Americans have $930 BILLION in CC debt

[haapai]

Dec 6, 2022 11:42:56 GMT -5 The Walk of the Penguin Mich said:

Dec 6, 2022 9:02:21 GMT -5 @athena53 said:

I'm glad you were able to use it as a tool to get out of debt. Sure beats payday loans. Still, my guess is that the vast majority of people who make 0% interest balance transfers don't pay them off and add more purchases to the card. How would banks make any money on those offers otherwise?

I'm in favor of credit cards- have had them all my adult life. It's just unfortunate that banks lend so much money to people that they can't afford to pay it back. When my Ex had multiple credit cards in default he got more offers for credit cards in the mail than I did- with higher limits. Maybe if they were more responsible about lending they'd be able to cut their interest rates in half.

I can’t be the only person who used this as a tool.  When I transferred the $$ to those cards, the only other card I used was an AmEx that had to be paid off monthly.  That gave me the opportunity to use a card at places like gas pumps and the grocery store, but more cognizant of the balance that MUST be paid in full each month.  10+ years later, I still pay everything off.  

TBH, lower interest rates wouldn’t have mattered.  I cringe when I think of how I used credit in the past.  I was stupid, and paid my (well deserved) stupid tax.  

I had a pretty similar experience.  Everyone likes to say that "it's the interest that kills you" but it took me a while to figure out how only paying off shreds of principal each month was deceiving me.  (Thanks mom, for teaching me how to use spreadsheets even though those F-key-based things were awful to use!)  Even after some reforms in the aughts, credit cards still only ask for a tiny amount of principal to be repaid every month and you need to double or triple that amount of principal repayment in order to get rid of them before the next rainy day.  That's hard to do once the minimum payment has embedded itself in your brain as what you need to pay to stay in the good and even harder to understand once you are relying on them to do the jobs of sinking funds and emergency funds. 

 It was only after checking out YM's earlier incarnations that it reluctantly dawned on me that I needed to aim for living on something like 60-70% of my income instead of the 90% that I'd been lead to believe was prudent if I wanted to have any sort of control over my life. 

[nidena]

Dec 6, 2022 20:13:23 GMT -5 haapai said:

Dec 6, 2022 11:42:56 GMT -5 The Walk of the Penguin Mich said:

I can’t be the only person who used this as a tool.  When I transferred the $$ to those cards, the only other card I used was an AmEx that had to be paid off monthly.  That gave me the opportunity to use a card at places like gas pumps and the grocery store, but more cognizant of the balance that MUST be paid in full each month.  10+ years later, I still pay everything off.  

TBH, lower interest rates wouldn’t have mattered.  I cringe when I think of how I used credit in the past.  I was stupid, and paid my (well deserved) stupid tax.  

I had a pretty similar experience.  Everyone likes to say that "it's the interest that kills you" but it took me a while to figure out how only paying off shreds of principal each month was deceiving me.  (Thanks mom, for teaching me how to use spreadsheets even though those F-key-based things were awful to use!)  Even after some reforms in the aughts, credit cards still only ask for a tiny amount of principal to be repaid every month and you need to double or triple that amount of principal repayment in order to get rid of them before the next rainy day.  That's hard to do once the minimum payment has embedded itself in your brain as what you need to pay to stay in the good and even harder to understand once you are relying on them to do the jobs of sinking funds and emergency funds. 

 It was only after checking out YM's earlier incarnations that it reluctantly dawned on me that I needed to aim for living on something like 60-70% of my income instead of the 90% that I'd been lead to believe was prudent if I wanted to have any sort of control over my life. 

My CCs will show a $0 minimum due if I pay anything before the statement comes out, no matter what the balance is.  You have to read the fine print to see what it might have been if they had used it.  But...that $0 comes in handy when I'm trying to snowball.

In regard to the overall theme of paying cards off each month and having sinking funds, in general...it can be very difficult to go from using cards for everything to using cards as necessary and creating specific savings buckets.  I know this is where I'm still refining what I know.

I got off track this spring when I got a $3000 (Fed & State) income tax bill.  I had paid my CCs off in March and a week before I filed my taxes, I had paid off my rain gutters.  I was FINALLY going to be able to put money in dedicated savings accounts.  Then I got hit with that bill.  I had to use my CCs to pay for each of them.  Add to that my regular purchases and buying a few pieces of furniture for my still nearly-empty house, and the balance ballooned.  But I own all those decisions.  The only thing that would have repercussions for not purchasing, so to speak, were the taxes.  I could have lived without everything else.  So, after my unnecessary-but-wasn't-going-to-not-go trip to my hometown to visit my kids and their adoptive mom (having not seen them in five years), I've put myself on a minimal spending diet.

I'm also doing my best to be less generous and helpful.  I tend to want to help all my friends who are struggling because I know my income is steadier than theirs and, in many cases, more.  Like, my young friend who was nearing the end of her car loan term with Santander.   She had fallen behind last year when she got COVID, twice.  She's an EMT and makes ~$15/hr (maybe).  She still had $4500 to pay on her loan with a rate of 26.44%.  So, to help her out, I took out a PL and paid it off for her.  Did I ask her to pay me back?  No.  She has two kids and makes shit wages saving people's lives.  So, I'm working to not do things like that unless I have $5000 just laying around.

It just really bothers me to read some of the things on this board.  Some people on here just seem to be all sanctimonious and have nothing better to do than nibshit over how other's spend their money.  It isn't YOUR money so quit judging folxs for THEIR debt.  And I'm not talking student loans so nip that rebuttal in the bud, whomever has such contention for the situation there.

[minnesotapaintlady]

Dec 6, 2022 20:47:35 GMT -5 nidena said:

My CCs will show a $0 minimum due if I pay anything before the statement comes out, no matter what the balance is.

I'm assuming the amount you paid before the statement came out at least equaled what the minimum payment would have been though.  As long as you get that 1% in (or whatever it is), they're happy to let your balance ride.

[TheOtherMe]

I don't recall having a credit card show that I have $0 minimum due if I make a payment during the statement period.  It shows the minimum due for the balance still owed.  

I tend to make several payments a month because I don't like looking at big numbers.

[minnesotapaintlady]

Dec 6, 2022 21:29:32 GMT -5 TheOtherMe said:

I tend to make several payments a month because I don't like looking at big numbers.

Same.  I don't even keep track of the dates (although I think most are the first week of the month).  Paying off 2-3 times a month at least one of those times is after the statement posts.

[minnesotapaintlady]

Dec 6, 2022 21:29:32 GMT -5 TheOtherMe said:

I don't recall having a credit card show that I have $0 minimum due if I make a payment during the statement period.  It shows the minimum due for the balance still owed.

Now that you mention it, I've never seen that either, even with paying it down to 0 multiple times prior to the statement hitting.

[nidena]

Dec 6, 2022 21:14:58 GMT -5 minnesotapaintlady said:

Dec 6, 2022 20:47:35 GMT -5 nidena said:

My CCs will show a $0 minimum due if I pay anything before the statement comes out, no matter what the balance is.

I'm assuming the amount you paid before the statement came out at least equaled what the minimum payment would have been though.  As long as you get that 1% in (or whatever it is), they're happy to let your balance ride.

In looking at my statements, yes.  In Oct, I paid just $100 to my Visa while I focused on paying off the AmEx and the minimum payment--had it been required--was $58.

USAA calls this their Pay-Ahead Program:
Your Regular Minimum Payment is the Minimum Payment amount calculated in accordance with the USAA Credit Card Agreement. If

your account is eligible for our Pay-Ahead Program and is in good standing, when you make more than the Regular Minimum Payment, we may, at our option,

permit you to skip some or all of your next two Regular Minimum Payments. When this occurs, we continue to calculate your Regular Minimum Payment;

however, the amount of the minimum payment due displayed on the first page of your statement, on usaa.com, on mobile devices, and on our phone systems

is reduced by the amount you may skip.

[Deleted]

And now they have after=pay programs such as Klarna, which let you break it into 4 installments posted monthly to your credit card. No interest during those 4 months but it's just another way to get into trouble.

Dec 6, 2022 20:13:23 GMT -5 haapai said:

I had a pretty similar experience. Everyone likes to say that "it's the interest that kills you" but it took me a while to figure out how only paying off shreds of principal each month was deceiving me.

But that's because the interest is killing you! Here's a real-life example from my last Costco Visa statement. Balance due = $1,328. Minimum payment = $41. Interest rate a bit under 1.5%/month. (They note that if I have late payments they'll add a $41 penalty and the rate could go up to 29.99%. )

So, if I pay $41, $20 of that goes to interest. I'm paying off only 1.66% of my balance ($21/$1,328). If the interest rate were half that, interest would be $10 and I'd be paying off 2.3% of my balance. Not a great improvement but better than 1.6%. They do note that if I make no new charges on the card (a big "If" for the typical cardholder) and continue to make the minimum payment, it will take 4 years and I'll have paid $1,836 in interest. Wow.

I wonder how many people actually read that part of their statement.

[haapai]

I don't.  But you just solved the mystery of why I am getting paper statements again.  

Interestingly, my credit union has stopped charging a minimum payment of $25 or the balance.  They now calculate minimum amounts due that are much smaller than $25.   I thank the heavens that I've learned to ignore that number. 

[TheOtherMe]

Dec 6, 2022 21:59:31 GMT -5 nidena said:

Dec 6, 2022 21:14:58 GMT -5 minnesotapaintlady said:

I'm assuming the amount you paid before the statement came out at least equaled what the minimum payment would have been though.  As long as you get that 1% in (or whatever it is), they're happy to let your balance ride.

In looking at my statements, yes.  In Oct, I paid just $100 to my Visa while I focused on paying off the AmEx and the minimum payment--had it been required--was $58.

USAA calls this their Pay-Ahead Program:
Your Regular Minimum Payment is the Minimum Payment amount calculated in accordance with the USAA Credit Card Agreement. If

your account is eligible for our Pay-Ahead Program and is in good standing, when you make more than the Regular Minimum Payment, we may, at our option,

permit you to skip some or all of your next two Regular Minimum Payments. When this occurs, we continue to calculate your Regular Minimum Payment;

however, the amount of the minimum payment due displayed on the first page of your statement, on usaa.com, on mobile devices, and on our phone systems

is reduced by the amount you may skip.

I have never had a card that worked that way and I wouldn't want one.  The credit union has offered skip a payment at Christmas when I had car loans.  All that does is make it a month longer to pay it off.  Why would I want to do that?  

That program does nothing to pay off the card.  The goal is to pay off the card.

[The Walk of the Penguin Mich]

Dec 7, 2022 9:33:35 GMT -5 TheOtherMe said:

Dec 6, 2022 21:59:31 GMT -5 nidena said:

In looking at my statements, yes.  In Oct, I paid just $100 to my Visa while I focused on paying off the AmEx and the minimum payment--had it been required--was $58.

USAA calls this their Pay-Ahead Program:
Your Regular Minimum Payment is the Minimum Payment amount calculated in accordance with the USAA Credit Card Agreement. If

your account is eligible for our Pay-Ahead Program and is in good standing, when you make more than the Regular Minimum Payment, we may, at our option,

permit you to skip some or all of your next two Regular Minimum Payments. When this occurs, we continue to calculate your Regular Minimum Payment;

however, the amount of the minimum payment due displayed on the first page of your statement, on usaa.com, on mobile devices, and on our phone systems

is reduced by the amount you may skip.

I have never had a card that worked that way and I wouldn't want one.  The credit union has offered skip a payment at Christmas when I had car loans.  All that does is make it a month longer to pay it off.  Why would I want to do that?  

That program does nothing to pay off the card.  The goal is to pay off the card.

Mine does this too.  Since I use my USAA card primarily (no foreign transaction charge, and a bunch of other benefits which are local), this is really a moot point since I pay off everything.  

Most times, when I go into pay it, there will be 3 choices of what to pay.  The minimum payment, the balance for the billing cycle and the full balance , which includes what I have charged after the billing cycle has closed.  I usually pay off everything.  

Why would someone want to skip making a payment?  I used this option only once.  Waaaaaay back when, I needed to buy a plane ticket to fly to NY for my grandfather’s funeral.  I put it on my AmEx card, which had to be paid in full.  To pay that card in full, I had to skip a payment on another card.  Yes, there are people who do stupid things like this and manage to rationalize it.  Just because YOU can’t wrap your brain around it, it doesn’t mean it doesn’t happen.  Like I said, I paid a tremendous stupid tax on my stupidity in using credit, and obviously I’m not the only one out there.  

The mindset in using credit is very different, and I know the event that changed MY mindset to do myself out of the quagmire.  It wasn’t easy, but for me at the time, I was working on my PhD (tuition paid by employer) and I had no time to socialize.  This helped a lot, if you have no time to do anything but work, study, go to the gym and sleep (my gym membership was the one thing I maintained, as my hip had started failing and keeping it strong allowed me to go much longer on failing hips).  That was my life for 6 years.  Once I passed my comps, I got a 50% increase in salary, which helped too.  Had I done things the YM way, I’d have had to sell me car (I had a reliable, newer car because I was a single woman in a city with a lousy bus system and failing hips), get a second job (which wouldn’t have brought in near as much as passing my comps) and stopped contributing to retirement (which my employer contributed $2 for every $1 I contributed).  Getting rid of my gym membership (that ole failing hip thing described above).  These were all what YM preached, that I ignored.  

Take home message, smart people can make stupid mistakes. I’m sure you have done things you’ve regretted too, but misusing credit feeds back on itself and quickly escalates out of control.  It is also one thing that (IMO)  you aren’t likely to do again if you dig yourself out.  If someone gives you money to pay it off, you don’t learn anything.  

[TheOtherMe]

Of course I have done stupid things and I have paid the stupid tax.  I hope to not make those mistakes ever again.

[nidena]

Dec 7, 2022 11:25:45 GMT -5 The Walk of the Penguin Mich said:

Dec 7, 2022 9:33:35 GMT -5 TheOtherMe said:

I have never had a card that worked that way and I wouldn't want one.  The credit union has offered skip a payment at Christmas when I had car loans.  All that does is make it a month longer to pay it off.  Why would I want to do that?  

That program does nothing to pay off the card.  The goal is to pay off the card.

Mine does this too.  Since I use my USAA card primarily (no foreign transaction charge, and a bunch of other benefits which are local), this is really a moot point since I pay off everything.  

Most times, when I go into pay it, there will be 3 choices of what to pay.  The minimum payment, the balance for the billing cycle and the full balance , which includes what I have charged after the billing cycle has closed.  I usually pay off everything.  

Why would someone want to skip making a payment?  I used this option only once.  Waaaaaay back when, I needed to buy a plane ticket to fly to NY for my grandfather’s funeral.  I put it on my AmEx card, which had to be paid in full.  To pay that card in full, I had to skip a payment on another card.  Yes, there are people who do stupid things like this and manage to rationalize it.  Just because YOU can’t wrap your brain around it, it doesn’t mean it doesn’t happen.  Like I said, I paid a tremendous stupid tax on my stupidity in using credit, and obviously I’m not the only one out there.  

The mindset in using credit is very different, and I know the event that changed MY mindset to do myself out of the quagmire.  It wasn’t easy, but for me at the time, I was working on my PhD (tuition paid by employer) and I had no time to socialize.  This helped a lot, if you have no time to do anything but work, study, go to the gym and sleep (my gym membership was the one thing I maintained, as my hip had started failing and keeping it strong allowed me to go much longer on failing hips).  That was my life for 6 years.  Once I passed my comps, I got a 50% increase in salary, which helped too.  Had I done things the YM way, I’d have had to sell me car (I had a reliable, newer car because I was a single woman in a city with a lousy bus system and failing hips), get a second job (which wouldn’t have brought in near as much as passing my comps) and stopped contributing to retirement (which my employer contributed $2 for every $1 I contributed).  Getting rid of my gym membership (that ole failing hip thing described above).  These were all what YM preached, that I ignored.  

Take home message, smart people can make stupid mistakes. I’m sure you have done things you’ve regretted too, but misusing credit feeds back on itself and quickly escalates out of control.  It is also one thing that (IMO)  you aren’t likely to do again if you dig yourself out.  If someone gives you money to pay it off, you don’t learn anything.  

Must be a USAA thing because my CCs are both USAA, too, and they both have the pay-ahead thing.

[happyhoix]

I did stupid things with credit when I first graduated. Maxed out the card, paid just the minimum, tried to keep up with the Jones.

I was fortunate that my first job didn’t pay a lot and I think my credit card had a max of 2000 bucks. Can’t get too far in debt when you have almost no credit 😀

I can see how people who inherit a lot of money early in life or who have some kind of talent that gets them a lot of money early on often wind up blowing it. Being young and broke is not such a bad thing.

[nidena]

Looks like interest balances will increase again.
The Federal Reserve is about to hike interest rates one last time this year.

[Deleted]

Dec 12, 2022 20:40:24 GMT -5 happyhoix said:

I did stupid things with credit when I first graduated. Maxed out the card, paid just the minimum, tried to keep up with the Joneses.

I was fortunate that my first job didn’t pay a lot and I think my credit card had a max of 2000 bucks. Can’t get too far in debt when you have almost no credit 😀

Most likely you'd be able to get multiple credit cards with higher limits now on that salary (adjusted for inflation).  When I got out of college in 1975 and was making $10K/year I managed to get an Exxon card (I think it was just Standard Oil of Ohio but could be used at affiliates).  I "graduated" to a Visa card with a $300 limit after I'd proven myself with the Sohio card.  Can you imagine someone starting at $60K now getting a Visa with only $1,800 of credit limit?

[resolution]

I think the credit limits are stricter than they were in the 90s. Back in the late 90s I was earning under 40k and had a credit card with a limit of 30k and another one with over 20k. I also had a mortgage and a HELOC. I would literally take out 30k from the credit card, stick it in the bank at 5% and then pay it back just before the 0% expired.

Nowadays, I haven't been able to get my credit card limit raised to 30k, even though I wanted it for a legitimate hvac purchase.

[TheOtherMe]

I have one credit card, Discover, with a ridiculous limit that is over 1/3 of my income.  No, I will never let it get that high, but why do they give that to me.  

If I add up all of the limits, it's more than my annual income.  I will never get them that high.  BTDT.  Not going back.

[saveinla]

Amex actually reduced my limit as I was not using the card like before.

[minnesotapaintlady]

The only higher limit card I have left is my Fidelity card which is like 23K.  I think all the other ones are in the 6-12K range.  Of course, you add them all up and it's a lot just because I have so many. 

[resolution]

We bought a 40K hvac system last year (our house has never had air conditioning, so we had duct work and vents installed, as well as a couple of high efficiency units). There was no cash discount, so I tried to get Citibank to raise our limit so i could get the 2% cash back. They raised the limit by like $1500, and told me I could ask again in six months...

I had to get charged in portions and pay off each portion before I could charge the next portion, very inconvenient since it takes a few days for Citibank to acknowledge a payment.

So three credit limit raises later, I still have less credit than I did 30 years ago. In the mean time my income is 4x higher.

ETA the company was going to charge in portions anyway (a deposit, start of work, and end of work) but I was very stressed out waiting for each payment to clear before the company was ready to charge the next portion.

[TheOtherMe]

Dec 14, 2022 10:27:34 GMT -5 minnesotapaintlady said:

The only higher limit card I have left is my Fidelity card which is like 23K.  I think all the other ones are in the 6-12K range.  Of course, you add them all up and it's a lot just because I have so many. 

Discover's limit was $20K when I opened it.  I don't make $60K.  Why would a CC company do that.  The limit has never changed in 10 years.  I certainly don't want it going up.

The only time I made a large charge was $5K for dad's hearing aids.  He had given me a check so as soon as it showed up as a charge, I paid it off.