News & Politics - Credit cards

McGrawchick · 04-14-2008, 10:36 AM

How many credit cards do you own?
Do you know the % interest you are paying on each?
Do you pay more than the mininum?
What are the balances?
Anybody beside me out of control?

just wondered because I read that its become a problem in America, for every $1 we earn, we spend $1.22. Beside the housing crisis we have this credit crisis and the incredible shrinking USD dollar..... thank goodness I don't have car payments or a mortgage right now.

I own 3 personal credit cards. I don't know offhand what the % are, but they change sometimes (they go up occassionally). I don't know my balance offhand but its over 10K. Yes, I am part of the credit crisis! not good. My mom says I can't even think about getting married (not that anyone has asked me anyway!) until I get my debt under control.....

I think she's right...

migamoo · 04-14-2008, 10:42 AM

I have more credit than I'd care to have. It's mostly because I'm young and thought "well, what's the problem with it?" I'm so in debt because of it, it's not even funny. Yes, the cards can come in handy when you need them, but to get them just to have them when you can't afford them is definitely not a good thing to do.

Also, where did you read those numbers from?

McGrawchick · 04-14-2008, 10:48 AM

Quote:

Originally Posted by Fieryangel (View Post)

Also, where did you read those numbers from?

I read it in the knoxville news-sentinel on Sunday (yesterday). I'll try to find a reference for that.

(so you all won't think I'm just pulling this out of the air so to speak!!)

Edited to add:
Apparently the $1 earned for every $1.22 spent is according to the U.S. Department of Commerce Bureau of Economic Analysis, says the Fort Worth Business Press.
Here's a link I found:LINK.

Quote:

Tax rebate tempts Americans to indulge bad habits

With a tax rebate on the forefront of many consumers' minds, it is critical that individuals and families take this opportunity to review their financial status, and ignore what many American leaders are urging, Buy something – anything – and buy it now!
When it comes to spending, we hardly need encouragement. Just consider these sobering statistics from the American Institute of Certified Public Accountants:

• Americans spend $1.22 for every $1 they earn, according to the U.S. Department of Commerce Bureau of Economic Analysis;

• More than one-third of Americans report they do not use a budget to manage their family’s expenses.

• Fifty-five percent of American workers have no idea how much they will need to save to make their retirement dreams a reality.

We need to ask ourselves some difficult questions as a county such as: How can we expect the economy to be healthy when the financial affairs of the average American are in such disarray? And is it possible that the supposed short-term needs of the economy are in conflict with the long-term needs of American families?

Clearly, the answer to the second question is “Absolutely.” In the short term, the economy might or might not benefit from a transfusion of consumer cash, but in the long term there can be no doubt that most consumers will be better off keeping that money in their pockets to start a real savings plan. Don’t wait – do it now.

Might a government that mounts programs aimed at getting people to stop smoking someday consider a similar drive to encourage American families to pause in their spending to construct a financial plan? Might a letter have accompanied the rebate checks noting the multiplier effect of investing the $600 for 10 years with interest compounding annually?

The arrival of rebate checks provides Americans with the opportunity to rethink their spending habits and ideally to take steps to avoid the following seven mistakes that affect their personal well-being and arguably, that of the nation’s long-term economic health:

1) Assuming one’s financial future is set, thanks to corporate and federal benefits – With convenient payroll deductions to retirement funds, it’s easy to become complacent about retirement and your financial preparedness. Rarely is the amount being set aside enough to address all future needs.

2) Not knowing how much one needs for retirement – Too often, workers fail to address this question until they’re nearing retirement – then discover that they must adjust their expectations for the reality of their financial situation. Today, people live longer and have more active retirement lifestyle, which means you may need to save more than you thought.

3) Failing to take full advantage of matching retirement contributions – The federal government and many companies offer matching programs for employee contributions to retirement funds. But if one contributes less than the maximum, money is left on the table.

4) Not having an insurance strategy – Many Americans have insurance options through their employer but there are good reasons to consider supplementing this insurance. As part of a financial plan, an insurance strategy that includes life, home, auto, liability, disability insurance and more can help protect against financial misfortune due to a loss of life, property or income.

5) Failing to consider financial goals and events other than retirement – Investing only for retirement can leave one unprepared for other financial needs, such as funding college education, paying for a child’s wedding, starting a business or building a weekend retreat. Most Americans are likely to experience the occasional unexpected event that can put a dent in their finances if they haven’t prepared for it.

6) Underestimating your spouse’s or other survivors’ income needs – Determining the amount necessary to address survivor’s needs requires careful thought, and consideration of other investments or insurance that can support those needs.

7) Worrying about things you can’t control – Most people focus far more attention on their investments’ rate of return than on ways to increase their saving and investing. But one has little control over the former and significant control over the latter. Americans should take the long view, contributing regularly to their 401K, IRA or Thrift Savings Plan. Focusing on the things one can control – the length of time and the amount invested – can remove the emotion from investing and help the individual pursue his/her goals more consistently.

Millions of Americans are making these mistakes and we need to bring it to a halt, for our betterment as a country. Tens of millions will obey their government’s urgings to run out and spend their rebates. And many will debate the notion that it is government’s job to counsel them otherwise. But if providing good financial advice is perceived as being beyond the scope of government, might we all agree that there at least be limits established on how much bad advice is allowed? My advice is – ignore the urgings and start building a sound financial future for you and your family, today. You will be better off in the long run.

McGrawchick · 04-14-2008, 11:40 AM

Ok, I found another SOURCE too, about the credit card crisis.

Quote:

From the New York Times

First, Self-Control. Then, Debt Control.

If you have gotten in over your head in credit card debt, you are in good company. The Federal Reserve says Americans have accumulated nearly $1 trillion, a record amount, in what it calls “revolving credit.”

But while the financial experts are urging people to pay down debt — particularly expensive credit card debt — that is easier said than done.

It may help motivate you to look at your debt in a new light, said Hersh Shefrin, a professor of behavioral finance at Santa Clara University. Although many overstretched consumers think of paying off debt as a form of self-denial, Professor Shefrin said they have got it wrong. Debt, he said, is actually a form of borrowing against future consumption. In other words, paying off a credit card with a high interest rate now means you will have more money to spend on yourself later.

For example, the typical American carries a $9,000 credit card balance from month to month. Say this card charges an annual 18 percent interest rate and allows paying as little as 2 percent of the balance each month. Even if no more charges are made on the card and the minimum payments is made on time every month, it would take 47 years to pay it off, according to the National Foundation of Credit Counselors. By then, total payments would be $32,994, including $23,994 in interest.

For those now persuaded that paying off their credit cards is a good thing, the question is how.

Using the language of a 12-step program, Gail Cunningham, the spokeswoman for the National Foundation for Credit Counseling, said the first step was “admitting that you have a problem.”

“So many people walk into our offices every day with grocery bags filled with unopened bills,” Ms. Cunningham said.

Many consumers can figure out how to get their finances back in order on their own, she said. But for anyone who needs help, nonprofit credit counseling agencies that are members of the foundation are available in all 50 states, the District of Columbia and Puerto Rico. (You can locate the counselors on the Web site, Welcome to NFCC! or by calling (800) 388-2227.)

The next step is taking a good look at your income and expenses, just as you would the balance sheet of a company whose stock you are thinking of buying. Does your financial life more closely resemble Google or Bear Stearns?

Ms. Cunningham says she routinely tells clients to cut back spending. But if there are not many expenses that can be cut, she said, perhaps more income is needed. Taking a second job may sound hard, she said, but it is not as hard as living with debt.

Beyond figuring out a way to get income and expenses into better balance, credit counselors have a few basic dos and don’ts.

The most common advice is to pay off credit cards or other loans that have the highest interest rate first, and then keep working down the list. Of course, each situation is unique. If you have many debts, some experts recommend paying a few manageable bills first. Even if these do not have the highest interest rates, you get a sense of accomplishment that may keep you going.

One thing to keep in mind when setting priorities on which debts to pay first is which debt is secured and which is unsecured. The biggest secured debt that most Americans have is the mortgage on their homes.

During the mortgage boom, experts say, many Americans made a huge mistake by taking out home equity loans to pay off high-cost credit cards. That may have sounded like a good idea because the interest rates for home equity loans are generally much lower than those for credit cards. But what these consumers were really doing was transferring unsecured debt to secured debt, “and that is never a good idea,” said Nancy Register, the associate director of the Consumer Federation of America in Washington.

Ms. Register is the director of America Saves, a national campaign the federation runs in coordination with more than 1,000 governmental, nonprofit and corporate entities. “Getting to zero debt is a wealth-building strategy,” and a cornerstone of the America Saves program, she said. (For more information, go to America Saves.)

But, of course, getting to zero debt is not exactly what the card companies encourage. Indeed, Ms. Register blames “relentless marketing” by credit card companies for the historic levels of consumer debt in America.

So do not be surprised if once you start paying off debt, your mailbox is flooded with new credit card offers.

“Credit card companies love to get you to take on more debt again,” said Douglas Heller, the executive director of Consumer Watchdog, an advocacy group based in Santa Monica, Calif. But he said there might be a silver lining to those new offers, if you know how credit scores work.

Those who fall into debt, he said, are often trapped in a downward spiral. “The higher your debt load, the lower your credit score,” he said. “And the lower your credit score, the more you will pay for any loan.” That, Mr. Heller added, “just makes it harder and harder for people to climb out of these holes.”

**TheAngel** · 04-14-2008, 12:21 PM

I only have one credit card and I'm only keeping that one with hopes to build up credit before I'm out on my own. I'm determined not to have another credit card at least until I get out of school, which will be next year. I'm sure I'll be heading towards debt because I'll be getting an apartment, furnishing it, looking at paying utilities for the first time in my life, since I live in an on campus dorm. I'll also be paying more for food and other things as well. But, my parents did a good job teaching me about credit and that it wasn't just free money. I have quite a bit of money in stocks that I hope to use before I start getting a pay check, though I plan on doing that fairly soon after I graduate, but that can help for down payments and buying furniture and the like. I'm hoping to stay out of debt for as long as I can, but I'm sure it will happen some day. Maybe I can keep a nest egg somewhere just in case, though.

migamoo · 04-14-2008, 07:08 PM

Angel, that sounds like a good plan. A lot of people really don't think about these things and when they do get any sort of credit, they don't know how to budget or use it wisely. Sadly, I was one of them.

*Ledi* · 04-14-2008, 08:31 PM

Having good credit is so important for young adults. I work at a bank now, and everything I have been taught has opened my eyes so much. I have always been good with my credit - I think I have only paid interest once - but I've become so much more careful about it ever since I started working for the bank. It's amazing how differently we treat our customers who have good credit, compared to the ones that don't. You really don't want to be in the same group as the latter.

Not having good credit now can get in the way of so many things later in life. It actually amazes me. I just wish young people would realize this.

**TheAngel** · 04-15-2008, 03:50 AM

Quote:

Originally Posted by Fieryangel (View Post)

Angel, that sounds like a good plan. A lot of people really don't think about these things and when they do get any sort of credit, they don't know how to budget or use it wisely. Sadly, I was one of them.

My parents are the one to thank...or blame...for my sense of financial responsibility. I saw them go into debt because my dad's business went under but they've been working hard to pay off credit cards for years and are finally being able to do so, which is great. Because of that my mom's able to go back to school and get her nurse practitioners certification which will make them even more financially secure. So I guess I've lived with good examples of good ways and bad ways to spend money. It's been good to see both sides.

migamoo · 04-15-2008, 09:06 AM

Yeah, my mom was never so good with credit, but my dad is. But my dad wasn't always around so I saw how my mother spent money. You know what they say about learning from your environment.

Dark Half Undine · 04-15-2008, 08:15 PM

I have never had a credit card and I don't plan to own one for a while.

They are just too dangerous. I plan on building my credit by paying off my student loans and my mom put our recent furniture purchase in my name so all the good credit for paying it back will come to me.

***Jerry D*** · 04-17-2008, 05:36 PM

I only use a debit card, and I don't spend above my means. I have two credit cards, but I never use them.

My wife, however, has quite a lot of credit card debt, although she's trying to bring it down.

We handle our finances separately, so I pay the mortgage, taxes, and utilities with my salary, and she buys food with her salary, and she buys whatever else she wants to get for herself with her salary.

My mother and father hardly used credit cards, so neither do I, while my wife's mother and father used credit cards a lot, and they both had a lot of debt, so we have some very real differences between us concerning money, so that's why we keep our finances separate.

Granted, I make quite a bit more money than my wife, but I've never understood why I have no credit card debt and she does, when I'm the one who pays most of the bills!

SMG_fan · 04-18-2008, 04:37 AM

I have one credit card which is at around $5750, I cut it up about 19 months ago and have been paying it off since then without using it. I have made a total of around $2000 in payments but only $250 of that has come off the total.

I have a visa debit card now, and I don't think I'll ever get another credit card.

Belinda

McGrawchick · 04-20-2008, 05:43 PM

I'm getting a second job to pay off my debt, and I'm moving to a cheaper place in May. Unfortunately, my car just died, so I'll have another thing to pay for in the next few years, but I'll buy a used one. It's really scary...... my mom says I may have to go into bankruptcy, but I'm still trying to make it without doing that. (I'm not even sure how to do about claiming bankruptcy, but I think I would call a lawyer and go from there). My mom sent me a check to help me out, but I sent it back to her because I know she doesn't have a lot of extra to spend.

pacifierrocks · 04-20-2008, 09:09 PM

I have one personal credit card but when I use it I always make sure I have the money to pay it in full when the bill comes. The only time I use it is when I don't have that kind of money in my debt card. Even the vacation I'm taking in a few months I'm buying the tickets, etc with my credit card but I made sure I saved more than enough money to cover all of that before I even bought the tickets. I didn't really learn that from anyone. Honestly it just has to do with the fact that I just hate being in debt and owing anyone. Both my parents use credit cards but as far as I know they aren't in danger of anything.

migamoo · 04-21-2008, 07:57 AM

Quote:

Originally Posted by Jerry D (View Post)

Granted, I make quite a bit more money than my wife, but I've never understood why I have no credit card debt and she does, when I'm the one who pays most of the bills!

My parents are like that. But my mom makes more money than my father but has more debt than he has. He might have a small balance or two, but nothing compared to what she has.


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