US Credit Card Debt Nears $1 Trillion

My family works hard to avoid debt of any type.
We payed off the mortgage, we never had a car loan, and we do not keep credit cards.
And I look at news like this and know at some point someone else wallowing in debt will hurt me.


Well, there is obvious increasing demand for this service, back in the 70s and 80s, payday loan places did not exist (that I know of), and their customer base is ever increasing as people spend out of control.

Its strange more cities do not treat these places like a plague, I know of a local city who fought porn shops trying to open up, but I can name about 5 payday loan businesses within the same city??

I plead guilty to having credit card debt, but none of it is at high regular rates. Just last week two of my credit cards offered me checks where I could borrow for 15-18 months for a 3% fee. I don’t need the money to spend, but for less than 3% I will borrow all I can. In this case it was another $23,000 added to my debt. This is less than half what I would have to pay for a margin loan. Barclay’s keeps offering me 15 months for a 1% fee. If I can’t do better than 3% on my investments, I will give up on investing altogether.

In the good old days before the crisis, I would get offers of 0% for a year with no fees and my checking account paid 4% with the FDIC guarantee. I made $1000 interest on their money for a $26,000 cash advance.

This is not for most people, but one of the results of new regulation on banks, people with good credit are having money thrown at them, and people with bad credit history get none. One of my four principles for avoiding poverty is to keep your word. That is the most important part of your credit score. I would also recommend you not to marry a person with bad credit. Do you really want to spend the rest of your life with a person who does not keep his or her word?

The credit card companies are good at using behavioral analysis to find the right targets for their products. Their business model depends on targeting the right fools with the right offer at the right time. And thanks to social media they probably know their targets pretty well. And I’m sure they’ve crunched the numbers very carefully to be sure all those flyers they send out and all those miles promotions they offer pay off in the long run.

I can remember well times when we would be in a financial crush and then suddenly we would see all of these offers show up in the mail.

Definitely targeting people in financial stress, and setting them up for worse in the future.

I am sure there is a special place in hell just for those people.

And if they’re banned and people turn to criminals for loans like these, what then?

Well society did just fine before they existed, even back in times of very high unemployment, high interest rates, etc, and they have really only been around for about 10-15 years now. Thats pretty bad if we have reached a point where we cannot do without an industry that is 15 years old.

Plus, whose to say they are not criminals, from what Ive seen the interest rates are ridiculous, they are doing the same thing the mafia does in loan sharking, taking advantage of people in desperate times, only difference is, they have made loan sharking legit now, and have the legal system to back them up.

Is there any way for the working people who have deluded themselves into this massive credit card debt to dig out? Seems like many try but one unexpected hit they certainly haven’t prepared for puts them over the edge. There have been so many of these cases but nothing so far to save the ships. Most home mortgages are already over their worth and then the houses are abandoned by the lenders and the families added to the long list.
I do not think there should be a wipe the slate clean, but some pay back without interest perhaps could be doable.

The predatory lending must be ended - it is designed like bait on a hook! At least that should happen and the mortgage bundling and selling game better not be a repeat!

maybe, but would you lend at 3% or so when chances are high the principal won’t be repaid? Banks are in the business of lending money not giving it away. Talk to Janet Yellen if you want (almost) free money.

Long before payday lending and a real banking system, there were pawn brokers. Their rates are not anything that would interest me. (pun intended:p) I have had lots of friends and family members borrow money from me. Some even repaid the loans.

If you don’t want to pay very high rates from strangers, try strengthening families first. Then learn to be financially responsible so you can be in a position to help others. It is the Christian thing to do.

Ask the people who lent money to Argentina, Venezuela, Puerto Rico, Detroit, and Chicago. What would you consider a fair rate to charge them?

No, but we made this same mistake, back with the housing collapse, they were basically giving loans and homes to people who could not afford them, for the sake of just having another loan/ sale…We all saw where this leads.

The payday loan places are giving money out to people who more than likely will not repay it, but I guess they bank on them making at least some of the payments and at 20+ %, I bet they still turn a profit.

I recall when I was 18-19, didnt have that great of a job, the few times my car broke down, and it was a major repair, I was out of luck, my credit was not stellar back then, I didnt bring in much money, I had a lot of bills, etc, I tried applying for ‘signature loans’ a few times, but was rejected every time, there was no payday loan place for me to go either, yet everything still worked out somehow.

Im not sure why they think we need to cater to every single demand there is, especially when it comes to money and loans, I knew some other people back at the time that were in the same boat, they just had to work it out, but going in for a loan at 20% is sort of taking advantage of those people, why cant they ‘work it out’ like people did in the past?

In the case of Chicago, I’m almost sure that recently the CTU (against the advice of the state) issued less than a billion dollars worth of bonds at about 8.5% for 30 years. The junk bond status puts them at 12% default within 5 years. Sounds about fair. Decent chance of getting money back at least. You’re from Chicago, aren’t you? What do you think?

This credit bubble is not going to end well.

One maxim of Wall Street is that the bond traders are always smarter than the stock traders. As a stock trader, I have to agree. Chicago and Illinois are now in a huge mess that won’t be fixed any time soon. Even if there is no bankruptcy for Chicago(not possible for a state), there is an excellent chance of renegotiation, delays, and headaches for bond holders.

I moved to Indiana in 1984 and am shocked by how messed up the once prosperous State of Illinois has become. I was back there last week for a funeral and the news was that a 30 cent raise in the gas tax is needed to fix the roads, even though Illinois taxes are already higher than Indiana. At least one politician claimed that they would be hated for a 5 cent increase, so they might as well go for 30 cents. Today I got my real estate tax bill. It is less than half what I would pay for a similar home in DuPage County. Illinois also has higher income tax rates, higher sales tax, and higher costs for public colleges.

Widespread political corruption is really expensive. Expect a refugee crisis at the Indiana border.

True all that. I live in DuPage so I know.

Bond traders I think are smarter too. Probably CD holders too. Going back to your question of how high should the interest rates be, though, many use the rule of 72. At 9% compound interest, for example, it would take 8 years to double your money. At 3% 24 years. That’s significant risk. Even if you purchase an A/AA- bond, chances are that it will be downgraded enough during that time to make the initial purchase look shaky. But bond traders seem pretty risk averse these days, especially since a 3% CD is hard to find. Insurance companies, pension holders, and savers tend to be in this category. And retirees are increasingly worried that they will outlive their savings.

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