American family today pays about $1,200 annually in credit card interest. 15.The average interest rate on credit cards is 18.9%. So? They probably pay that much in interest on their car loans, too. 16.Last year the credit card industry took in $43 billion in card fees. That credit cards are good for the banks doesn't, in and of itself, mean they are bad for the consumer. 17.9 of 10 Americans claim credit card debt has never been a source of worry. 18.But 47% would refuse to tell a friend how much they owe. They probably have similar views about sex and other personal tidbits of information. 19.23% of Americans admit to maxing out a credit card. 20.11% of Americans admit card debts went to collection. So that means 89% (i.e. most) did not. 21.13% of Americans have been 30 days late paying credit card bills in the past year. That means 87% (most) did not. 22.The average graduate student has 6 credit cards and 1 in 7 owes more than $15,000. That sucks. 23.People using credit cards in fast food restaurants spend up to 50% more than when they pay cash. If I can pay it all off later, why not get some rent-free money for a couple of weeks? 24.The personal savings rate in the United States has dropped from 8% in the 1980s to just under 2% since 2000. That is, indeed, bad. 25.Medical debts sink the ship in 1 of every 20 bankruptcies. Typical health care debt: $25,000. Typical victim: a senior on a fixed income. Typical scenario: pricey prescriptions bought on high-interest credit cards. again, that just means medical debts aren't the cause of 19/20 BKs.
See, my problem with the excuses and reasoning that Joshua and others put forth is that no one is considering to WHOME the excuses and reasoning is being directed. The people on this website ALL have credit issues, large and small. So why are you trying to convince them that they need MORE credit in order to reestablish credit? Because they need to get a loan? In what universe will people who cannot handle a 10K credit card be able to handle a mortgage. It just doesn't make sense. It takes one person to change the world, and I think we all need to be that one person! No more credit control! I stick by my opinion.
Thanks for the help ccbob. Also, beware of "averages" when dealing with statistics...they never tell the true story. Medians are much better. Anyway, I recommend taking a look at the Fed's most recent Survey of Consumer Finances, which was released in February of this year. The Fed's survey is basically the most comprehensive study out there, and in my opinion it's the most reliable information we can get our hands on at the moment. Unfortunately, as soon as it's released, it's already outdated. But still, it's the best we can get. Here's a link: FRB-Survey of Consumer Finances Here's a quote from the opening paragraph on Credit Card Balances as well: "As with installment borrowing, the carrying of credit card balances is widespread but considerably less common among the highest and lowest income groups, the highest wealth group, and families headed by a person who is aged 65 or older or who is retired. The proportion of families carrying a balance, 46.1 percent in 2007, was barely changed from 2004." Of course, I believe this number reflects some families who don't use credit cards at all. So, here's another quote from the same section. "The proportion of holders of bank-type cards who had a balance went up 2.1 percentage points, to 58.3 percent; the proportion of holders of bank-type cards who reported that they usually pay their balances in full retreated a bit, from 55.7 percent in 2004 to 55.3 percent in 2007." The stats are getting worse due to poor economic conditions and high unemployment rates, but 55% supposedly still pay their balances in full. I'm not trying to be argumentative or proclaim that a lot of people in our country don't have problems with debt. I just personally don't buy into all the gloom and doom. That's why we built this site...to provide people with a free place to educate themselves about credit and receive advice from others who are willing to help. I believe it's a much better path to take than trying to just ignore that credit does play an important role in our personal financial lives.
Well stated. I guess I just question the push for credit when, in the end, it adds unneccessary drama to the middle and lower "class." People need to start accepting that they aren't rich. End of story. No more living in a fantasy world, buying things they can't afford with the "free money" credit affords them. And also, frankly (I love that word, can't you tell) we need to stop basing our lives on our "finances." It's just money. It's not life.
I don't see what the big deal is. Credit is like many other things in life (work, money, alcohol, marijuana, sex, etc.), in a reasonable dose, it can be a good thing. Too much or not enough and you can get into trouble. If you can't manage it, then you should probably avoid it. If you can manage it without it taking over your life or becoming dependent on it, what's the problem? I'll answer that for you. The problem is when you don't know what you don't know. I think the biggest problem with credit (to the extent there's a problem) is ignorance and lack of credit (and debt) education. If anything needs to change, it's that people (from Jr. Hi, on up) need a much better education in how to live within their means and manage their money and their credit. Unfortunately, from what I've seen, the most common source of credit information is the banks that offer credit cards.
Try renting a car with cash,a hotel a plane ticket,Now when you do a large purchase with cash.They want to involve homeland security.
Like you wouldn't believe. It isn't just about credit haves and have nots but our total financial situation. 2010 will be the worst in U.S. history for the average man as the value of our money erodes faster and faster. Most of our gadgets are made in other countries and now so is much of our food, fuel and other necessities. As the dollar declines in value the prices will increase faster than ever before. Such things are very cheap right now compared to what they will soon become. As usual, the wealthy have a way out by investing in gold and other currencies as well as stocks and bonds of other countries. Gold, now at about $1100 an ounce will soar to $2,000 and higher. Right now the only viable source of gold for the little guy is garage sales and most people know real gold. Most of the jewely available at garage salse is pure junk. Might be plated with a little gold but not of any real value. The problem is learning how to differentiate between the real gold and the junk. But other metals are also soaring in price. Silver is much more available at garage sales and pawn shops and will soon be worth much more than it is now. Credit is the least of our worries right now. Unemployment is at the highest rate it has ever been in the entire history of the U.S. and climbing rapidly. Right now we have about 225 million people unemployed. More are underemployed. That amounts to about 20% of our population. Things are going to get mighty rough in 2010 and beyond.
Well, I don't quite agree that credit is the least of our worries, but we certainly do have other worries as well. The more people depend on their credit cards and the more they obsess about their credit scores, the more the banks have us by the proverbial male body part. I'm just trying to preach to the almost-converted: quit your credit addiction! Oh, and in response to the person who mentioned car rentals: If you need to rent a car, there ARE some car rental companies that let you use a debit card to reserve the vehicle. Granted, you need to have a certain amount on your card in order to use it, but if you stop spending your hard-earned dough on CREDIT CARD FEES then you will have the money on your debit card! And you know what? If you don't have the money on your card, you probably don't have the money to rent a car, and therefore you should be taking the bus!
Regardless of the evils that go with credit cards they are an absolute must for many. As I said in another post somewhere, I know a man who has a credit card with a $1 million credit limit. He maxes the card out every week then pays it off every week. He often maxes it out in just one day and if so pays it that day or the next. Yes, he makes that kind of money. He has 10 new car dealerships and spends the million buying used cars at auctions to sell on his lots as well. That man couldn't live without his credit availability. There are lots of people who have unlimited credit both on loans and on credit cards. They got so rich by getting good credit early in life. Yes, many of them were born to very wealthy parents. Business runs on credit and without that credit they could not provide the goods and services they do. Government runs strictly on credit. The problem is that credit is and will continue to be Government's main problem. They, like far too many Americans are simply living on borrowed time. They are spending money far faster than they can ever hope to collect from their taxpayers who are their only source of actual income. The results are starting to hit home now as more and more other nations realize that the credit of the United States Government is worthless or next to it. China alone has well over a trillion dollars of U.S. bonds and other investment vehicles. Our government is spending money on wars and social benefits like it is going out of style which it actually is. China, on the other hand is spending trillions on their infrastructure, roads, bridges, land development, agriculture and new manufacturing facilities. They are putting their people to work earning more money than ever before and are exporting their goods and services at an ever accelerating pace. Theirs is a vibrant economy while we are doing all we can to destroy ours. The Chinese stock market has outperformed the American DOW by about 38% for the last couple of years or so. Brazil has an even more vibrant economy and their stock exchange has outperformed the DOW by a whopping 75% over the same period of time. They are spending their money on roads, bridges, infrastructure, developing new land, getting rid of slum areas and providing decent jobs and homes for their people as both China and India are doing. India is also a rapidly developing nation whose stock market has also outperformed the DOW by a huge margin. Our infrastructure is deteriorating at a rapid rate. Our roads and bridges are falling apart because despite the stimulus money currently being provided to the states it simply isn't enough. The reason is because our infrastructure has been allowed to deteriorate for so long. We have no production base and no real agricultural base. We must rebuild it all and credit is the only way we can do it. We have to put people back to work and credit is the only way we can do it. Credit is an absolute must whether we like it or not. All we have to do is use it wisely and not buy the world's junk. We need to stop buying things just to keep up with the other fellow or buying on whims. We need to work on building our savings, not our credit. Build your savings first and your credit later. An amazing thing happens when you learn to pay yourself first. You learn how to manage your money.
I agree Cap we all need credit, we just have to manage it responsibly. There are certain things that credit should and should not be used for if not greed and a lack of financial restraint will cost us dearly. On your other point, I have often considered purchasing land in another country and I am investigating more and more. I love my country but these politicians (Dems and Repubs) and "Captains Of Industry" are killing it.
I honestly think that the only reason we think we "need" credit is because the banks are telling us we need it. If we could all just stop depending on it, suddenly credit wouldn't be such a neccessity, you see what I'm saying? I think caponesucks makes my point: Yes, some very wealthy people are able to manage their credit quite nicely. Thing is, most people aren't wealthy. They just act like they are by making credit card purchases and living in the fantasy that the money is free. My uncle, who is extremely cash poor (has decent real estate but nothing he can sell right now), used to tell people "Oh, you don't need to pay back your credit card company! They'll never catch you." Now that's an extreme case of ignorance, obviously, but I don't think it's that far from a lot of people's subconscious thinking. We DO need to stop buying junk. We also need to stop buying neccessary objects with credit. We need to start paying in cash, especially those of us who are poor. If you don't have the cash, then you probably shouldn't have the item. Does that mean going hungry sometimes? I hope not, but unfortunately it probably does sometimes. That's the world we live in. I've gone hungry before. Does it mean you can't feed your kids? Well, firstly I'd suggest not having any more children. Beyond that, there are programs for children who are poor. I don't know what they are, because I don't have kids (I'm not responsible enough to raise a child, and I probably never will be) but they are out there. But the truth is, not using credit won't make you starve. I've gone hungry without credit, and I've gone even hungrier WITH major credit card debt hanging over my head. Credit does not save your life or make things possible. It makes things worse.
Glass, unless you are buying homes out right in cash you WILL need credit, why, because no matter the amount of money you put down you will still owe someone for the remainder of the balance. Now if you never plan on owning a home that is fine.Some of us do. Transportation: Can you buy a car out right? Yes, depending on the amount of cash you have and what the car will be used for you have to decide if you want something you can depend on with a 5 year warranty or if you want something you have to fix all the time which could (in the long run) cost more than buying something using credit (I've done both) . Oh and then there's that little thing called employment, did you know that more and more companies do a credit check on you to see if you qualify for employment? When my credit was bad I actually lost out on a great Job at the time because of my credit (as yes having no credit would have been just as bad as far as they were concerned). The point here is being responsible. As far as your other statements I will just say this, until you become a parent and a hungry child is staring in your face or your infant is crying because they are hungry and payday is a couple days away I would refrain from telling people what to do to feed their kids. An emergency could have come up with that used car they just paid all cash for and they had to use the rest to get the Transmission fixed or something else and they say â??hey, Iâ??ll go to the store and pickup and few things and then make a payment online when I get paid this Fridayâ?. No hungry kids, no broken car and they can continue with their lives responsibly. I understand you have had some bad experiences with credit, I have too but Iâ??ve also been in a couple of car accidents in my life and that didnâ??t stop me from driving, it just made me a lot more careful when Iâ??m on the road and I donâ??t take unnecessary risks.
