[♥]

Did any of you see it?

It was an awesome movie that illustrates that the current credit situation in this country is an utter disaster. Not only are we as individuals deeply in debt and in some instances bankrupt (admittedly or unadmittedly), but the entire country is bankrupt, literally.

The movie is excellent on so many levels and illustrates how the current credit scoring system is set up to keep people in credit failure and how many people are, literally, nothing more than slaves to the credit companies and banks.

Hope someone else has seen it and if you haven't seen it, it's a must-see.

[Eug]

You speak almost as if the people who overextend themselves on credit don't deserve blame.

[Spliffdaddy]

Damn, I've been preaching EXACTLY the same thing for years. It's amazing how many different reasons people will give me in an effort to pretend borrowing money is a good thing. "But I need a car...and a house...and school loans...and an iPhone....oh and I always pay my credit cards in full each month!"

Pfft. If your credit score isn't zero you're doing it wrong.

[dcmacdaddy]

Originally Posted by Eug 

You speak almost as if the people who overextend themselves on credit don't deserve blame.

Well, you know that in this country the credit card companies *do* hold a gun to your head until you sign up for their cards.

Sigh!

The credit/debt problem in this country has to do with our culture of recreational consumption--buying things is a recreational activity in this country--and a public all-too-willing to believe the mass-media advertising that tells them they deserve to have everything they want. I hope there is a great credit crunch/collapse and lots of people go into bankruptcy from living beyond their means. Those who can't live within their means deserve to suffer for their selfish, short-sighted behavior.

Me, I've got US$1,125 in credit card debt--I just bought plane tickets to Europe--and that is it. That debt will be paid off by the end of August and then I will be debt free again. There are plenty of material things I would like but if I can't afford to pay for them outright, I don't buy them.

Granted, for those people at or near the poverty level credit card debt may be the one way they pay for medical services but I would imagine the percentage of people is low that have massive credit card debts due to medical expenses. I think most Americans are just too short-sighted, simplistic, and materialistic to want to live within their means.

[Eug]

Originally Posted by dcmacdaddy

I hope there is a great credit crunch/collapse and lots of people go into bankruptcy from living beyond their means. Those who can't live within their means deserve to suffer for their selfish, short-sighted behavior.

It will be interesting to see what happens with the subprime mortgage market in the coming years. However, I also blame the US lenders for being just a little too lax sometimes. Mind you, better regulation would have reigned them in, but that wasn't there either.

[dcmacdaddy]

Originally Posted by Eug 

It will be interesting to see what happens with the subprime mortgage market in the coming years. However, I also blame the US lenders for being just a little too lax sometimes.

It's my understanding that it's not the sub-prime market you need to worry about. It is the after-market financiers that use sub-prime loans as assets to back collateralized debt obligations (CDOs). There have been hundred of billions of (US dollar) loans made with the collateral being packages of sub-prime loans. My understanding of this issue is that if the sub-prime market completely tanks all the secondary loans made based on these debts become worthless leading to a secondary round of defaults possibly leading to the demise of some major investment banking firms.

(Would you bother to pay back a loan if the collateral you used to secure the loan is worthless? Probably not. You can default on the loan and the loan issuer can collect the now-worthless collateral in exchange and you get to keep all the funds you borrowed.)

It's like some "free money" scam. Take something of little value and use it as collateral to obtain loans which can then be used for something of more value (perhaps less risky investments). You can choose to pay back the loan or default on it and surrender your collateral of little or no value. The lender gets worthless collateral and the loan-holder has both their debt obligation removed and whatever income was created by the loan before the default. This is a gross simplification of the process involved in the debt markets but conceptually the point is made: easy credit in one market sector led to easy credit in a secondary market sector and the debt-holders in both markets are mostly the same. So, if one or both sectors goes into default the debt-holders are left with nothing of value.

[peeb]

Promoting consumer credit is entirely irresponsible. It's in the same league as drug dealing, and should be subject to the same sanctions.

[D. S. Troyer]

It's the ****ing lefties fault.

[peeb]

Au contraire, it's the ****ing barbarians fault. Oh, sorry, wrong outdated political description system.

[Rumor]

Interesting that you post this. The topic of my business class this week is the US trade deficit, which is around $900 billion a year. Over $200 billion to China alone.

[Buckaroo]

I need another credit card. Just kidding. Those things are like leeches. They get on you and suck you dry.

[peeb]

Unless you are one of the people they call 'deadbeats' who have a (for example) air miles card, and pay it off every month, never paying them anything.

[shifuimam]

Originally Posted by ♥ 

The movie is excellent on so many levels and illustrates how the current credit scoring system is set up to keep people in credit failure and how many people are, literally, nothing more than slaves to the credit companies and banks.

No, the credit score system is setup so that if you don't pay off your debts on time, you get punished for it. Why should you have no repercussions for getting yourself $3,000 in credit card debt and then failing to pay it off at the end of the month? That makes no sense. If that were the case, any loan-oriented thing (mortgages, credit cards, personal loans, etc) would make the companies that provide them go bankrupt.

Originally Posted by Spliffdaddy 

Damn, I've been preaching EXACTLY the same thing for years. It's amazing how many different reasons people will give me in an effort to pretend borrowing money is a good thing. "But I need a car...and a house...and school loans...and an iPhone....oh and I always pay my credit cards in full each month!"

I know a guy at work who can't stand to have a car that's more than three years old. He and his wife both lease their cars and both insist on getting nice cars (last year they had an Altima and a Honda Odyssey) - he's got a top-of-the-line 4Runner now, and his wife "had" to get a GMC Envoy because they couldn't afford the payments on another Japanese car. They have two kids in grade school. I fear for them - who will support them if their parents can't control their spending?

Pfft. If your credit score isn't zero you're doing it wrong.

See, that doesn't make any sense to me. You mean you should never do anything that involves credit? That would mean that you should never get a mortgage and just rent for the rest of your life, which is a bad financial move for sure.

I'm only 23 and my credit score is already pretty high - I had to get a credit limit increase on my card (and I do pay off my card every month, in full - I only had a like a $1000 limit and wanted a little more), and they told me I qualified for a $22,000 limit on that card. The credit card companies shouldn't allow people to have limits that high, but it did show that I was doing all right financially for them to trust me with a limit like that.

Originally Posted by peeb 

Unless you are one of the people they call 'deadbeats' who have a (for example) air miles card, and pay it off every month, never paying them anything.

Like me? I've got over 21,000 rewards points on my platinum MasterCard now - that amounts to a $250 airline voucher, among other rewards...It's possible to have credit cards and still never be in debt. As soon as you're spending more than you make every month, you're screwed.

I'm surprised Mikey Moore hasn't made a movie about this yet - how it's the fault of Big Business and private banks (because OMG privatization is so terrible) that Americans are so deep in debt. I'm sure he'll come out with it soon enough.

[Dakarʒ]

Personally I think the credit card companies are evil for the amount of junk mail they send me.

(by junk mail, I mean bills)

Just Kidding.

[Spliffdaddy]

re: "See, that doesn't make any sense to me. You mean you should never do anything that involves credit? That would mean that you should never get a mortgage and just rent for the rest of your life, which is a bad financial move for sure."

I understand that a mortgage is something most people will need. While it's possible to own a home without borrowing money, it's also likely to take many years of saving money in order to do it. In the meantime you'll be paying rent...making saving for a home more difficult. I'll concede that in most cases you're better off getting a mortgage and buying a home. As long as it's a 'conforming' mortgage at a fixed rate for a term no longer than 20 years.

Contrary to popular belief, paying your credit cards in full each month is not the best way to improve your credit score. There are several good guides online that will go into detail about improving your FICO score. But then, you don't even need a FICO score in order to get a mortgage. Any good mortgage company or lending institution will use an underwriter. Avoid any that don't. Again, you don't need a FICO score in order to buy a home.

Sure, you can use no-interest credit cards. You can pay off your balance every month just for "bonus points" or airline miles. But you're playing with fire. Nobody likes credit card companies, yet they feel like it's OK to participate in their schemes. Sooner or later you'll get burned. Granted, some never will. Still, there is no compelling reason to have a credit card. "But Spliff, I pay my balance in full each month" Hey that's great. Why didn't you just pay cash to begin with? Why don't you just get a debit card? Hell, all I have is a debit card and I manage to do everything I need to do. I travel all over the place.

See, you don't need a FICO score to buy a house and you don't need a credit card to make it through life.

Having credit debt made me a slave to my creditors as well as my employer. I did not have the freedom that people should have. The advice I'm giving is based on years of experience with credit - and without. There is no greater feeling than not owing anybody anything. You don't have to take my advice. I know I never took the same advice when it was given to me. Looking back, I wish I had listened.

My net worth skyrocketed just after I stopped participating in credit.

[Dakarʒ]

The one short coming I've found about Debit Cards is they won't let you make a purchase bigger than $300-500 on them. I learned this the hard way when I tried to buy an iMac online.

[olePigeon]

Originally Posted by Spliffdaddy 

Pfft. If your credit score isn't zero you're doing it wrong.

I think the default credit score for "no credit" is 900.

[Zeeb]

Originally Posted by shifuimam 

I'm only 23 and my credit score is already pretty high - I had to get a credit limit increase on my card (and I do pay off my card every month, in full - I only had a like a $1000 limit and wanted a little more), and they told me I qualified for a $22,000 limit on that card. The credit card companies shouldn't allow people to have limits that high, but it did show that I was doing all right financially for them to trust me with a limit like that.

You're not special. Credit card companies routinely grant credit limit increases on just about anyone-even those who missed payments. The idea is that if you have a $1000 limit and you've charged $700 you'll stop--because you're near your limit and you'll feel like you've overspent. If you have an increase of $22,000 and charge $700 you may feel "Aw gee, I've barely touched this card--I can charge more before even getting close to my limit"

They grant you more credit than you have income for a reason--so you'll be forced to make high interest payments for awhile. You sound responsible.

[Spliffdaddy]

cool, I didn't know that, OlePigeon. When I tried to get my FICO score using one of those online thingies it couldn't provide me with a numerical score. So, technically, 850 would be the highest score and 900 would be an indicator that there is insufficient credit data?

[Zeeb]

Originally Posted by dcmacdaddy 

The credit/debt problem in this country has to do with our culture of recreational consumption--buying things is a recreational activity in this country--and a public all-too-willing to believe the mass-media advertising that tells them they deserve to have everything they want.

I agree. --and most people agree--yet still spend.

Originally Posted by dcmacdaddy 

I hope there is a great credit crunch/collapse and lots of people go into bankruptcy from living beyond their means. Those who can't live within their means deserve to suffer for their selfish, short-sighted behavior.

Are you insane? The situation that you describe would collapse the economy as a whole and affect you--whether you personally are in debt or not. Unless you have gold socked away in a Swiss vault life would suck for you.

[Spliffdaddy]

Originally Posted by Dakarʒ 

The one short coming I've found about Debit Cards is they won't let you make a purchase bigger than $300-500 on them. I learned this the hard way when I tried to buy an iMac online.

That's true for nearly all debit cards. It's because the issuing bank is responsible for any unauthorized charges against your account. They want to limit their liability in case of fraud. I was able to increase my daily limit to $2500 on debit transactions simply by asking. Your mileage may vary.

[dcmacdaddy]

Originally Posted by Zeeb 

Are you insane? The situation that you describe would collapse the economy as a whole and affect you--whether you personally are in debt or not. Unless you have gold socked away in a Swiss vault life would suck for you.

Not gold but I will be transferring shortly about US$15,000 of my savings into Euros as a hedge against any kind of systemic market collapse.

[Dakarʒ]

Originally Posted by Spliffdaddy 

That's true for nearly all debit cards. It's because the issuing bank is responsible for any unauthorized charges against your account. They want to limit their liability in case of fraud. I was able to increase my daily limit to $2500 on debit transactions simply by asking. Your mileage may vary.

Definitely. I placed a call to find out why I couldn't make the charge to a well-stocked checking account. They gamely offered to raise my limit to a one-time $500 purchase. They couldn't tell me how to make the purchase without a credit card.

[OldManMac]

Originally Posted by dcmacdaddy 

Granted, for those people at or near the poverty level credit card debt may be the one way they pay for medical services but I would imagine the percentage of people is low that have massive credit card debts due to medical expenses. I think most Americans are just too short-sighted, simplistic, and materialistic to want to live within their means.

Your imagination would be mistaken. Half of Bankruptcy Due to Medical Bills -- U.S. Study

[olePigeon]

Originally Posted by Spliffdaddy 

cool, I didn't know that, OlePigeon. When I tried to get my FICO score using one of those online thingies it couldn't provide me with a numerical score. So, technically, 850 would be the highest score and 900 would be an indicator that there is insufficient credit data?

Correct.

[Spliffdaddy]

Originally Posted by Dakarʒ 

Definitely. I placed a call to find out why I couldn't make the charge to a well-stocked checking account. They gamely offered to raise my limit to a one-time $500 purchase. They couldn't tell me how to make the purchase without a credit card.

That sucks. It wasn't easy for me to get an increase, either. They kept trying to offer me a 'credit card' instead. I'm sure the bank *can* increase your daily debit limit, but some may be reluctant to do that. I use a local bank that I've had a relationship (a rough one at times) with for several years. When I explained that I don't use credit and had no other options they pecked at their keyboard for a few seconds and I got what I wanted.

edit: see if they will increase your daily "debit" limit - not the "credit limit". Debit transactions require a PIN number, whereas credit transactions require just a signature.

[CRASH HARDDRIVE]

The average bankrupt person surveyed had spent $13,460 on co-payments, deductibles and uncovered services if they had private insurance. People with no insurance spent an average of $10,893 for such out-of-pocket expenses.

Hasn't it been brought up before, that these are NOT numbers that are high enough for bankruptcy to be considered as anyone's only option? Seems to me, this indicates that far too many people hang their debts, rather than find a way to pay them. $10-13k are not insurmountable numbers.

Also, why is it that uninsured people spent less out of pocket than those with insurance? That's an interesting figure.

[dcmacdaddy]

Originally Posted by OldManMac 

Your imagination would be mistaken. Half of Bankruptcy Due to Medical Bills -- U.S. Study

No my imagination is NOT mistaken. Here is an excerpt from your own article.

"He said fewer than 1 percent of all bankruptcy filings were due to credit card debt. "That truly is a myth," Cauthen said in a telephone interview."

So my point--that the percentage of people is small who have massive credit card debt and are going bankrupt *because* of health-care charges on their credit--is still correct. Nearly one-half of bankruptcies are due to health-care costs but only a small percentage of those health-care related bankruptices are due to debt on a credit card--In other words, their health-care related debt is manifest in some other debt instrument.

So, my original thesis is still correct, namely that "most Americans are just too short-sighted, simplistic, and materialistic to want to live within their means" leads them to incure significant credit card debt due to "our culture of recreational consumption--buying things is a recreational activity in this country--and a public all-too-willing to believe the mass-media advertising that tells them they deserve to have everything they want."

[Spliffdaddy]

Why do so many people relate bankruptcy as 'failure'? As if your life isn't worth living after you're bankrupt. I've been there and done that. And it was the best decision I ever made. A word of advice, though...never depend on having 2 incomes to pay your debts when you're married. Your wife might just lose her freakin mind one day and decide to stop going to work, go to Europe, and disappear for a few months while she runs up a $37,000 tab on your American Express Gold card.
There was no possible way I could pay for the debts we had without her income. Well, I could have, but I couldn't have had food or water or shelter. There's no way to predict the future. Which is a great reason to avoid longterm debt. I would have been thrilled to have owed only $10-15,000. But at the time we owed closer to $300,000. We weren't overextended. In fact, our finances were in great shape. I think it was exactly 7 days after the bankruptcy was final that I got my first pre-approved credit card offer - with a $12,000 limit. I was a great credit risk. I had a huge income, a solid history of paying debts, and I didn't owe anybody a dime.
It ain't the end of the world. But bankruptcy should be limited to those folks who would never be likely to pay their debts otherwise.

I think the current legislation makes sure that those who file are truly bankrupt. At first I disagreed with the new rules. But lately I think it's a good idea. I know people who filed bankruptcy over $3,000 worth of debt. WTF? It probably cost $750 just to file.

[OldManMac]

Originally Posted by dcmacdaddy 

No my imagination is NOT mistaken. Here is an excerpt from your own article.

"He said fewer than 1 percent of all bankruptcy filings were due to credit card debt. "That truly is a myth," Cauthen said in a telephone interview."

So my point--that the percentage of people is small who have massive credit card debt and are going bankrupt *because* of health-care charges on their credit--is still correct. Nearly one-half of bankruptcies are due to health-care costs but only a small percentage of those health-care related bankruptices are due to debt on a credit card--In other words, their health-care related debt is manifest in some other debt instrument.

So, my original thesis is still correct, namely that "most Americans are just too short-sighted, simplistic, and materialistic to want to live within their means" leads them to incure significant credit card debt due to "our culture of recreational consumption--buying things is a recreational activity in this country--and a public all-too-willing to believe the mass-media advertising that tells them they deserve to have everything they want."

My mistake; misread the article.

[Rumor]

Originally Posted by Dakarʒ 

The one short coming I've found about Debit Cards is they won't let you make a purchase bigger than $300-500 on them. I learned this the hard way when I tried to buy an iMac online.

Depends on the bank. I can make up to $3000 in purchases a day.

[peeb]

I use credit cards because of the consumer protection element. If someone cleans out your bank account from debit card fraud, you're on the hook - with credit card fraud, your bank is. Plus, you can dispute the charge if the thing or service is not right.

[peeb]

Originally Posted by dcmacdaddy 

Not gold but I will be transferring shortly about US$15,000 of my savings into Euros as a hedge against any kind of systemic market collapse.

You'd be better off buying tinned food and shotgun cartridges to hedge against that.

[Spliffdaddy]

Oh and sandbags. Line your mountain cabin with sandbags. Unless you want the Spliffster to be the sole survivor of Armageddon.

[shifuimam]

Originally Posted by Spliffdaddy 

Why do so many people relate bankruptcy as 'failure'? As if your life isn't worth living after you're bankrupt.

Failure != "life isn't worth living". Failure at something means that you didn't succeed or finish. If you fail to pay off your debt, and cannot pay off your debt without declaring bankruptcy, then you did fail in that area.

One should never be in a position to have to legitimately consider declaring bankruptcy. Sure, it's a "good idea" for some, but only if they have dug themselves that deep into debt already. If you're never in debt, you never risk failing at paying off your debt, and you never have to even think about declaring bankruptcy.

Not to mention the havoc it wreaks with your credit score. One of my high school teachers had to do it after a major snafu in her life, and ten years later she was still unable to get loans of any kind at a sensible interest rate.

Originally Posted by Spliffdaddy 

I understand that a mortgage is something most people will need. While it's possible to own a home without borrowing money, it's also likely to take many years of saving money in order to do it. In the meantime you'll be paying rent...making saving for a home more difficult. I'll concede that in most cases you're better off getting a mortgage and buying a home. As long as it's a 'conforming' mortgage at a fixed rate for a term no longer than 20 years.

You can stop after the fixed-rate part. While many people can get a 20-year mortgage, it's not a terrible, disastrous, or unwise decision to get a longer mortgage. Contributing towards the principle in addition to your monthly interest-only payment will certainly make a difference. It's what my mother has done with the four houses she has bought in Indiana, and she has a fantastic (800+) credit score.

Contrary to popular belief, paying your credit cards in full each month is not the best way to improve your credit score.

It may not be the best way, but it worked for my mother. Like I said. 800+ credit score, always paid off debt in full, has never had car payments in her life except the very first car she and my father bought after they got married (and they paid it off almost immediately). A friend of mine, on the other hand, is still nearly $10,000 in credit card debt from medical bills. He makes more than the minimum payment every month, and his credit score is higher than my mom's. That tells me that both methods reap positive returns.

Sure, you can use no-interest credit cards. You can pay off your balance every month just for "bonus points" or airline miles. But you're playing with fire. Nobody likes credit card companies, yet they feel like it's OK to participate in their schemes. Sooner or later you'll get burned. Granted, some never will. Still, there is no compelling reason to have a credit card. "But Spliff, I pay my balance in full each month" Hey that's great. Why didn't you just pay cash to begin with? Why don't you just get a debit card? Hell, all I have is a debit card and I manage to do everything I need to do. I travel all over the place.

But, Spliff, I don't carry cash. I've had my wallet stolen multiple times, and I'm sick of losing money because of it. Not to mention that there's a lot more buyer's protection with a credit card when buying products online. I have a debit card. I use my debit card where necessary. But I also use my credit card, and I am in no way "playing with fire". I like my credit card company (which is also my bank and car/renter's insurance provider). They have treated me well, and I have no regrets about getting a credit card in the first place.

I'm able to maintain a substantial balance in my savings account and checking account every month. I still use a credit card. I don't have a compelling reason to not use a credit card, and "because Spliff is judging me for it" just isn't a good enough answer.

Having credit debt made me a slave to my creditors as well as my employer. I did not have the freedom that people should have. The advice I'm giving is based on years of experience with credit - and without. There is no greater feeling than not owing anybody anything.

Credit debt != credit card. I don't consider it debt when my balance every month is half of what I make in a month. I'm not a slave to my creditor. I just paid off last month's balance. I can start using cash-only immediately, and I am in no way forced to continue paying any money to my creditor.

You don't have to take my advice. I know I never took the same advice when it was given to me. Looking back, I wish I had listened.

Thanks for giving me your blessing to ignore your "advice". I'm going to. Your situation does not encompass the financial situations of everyone else in the United States, on this planet, or somewhere else in the universe. My financial choices have thus far rewarded me. I have the highest credit score I know of anyone my age (23, but I was 21 last time I got my credit report done).

My net worth skyrocketed just after I stopped participating in credit.

How? Even without using a credit card, you're still going to have to buy things. The things I buy with my credit card I would have otherwise bought with checks or cash - bills, food, rent, gas, and the occasional unnecessary purchase. What were you doing with a credit card that you quit doing when you canceled your cards? Was it because you carried a negative balance on your card? Or do you mean after you paid off your house?

Originally Posted by Zeeb 

You're not special.

Oh, snap.

They grant you more credit than you have income for a reason--so you'll be forced to make high interest payments for awhile. You sound responsible.

I don't know if you mean that I sound responsible to you, or that the creditors think I'm responsible based on my income and credit history...

[CRASH HARDDRIVE]

Originally Posted by shifuimam 

I don't consider it debt when my balance every month is half of what I make in a month.

um, why wouldn't you consider a balance of half your income ( ) debt?

[Spliffdaddy]

Maybe it's a state of mind. All I can say is that there's no better feeling than not owing anybody. It's hard to explain until you can feel it.

I can disappear right this minute and nobody will suffer. I don't need to wait for my credit card statement. It's the definition of freedom. My FICO score means nothing to me. I'm nobody's slave. I didn't feel this good when I had an 850 score.

Ya'll just come back and thank me later.

[peeb]

Bizarrely I agree with you that being debt free is generally a good thing, but I don't go along with your argument that all credit is always bad. It's a tool, that you can use responsibly, or not.

[Spliffdaddy]

Even when used responsibly it's still a risk. Kinda like keeping a diamondback rattlesnake in a fish tank in your living room.

[Uncle Skeleton]

kinda like smoking? don't be so afraid of risk, man

[Spliffdaddy]

When I bought my first home many years ago, the mortgage company explained to me that I didn't have to include any debts that would pay off in the next 11 months. They told me to get an 11 month loan against my new car and consolidate any other debts into a single 11 month loan. Seriously, how stupid is that? I managed to refinance my Nissan Maxima and some minor credit debt into a single loan from my credit union. And none of it counted as money I owed. that's when I first discovered that home mortgages were based on fiction. I owed $19,000 and exactly none of that debt counted against me. Is it no wonder that so many people default on their house payments? Would you loan somebody $150,000 at 6.5% interest for a home loan? I know I wouldn't. And I could probably afford to. Be wary. Buy a cabin in the mountains and a lot of sandbags. That's my advice. Something's gonna happen and it ain't gonna be pretty.

[Eug]

Originally Posted by Spliffdaddy 

Maybe it's a state of mind. All I can say is that there's no better feeling than not owing anybody. It's hard to explain until you can feel it.

I've felt it. In itself, it's nice, but nothing special.

Mortgages are good (if not a stupid one), and there's nothing wrong with a 25-year amortization period. Furthermore, a 25-year amortization period doesn't mean you have to pay it off in 25 years.

ie. As far as I'm concerned, there is nothing wrong with some debt, as long as it is part of well-managed finances. As others have said, credit is a tool, and when used properly is a great thing. The fact that there are many people that don't use it wisely doesn't mean that credit is evil.

Would you loan somebody $150,000 at 6.5% interest for a home loan?

No, but I wouldn't loan most people $500 at 10% either. However, if the banks want to, and they have good underwriting practices etc., then it makes perfect business sense for banks to loan someone $150000 at 6.5%. Yeah, you'll get some defaults, but you'll make a crapload of money off those who don't.

The problem arises when you have too many lenders being far too lax.

Originally Posted by Spliffdaddy 

Why do so many people relate bankruptcy as 'failure'? As if your life isn't worth living after you're bankrupt. I've been there and done that. And it was the best decision I ever made. A word of advice, though...never depend on having 2 incomes to pay your debts when you're married. Your wife might just lose her freakin mind one day and decide to stop going to work, go to Europe, and disappear for a few months while she runs up a $37,000 tab on your American Express Gold card.
There was no possible way I could pay for the debts we had without her income. Well, I could have, but I couldn't have had food or water or shelter. There's no way to predict the future. Which is a great reason to avoid longterm debt. I would have been thrilled to have owed only $10-15,000. But at the time we owed closer to $300,000. We weren't overextended. In fact, our finances were in great shape. I think it was exactly 7 days after the bankruptcy was final that I got my first pre-approved credit card offer - with a $12,000 limit. I was a great credit risk. I had a huge income, a solid history of paying debts, and I didn't owe anybody a dime.

So basically you're calling credit bad, because your wife lost "her freakin mind".

P.S. While it wouldn't have helped you in your situation above, it should be mentioned that insurance is also a good thing. As you said you cannot predict the future. For instance, for a house purchase, mortgage insurance might be useful. Or perhaps life insurance - if your wife had gotten hit by a car and died, the life insurance could have covered the mortgage. The same goes for disability insurance. If you get hit by a car, but don't die from the accident, then you still need a place to live, but won't be able to work. With adequate disability insurance, you should be covered. Some people also consider getting critical illness insurance. Just being debt free won't help you much if you're permanently disabled.

Now, you don't have to go whole hog with a bazillion different types of insurance, but being properly insured feels much nicer than simply not having any debts.

[peeb]

It seems like Spliff is reeling from some personal trauma, but aside from his typically extreme position, I think most sane people would agree that credit is neither good or bad in the abstract. There are foolish and wise ways to use it, and other ways for wives who have 'lost their freakin minds' to ruin your life without credit cards.

[Spliffdaddy]

nah, all that stuff is like a decade past. Even at the time it wasn't all that traumatic. I still talk to my ex-wife.

My point was that people believe being bankrupt will ruin their life. And it just isn't so. I still don't believe there's such a thing as "responsible" use of credit any more than there's a responsible use for heroin. To each their own.

[shifuimam]

Originally Posted by CRASH HARDDRIVE 

um, why wouldn't you consider a balance of half your income ( ) debt?

My paychecks are about $1300 each, every two weeks. I spend a little more than that a month on my credit card. Keep in mind that everything goes on this card, including $905 for rent and parking, my cell phone, my home phone/DSL, insurance, etc. The only thing I can't pay with a credit card is my electric bill. Only $200-$400 a month is not actual regular bills, and I work 40 miles from my home, so I easily spend $200 a month in gas alone.

So, no. It's not debt. It's called paying to keep myself alive. I make enough to afford the rent on my apartment (which is in a prime location for downtown Indianapolis), and I would have to say that I'm saving plenty right now. To save more than I do would require me to have no cell phone, no DSL, no home phone, and move to a different apartment - but breaking my lease would cost me so much that's it really not worth the small return in saving a few hundred dollars a month.

I can afford to pay my living expenses every month. I buy new clothes once in awhile. I have zero debt.

[shifuimam]

Originally Posted by Spliffdaddy 

I would have been thrilled to have owed only $10-15,000. But at the time we owed closer to $300,000. We weren't overextended. In fact, our finances were in great shape.

This doesn't compute. At all. If you owed $300,000 in credit card debt, you can bet your ass and everything else you own that you've overextended yourself. Unless you had multiple major surgeries that created all that debt, you had a serious problem. If your wife wigged out and started racking up enormous charges on your credit card, that's still overextending yourself - except that she did the overextending for you. $300,000 in debt != "finances in great shape". You may have been rebuilding and restabilizing your finances, but that much debt? Do explain how that translates into "finances in great shape" and "not overextended financially".

Originally Posted by Spliffdaddy 

I still don't believe there's such a thing as "responsible" use of credit any more than there's a responsible use for heroin. To each their own.

Buying a house is certainly a responsible use of credit. Unless you can save up enough money to buy a house for cash (which means you're burning money on rent in the meantime), buying a house is an excellent investment. Property values generally go up, not down, and doing something as life-changing as buying a house means that you take that into consideration. Buy a house in a good location, and five or ten years from now it will have gained substantial value. How is that irresponsible?

Using a credit card so that you get rewards points or cash back - while ensuring you can pay off 100% of the balance every month (which is essentially like using a credit card as real cash) is a responsible use of credit. It also protects you from fraud and theft more than cash or debit cards will. That's a responsible use of credit.

You're right. To each his own. As long as you are not judging the rest of us for choosing to use credit cards, you're fine. But if you start trying to tell people that they are irresponsible, naive, misled, or stupid because they can responsibly use credit cards, that's an issue.

[Spliffdaddy]

Originally Posted by shifuimam 

This doesn't compute. At all. If you owed $300,000 in credit card debt, you can bet your ass and everything else you own that you've overextended yourself. Unless you had multiple major surgeries that created all that debt, you had a serious problem. If your wife wigged out and started racking up enormous charges on your credit card, that's still overextending yourself - except that she did the overextending for you. $300,000 in debt != "finances in great shape". You may have been rebuilding and restabilizing your finances, but that much debt? Do explain how that translates into "finances in great shape" and "not overextended financially".

I think most of that was the mortgage on both houses. We had a vacation home in the mountains along with our 'regular' home. The remainder was a car payment and a motor home payment. We had no actual credit card debt. Our income was something near $180,000/yr. I don't think we were overextended. Most people owe over $200,000 on their home and have less income than we did.

Buying a house is certainly a responsible use of credit. Unless you can save up enough money to buy a house for cash (which means you're burning money on rent in the meantime), buying a house is an excellent investment. Property values generally go up, not down, and doing something as life-changing as buying a house means that you take that into consideration. Buy a house in a good location, and five or ten years from now it will have gained substantial value. How is that irresponsible?

Because you borrowed money. There are a lot of ways to justify borrowing money. But none of them make as much sense as not borrowing money. I've yet to meet the person who found wealth through being in debt. I guess what I'm saying is that you become a slave to the creditor. I'd rather pay rent, thank you.

Using a credit card so that you get rewards points or cash back - while ensuring you can pay off 100% of the balance every month (which is essentially like using a credit card as real cash) is a responsible use of credit. It also protects you from fraud and theft more than cash or debit cards will. That's a responsible use of credit.

You're right. To each his own. As long as you are not judging the rest of us for choosing to use credit cards, you're fine. But if you start trying to tell people that they are irresponsible, naive, misled, or stupid because they can responsibly use credit cards, that's an issue.

I know it must be difficult to defend the use of credit. All I can say is there's never any reason to defend the use of cash.

[peeb]

Originally Posted by Spliffdaddy 

There are a lot of ways to justify borrowing money. But none of them make as much sense as not borrowing money. I've yet to meet the person who found wealth through being in debt.

Then your grasp of economics is pretty tenuous. Practically everyone who has ever had a business or made money through property appreciation has done it through being in debt. I'm not saying that there are not a lot of ways to be in debt foolishly, but most of that involved use of debt to by consumer items. A lot of people make money by borrowing to buy assets like businesses or real property.

Originally Posted by Spliffdaddy 

I know it must be difficult to defend the use of credit. All I can say is there's never any reason to defend the use of cash.

For anything but small transactions, cash is insecure and inconvenient.

[Spliffdaddy]

It's tedious to argue about whether or not credit is good or bad. Kinda like nuclear energy...when used wisely it's a wonderful thing.
From my own experience I always felt like somebody's bitch when I owed money. I don't like that feeling and therefore I can't tell others it's alright to do it.

[Eug]

Originally Posted by Spliffdaddy 

It's tedious to argue about whether or not credit is good or bad.

So why are you then?

From my own experience I always felt like somebody's bitch when I owed money. I don't like that feeling and therefore I can't tell others it's alright to do it.

You don't like that feeling... Now there's a well thought out argument.
Oops, I forgot... You're not arguing, cuz it's tedious.