U.S. Credit Card Debt Closed 2018 at a Record $870 Billion

a reply to: ANNED

I was in the same situation until I needed a more reliable car to travel for work.

At which point I had to build credit.

originally posted by: toysforadults
a reply to: ANNED

I was in the same situation until I needed a more reliable car to travel for work.

At which point I had to build credit.

Your not the first person to end up in that situation, used correctly credit can build wealth, however most people abuse it and end up in a never ending cycle of debt.

It doesn't matter how many billions or trillions the U.S. debt is. As long as the dollar is the world's reserve currency, U.S. can print as many dollars as it wants to.

originally posted by: FamCore
a reply to: toysforadults

We also have $1.53 trillion in student loan debt and over $1 trillion in auto loan debt... $15 or $16 Trillion in mortgage debt

and about $123 TRILLION in unfunded liabilities like social security


Not to mention usdebtclock.org...

But nobody seems to care... tick.. tock...

Social Security for who, corporations or individuals??

a reply to: hopenotfeariswhatweneed

If you look at the debt to income ratio a lot of credit MUST be going to living expenses

Evidence for this can be gleaned from the collapse of retail and the consumer market

a reply to: toysforadults

It's more than alot, the majority are literally teetering on the edge.

a reply to: hopenotfeariswhatweneed

more than teetering now based on the rise in auto delinquency, student loan default, slow down in housing and default on credit debt

jobs just aren't paying enough, period there's no other way to look at it

The lobbyists for the bankers years ago pushed many policies to enable them to get a cut of everyones money.

You used to be able to find many stores that did not have credit card machines and some accepted cash only. Those days are gone.

Now you go through a drive thru at fast food restaurants and they have card swipes lol.

originally posted by: Ove38
It doesn't matter how many billions or trillions the U.S. debt is. As long as the dollar is the world's reserve currency, U.S. can print as many dollars as it wants to.

The dollar being the world's main trading currency is changing fast.

Many large and small economies are slowly dumping the dollar due to U.S. foreign policy.

The dollar is ok for now. 10 or 20 years maybe not. The only thing I can see stopping it is a massive world war, but then the U.S. is very fond of wars so maybe the dollar will be saved.

a reply to: toysforadults

I know you are trying to say that people are overspending and that is going to come to a bad ending or something along those lines. Am I correct?

Something most people do not understand is that credit card use actually increases the amount of money in circulation similar to the way the Government and Federal Reserve increase the money supply. It is a good thing. We all need more money to play the game with.

originally posted by: FamCore
a reply to: toysforadults

We also have $1.53 trillion in student loan debt and over $1 trillion in auto loan debt... $15 or $16 Trillion in mortgage debt

and about $123 TRILLION in unfunded liabilities like social security


Not to mention usdebtclock.org...

But nobody seems to care... tick.. tock...

Unfunded liabilities aren't an issue normally. If you budget something for $1 billion, and plan to pay for it in increments of $100 million per year over 10 years, the 9 years that are still in the future count as a $900 million unfunded liability. This only becomes an issue if/when you find your projected tax revenues are way, way off. Like when massive tax cuts are passed that create an additional $2 trillion in debt per year, with additional losses expected each year.

Student loan debt is definitely an issue. But, student loan debt hits a very different segment of the population than home debt. Most people with student loans can't afford homes, and if it's not through a high priced private lender, student loan debt has an interest rate roughly equal to that of inflation. It is high, and paying it off is hard, but it's not an exponentially growing problem on the individual level.

On the other hand, housing debt is, as housing prices are appreciating at a rate well above that of inflation. In some places homes are going up by 20% per year, while in the calmer markets they're still at 5% per year. This is a bubble, and those holding those homes are all going to be in negative equity when it collapses. The collapse by the way, won't help rental prices because property owners will still need to rent at a rate that can finance all that debt they're now holding.

Did you know that some markets now offer interest only home loans and other markets offer 50 year mortgages? The housing market is so absurd that these ideas make sense, and people keep offering up more and more money to purchase a house. The reality is, one should be spending no more than 3% of their after tax income on mortgage payments, with 5 payments per month (at 30 year rates) and an additional 1 payment per month to a repair fund. But, people don't do that... they instead spend 10 times that, 30% of take home pay on a single payment. As such, most people have bought way more home than they can afford.

As far as auto loan debt goes, when the subprime auto crisis hits, it will kick off several other crises. I believe that will be the spark that creates a wildfire of debt defaults. When people lose their cars, they lose their transportation to work. Without work, there is no income. That in turn means spending plummets, debt stops being serviced, student loans stop getting repaid, and most important of all... mortgages go unpaid. Since most of the US has no alternative to driving, a subprime auto crisis is quite bad, since 84% of cars on the road today are financed, and 50% of those are financed through subprime lending. Meaning, that when this particular bubble bursts it's quite likely that around 30% to 35% of the entire workforce, will simply be unable to continue working.

originally posted by: annoyedpharmacist
the student loans are a killer. there are so many people out there that are just not paying them back. I make a decent amount of money, and still have trouble paying back the extensive loans accrued over the years.......cost of education needs to come WAY down imo.

In theory, paying back student loans should be trivial. They have an interest rate roughly equal to that of inflation. Thus, if you can do nothing more than make the minimum payment which is typically 1% of the total amount borrowed (plus interest), rising wages through inflation should eventually "pay off" most of the loan for you. Even if you see zero raises in your career post graduation.

In practice, this isn't working, because wages are stagnating rather than keeping up with rising inflation. There's a bunch of reasons for this, and we've all heard them before. But, that is the real culprit behind the student loan issue.

originally posted by: jjkenobi
The entire USA industry and marketing is all about going into debt. It's crazy. It sucks most people in.

They should make Dave Ramsey's financial peace class mandatory for all high schools. But then big banks and credit card industries would torpedo that since they'd be the big losers.

The problem with Dave Ramsey is that his ideas don't actually work for most people. If you read his books or listen to him enough, when he addresses people who have lower levels of income, even he will tell them to ignore his advice. Until you make about 4 times the minimum wage for your area (so in an area that uses federal minimum wage that would mean about $62k per year) nothing he says is actually applicable to you.

Economics works very different at different income levels because the amount of choice one has is much more restricted, and the percent of income that must be spent on basic necessities, while considered normal by the middle class would be considered a catastrophic expense by the poor.

Here's some quick math for you: A new high end car will run you about $50,000. If you keep this car for 2 years, then trade it in for a brand new model of the same car, you will run yourself roughly $500/month to own a car (slightly higher before the first trade in). If you make $52k per year, you're looking at 10% of income going to your car. If you make $15k/year, and you try to eat somewhat healthy, you'll spend about $1800/year on food or 12% of your budget on food.

This is why advice from someone like Dave Ramsey cannot translate to the poor. Buying basic food is a bigger financial burden to people who aren't well off than buying a new luxury car every 2 years is to the middle class.