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speedwell (!)
January 12, 2009 6:54 PM
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I have done everything I can to stay away from consumer debt for 20-plus years, and have never regretted it.

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Swizzler121
January 12, 2009 7:42 PM
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@speedwell, avatar of snark: watching the pain my parents went through taught me to stay away from debt. I stay far away from credit cards too.

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EyeHeartPie
January 12, 2009 7:48 PM
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@Swizzler121: Staying away from debt does not equal staying away from credit cards. Many people manage to stay out of debt while using credit cards by not thinking of credit as free money, but rather as cash that you are immediately removing from your bank account. Also, by paying off CC balances and not just the minimum even though you can afford the balance. That way, paying the full balance on your CC doesn't hurt as much

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Con Seannery
January 12, 2009 8:20 PM
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@EyeHeartPie: I learned by watching my parents. A credit card is nothing more than an excuse not to carry cash. $1 on the card = $1 out of my account. Pay it off monthly.

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YourTechSupport
January 12, 2009 7:53 PM
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@EyeHeartPie:
Yes. But nowadays even honest, loyal credit card owners are getting [reference to non-consensual sex deleted] like a prom queen sent to county.

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 6:56 PM
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What about those of us who never *were* irresponsible, and thus had no lesson to learn.

If people want to continue to sink themselves into debt, let them. They'll learn eventually.

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gStein_*|bringing starpipe back|*
January 13, 2009 3:06 PM
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@Oranges w/ Cheese: i'm pretty sure most consumerist regulars \"didn't have the lesson to learn\"

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TCTH
January 13, 2009 12:01 AM
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@Oranges w/ Cheese: Exactly. Why are those of us who never had anything to do with creating this credit \"crisis\" having to pay right along with those who did?

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Chris Thompson
January 12, 2009 8:03 PM
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@Oranges w/ Cheese: We get to bail out the irresponsible ones first through tax dollars and then through inflation. Yay!

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KyleOrton
January 12, 2009 7:41 PM
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@Oranges w/ Cheese: Once the bailout and stimulus is over, we can look back with pride on how many flat screen TVs and Acura leases we actually paid for.

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Trae
January 12, 2009 7:22 PM
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@Oranges w/ Cheese: That just means you learned the lesson BEFORE the rest of the class.


You just didn't need to learn it the hard way. :P

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asten77
January 12, 2009 7:05 PM
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@Oranges w/ Cheese: Noooo... While I would tend to agree that irresponsible people should get what's coming to them... it's not so simple, though, because eventually all the people in debt screw things up for the minority who do things right..

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 7:14 PM
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@asten77: Unfortunately right now it seems more like the stupid people in debt get off the hook completely while the responsible people have to keep paying what they've been paying.

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Penny Dreadful
January 12, 2009 8:59 PM
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@Oranges w/ Cheese: the stupid people in debt

Hey, just because you're in debt doesn't mean you're stupid. I've made bad choices, and I've made big mistakes, but I am far from stupid. Anybody who thinks otherwise and underestimates me does so at their own risk (as well as much to my own amusement ...).

It always irritates yet amuses me when people who've never been in debt look down their noses at those of use who have, as though we're all nothing more than a loose collective of drooling morons who shouldn't even be trusted to dress ourselves. Because nobody knows what's going to happen tomorrow, and some of the most smug people out there could very easily find themselves in the same position as the people whom they slag off today.

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 9:51 PM
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@Penny Dreadful: Well there's a difference between being in debt and being irresponsibly in debt.

Technically, most people who have a mortgage are in debt because I doubt they have money in their savings to cover every penny of a newly purchased house.
Akin to the comment below about medical debt, if you're spending money on your credit cards, and then when that runs out you just open a new one and constantly living outside your means you ARE BEING STUPID. If some misfortune befalls you and you're plunged into debt and you do nothing to get yourself out of it, you are being stupid.
However, if you have the presence of mind to get out of the situation by spending less than you save, then you may be in debt but you aren't stupid.

I think the consensus here is that the debt they're referring to in this post IS STUPID DEBT.

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mythago
January 13, 2009 3:23 AM
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@Oranges w/ Cheese: \"Stupid debt\" here meaning \"other people's debt.\"

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TouchMyMonkey
January 12, 2009 7:01 PM
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@Oranges w/ Cheese: You would be in the minority, unfortunately.

The problem with issuing credit cards to anybody with a pulse is that sooner or later, the money needs to be repaid, or else you have the sort of problems we're having now that affect even the responsible. That's why the responsible should be in favor of oversight and regulation; it protects you, not just the irresponsible.

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johnva
January 12, 2009 7:41 PM
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@HurtsSoGood: Actually, I'm not so sure that responsible people are in the minority. I think that it's a relatively small percentage of the population that is REALLY irresponsible with credit card debt. A larger group probably carries a balance, but I wouldn't call that \"irresponsible\" as long as the payments on it are not growing and not beyond what they can handle on their income. It's not \"irresponsible\" necessarily to be in debt, as long as you're not in too much debt for how much money you have.

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cromartie
January 12, 2009 7:21 PM
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@HurtsSoGood: Debt never needs to be repaid. Just ask any economist. Or Dick Cheney.

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 7:13 PM
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@HurtsSoGood: I understand what you're suggesting. However, it isn't only the people who were stupid with their debt that got us here, it was the greedy people who offered them money in the first place.

The credit rating system (though grossly skewed some of the time) is there for a reason. You fuck up your money, oh well you pay for it. When its disconnected from the whole like that, it only hurts those people who were stupid with it to begin with.

The reason we are here now is because not only did the companies expect people to pay back the credit they couldn't afford, the companies then turned around and SOLD that credit to someone else and fully expected the money to be there when they needed it.

Stupid on both fronts, but If the stupid lending practices stop it will keep corporations from folding when people can't seem to get it through their heads that just because you have checks in the check book != you have money.

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speedwell (!)
January 12, 2009 7:04 PM
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@HurtsSoGood: Right, right. The government can obviously be trusted fully to oversee and regulate itself, so it should obviously be in charge of overseeing everything else. And no government officials are lazy or corrupt or incompetent. And I am Marie of Romania. (Really.)

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nicemarmot617
January 12, 2009 6:59 PM
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I don't care. I wasn't irresponsible with debt before and I won't be in the future. And in my experience, stupid people never learn, even from their own mistakes, so they will continue to take out just as much debt as they can get their hands on. It's the banks that need to learn their damn lesson - don't lend to people who can't afford to pay you back! I thought this was a basic rule of lending, but apparently I was wrong.

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johnva
January 12, 2009 7:42 PM
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@nicemarmot617: The banks aren't going to learn their lesson. The way they would learn their lesson is if they lost the money they lent out, but instead they are making most of it back from interest and getting the government to cover their other losses.

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Ragman
January 12, 2009 7:15 PM
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@nicemarmot617: Yeah, but when you make all those loans to unqualified customers, it takes time for them to go deadbeat. In the meanwhile, your books look better and better, and your company's stock goes up. Which seems to be the ultimate goal in the past decade - not long term, but the short term boost. Lift that golden parachute up higher before you jump.

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 7:15 PM
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@nicemarmot617: THIS!

People will continue to misuse debt. The banks need to stop giving it to them. The credit scores are there for a reason (though they need to be revamped, and centralized IMO)

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Jeremy82465
January 12, 2009 7:06 PM
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The reason I dont drink, do drugs, or smoke is the same reason I am not in debt: I saw my family do it in excess and learned from them that I didnt want to do it.


'A fool learns from his mistakes, but a truly wise man learns from the mistakes of others'

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 7:28 PM
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@Jeremy82465: God, the stories my boyfriend has told me about his mom spending money that just doesn't exist.

Such as: dad hides checkbook - she reorders checks.
He cuts up credit cards - she signs up for new ones.

It baffles!

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econobiker
January 13, 2009 4:37 PM
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@Oranges w/ Cheese: That is the description of an addict- debt addict.

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Cat_In_A_Hat
January 12, 2009 7:25 PM
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@Jeremy82465: Agreed, mom, big sister, aunt, etc, all in major debt. (On the other hand, Dad has always been a saavy spender who believes in saving for your wants and spending on your needs first.) I've spent the years learning from their mistakes and and at 23 years old have learned that credit card debt is the worst of all.

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nicemarmot617
January 12, 2009 7:18 PM
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@Jeremy82465: I thought it was a wise man learns from the mistakes of others; a smart man learns from his own mistakes; and a fool never learns at all.

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Jeremy82465
January 12, 2009 9:15 PM
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@nicemarmot617:


I thought it was something like that too, but I didnt want to misquote it so when I looked it up that was the answer I got. The quote is from Otto Von Bismark, go figure.

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JGKojak
January 12, 2009 7:09 PM
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The vindictiveness on this site always surprises me.


I have a good friend who is 42, and is on her second round of cancer treatments- first was breast, second lymph. She had to quit her job due to her first cancer, her COBRA ran out, and she has no health insurance. Needless to say, she is facing some consumer debt.


The real issue is that banks and credit card companies need to stop. Period. This would entail:
1) A cap on credit card interest rates indexed to real interest rates. If credit card companies could only charge 2x the normal interest rate, they'd cut out the credit card deluge real fast.
2) End ARMs and every other tricky/risky mortgage scheme for home lending. If businessess and investors feel they need other kinds of loans for short-term business growth (i.e. equipment purchase), understandable, but keep homeowners out of it.

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mythago
January 13, 2009 3:28 AM
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@JGKojak: Doesn't surprise me in the slightest. The world is full of people who, on seeing another human being have a setback in life, think it is God's way of telling them \"Please take this opportunity to crow about your superiority as a human being.\"

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catastrophegirl chooses not to fly
January 12, 2009 11:43 PM
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@JGKojak: for your friend: check the list on this site
[www.rarediseases.org]
and see if her type of lymphatic cancer is mentioned. it may not be listed under cancers, check aplhabetically for the long form of the name. if it is, the sooner she applies for help the better, they run out of money FAST. they are one of the organizations that can help pay for medical bills you already have as opposed to just helping with future ones

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xip
January 12, 2009 9:04 PM
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@JGKojak:

The vindictiveness doesn't usually surprise me, but it always frustrates me. Everyone has a personal weakness or personality flaw of some kind. But despite that, people are usually willing to rip on others who have weaknesses that they don't share or understand.

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johnva
January 12, 2009 7:47 PM
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@JGKojak: I don't think that's really \"needless to say\" that you would get into consumer debt just because you had a costly and unaffordable medical crisis. Medical debt is different from credit card debt, and it's foolish to put medical bills you can't pay on a credit card. It's a much better idea to just owe the hospitals and doctors money, as you've got a lot better chance of getting the amount you owe reduced via negotiation than you would trying to bargain with the credit card companies. I agree that our healthcare payment system sucks and bankrupts even a lot of people who actually have health insurance, and that's why I'm constantly talking about the need for reform there, so don't take this the wrong way. But in this system we have now, people need to be aware of the best ways to protect themselves financially in the event of a medical disaster. You need to protect your negotiating position instead of just placing yourself into credit card debt to pay off your bills, especially if the medical debt is far beyond what you could reasonably expect to pay back on a credit card within a couple of years.

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aftercancer
January 12, 2009 8:49 PM
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@johnva: Actually \"just owing\" the doctors and hospitals is not possible for many many people. Some doctors offices and hospitals are requiring cash before treatment, especially for treatments like chemo. Also, when you're in the middle of a medical crisis generally the last thing you're doing is thinking rationally about your finances.

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johnva
January 12, 2009 8:52 PM
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@aftercancer: All the more reason that we should be doing something really serious about fixing the healthcare crisis if many people are being totally denied care unless they take out personal loans at high interest rates. What happens to someone who needs chemo to survive but doesn't have the money saved or the credit rating to get sufficient loans/credit lines? Do they just die now that the hospitals are requiring cash up front?

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floraposte
January 12, 2009 9:28 PM
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@johnva: Pretty much. They get their treatment through emergency care.

The other problem is that the situation you postulate essentially requires the medical crisis to be a one-off situation, since the provider will stop seeing you. So management of the chronic, which is an important thing in quality of life, is right out.

I'm not disagreeing with your underlying principle, though--that it's a good idea to think critically, if your money doesn't stretch to your expenses, about which debts it makes the most sense to pay. I ran into yet another account of somebody who put stuff on his credit card rather than take money out of savings--how would the interest rates make sense on that?

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johnva
January 12, 2009 9:38 PM
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@floraposte: I just think this situation is totally unacceptable morally or even pragmatically in this country. Financially unmanageable levels of credit card debt should NEVER be a requirement for receiving proper medical care that is necessary to save someone's life. The real solution to this problem is socialized health insurance or care, but for some strange reason there is mega-resistance to this idea even among the non-insurance-CEO population. In the meantime there should probably be rules, for example, limiting hospitals' ability to demand upfront payment before providing care, and maybe even something limiting the interest rates that can be applied by anyone, directly or indirectly, to debt that was incurred for a medical expense. This would obviously force the hospitals to raise prices on everyone else, but then maybe more people would see how untenable the status quo is. I'm not willing to let my fellow citizen die of cancer just because they can't pay their insurance copays and deductibles, even if that seems fine to a bunch of selfish assholes who've never been in that situation themselves.

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floraposte
January 12, 2009 10:28 PM
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@johnva: You're preaching to the choir with me. How it is sucks--both morally and financially, for the country as well as for individuals.

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smonkey
January 12, 2009 10:11 PM
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@johnva:
Oh the resistance is simple to explain. un-insured (read:poor) know exactly what it's like to deal with government. Ever tried to file for unemployment? Sit in line at the RMV only to be told you need a different form and to go stand in that line over there?
The rich have the money to avoid, or smooth out the pits. I don't want my health care decisions made by the SAME people who ran the Walter Reed hospital.

On a side note, do you really want someone like GWB in charge of your health care? Just as hard as you fight for it, some bureaucrat can then take it away. All it takes is one bad election (or two) and it could crumble down. Picture health care as the environment, then imagine what the current administration could have done to that.

I also don't want the government monitoring my health. If I want to smoke, drink, ride motorcycles way too fast, then I should be. If I die, the only one I'll hurt is myself. But if I'm part of a socialized medicine, then I'm being socially irresponsible. Check out the rules in Japan, and Germany. My lifestyle, which could be directly reflected in my health should be no bussiness of the government. Once we socialize medical care it will be. That fat, smoking, drunk will be directly affecting your tax bill.

Yes the current system is broken, Yes you should not have to file bankruptcy just to live. Yes we need to fix the system. Just make sure the cure isn't worse than the illness.

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johnva
January 12, 2009 10:26 PM
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@smonkey: I don't think most of those fears about the government doing a bad job are all that realistic. Medicare already works more efficiently than most private insurance, so it's not like it's guaranteed to be bad (not to mention, the government already does run insurance for a huge number of people, just not everyone, and doesn't do too bad a job of it, especially when you compare them to the mindless stupidity at most of the insurance companies). The government would also have better economies of scale. I don't want to get too sidetracked here, but there are many good arguments for why what you're saying isn't true.

As for \"monitoring\", government insurance alone doesn't necessarily mean they're going to be monitoring and regulating your whole life. They don't do that now for Medicare patients, and they wouldn't have to start with single-payer. And you ARE being socially irresponsible by killing yourself on a motorcycle already, because a lot of other people's money is potentially going to be expended trying to keep you alive. Our system is already partially public, remember, not to mention the police and fire responders.

I agree that reform needs to be done in a smart way. But I think there is a mountain of evidence that public insurance doesn't have to be a nightmare just because it's public. It would probably become an entitlement and another political third rail to touch it if we enacted national health insurance, so I'm not too worried about a crazy president defunding it. Remember, Bush tried to privatize parts of Social Security, and failed.

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anonairman
January 13, 2009 2:34 PM
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@johnva: \"And you ARE being socially irresponsible by killing yourself on a motorcycle already, because a lot of other people's money is potentially going to be expended trying to keep you alive.\"


Last I checked, I have a stable job, I pay taxes, and I have my own health insurance. I can't speak for Smonkey, but if we want to go through the list of people not being socially responsible, let's start with the overweight people that make up more than half of this country. I'd be willing to bet if you averaged (yes, averaged) out the money likely spent on them (self-made Diabetics) as opposed to someone who has an accident on a motorcycle (likely caused by someone in a car not paying attention because they are eating a jelly donut or on thier cell phone) it doesn't come out to 1/10th of what the diabetic costs us.


Also... some of us ride a motorcyle because it uses less gas, is relaxing, and we actually enjoy the wind running through our hair... without speeding or riding like an idiot. You can't put a price on the benifits of that.

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catastrophegirl chooses not to fly
January 13, 2009 7:34 PM
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@anonairman: and motorcycles don't have as many tires on the road either so there's a potential for lower wear and tear on the roadways of america, which taxes go to pay for

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cromartie
January 12, 2009 7:30 PM
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@JGKojak: The vindictiveness on this site always surprises me.


It shouldn't. There's no shortage of people who like to say \"I told you so.\" The anonymity of the commenting forum just makes being holier than thou easier.


The real issue is that everyone needs to stop. Banks pursue short term gains by offering people they shouldn't revolving loans, so people who are pursuing short term gratification can buy things that satisfy that urge while going further in debt, which they then need to payoff using other short term loans.


Perhaps the Wal Mart CEO is right. The last set of stimulus checks were used in no small manner to pay down debt. I would suspect another lump sum would also.


Ultimately we could see another loop develop where ther economy shrinks because people are too scared to continue engaging in reckless behavior.


And maybe that isn't a bad thing.

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lalaland13
January 12, 2009 7:18 PM
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@JGKojak: I'm sorry to hear about your friend, and agree with you about some of the comments. Yes, we should all strive to be as responsible as possible. Sometimes, though, shit happens. My mom went through bankruptcy after a divorce. It taught me to never get married so I will never have to divorce (kidding, mostly). It also taught me to not fuck up my money beyond repair, and be very very careful with credit cards.

Seriously, some people are one medical problem or job loss away from disaster. Some are just irresponsible goobers who will never learn, true, but I bet there are more in the first category than some people want to admit.

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 7:16 PM
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@JGKojak: Medical debt is normally out of one's control. I believe we're more talking about the people who have 6 credit cards and stand in line in the grocery store going through each one as the previous one is declined.

People who live in excess, basically.

Best of luck to your friend :(

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speedwell (!)
January 12, 2009 7:16 PM
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@JGKojak: What's vindictive about making it possible for people with less-than-perfect credit to buy homes that they would not otherwise be able to buy?


Disallowing products designed for high-risk borrowers would eliminate their availability. Because that's what YOUR scheme amounts to. No company would offer their low-risk products to high-risk borrowers... it just doesn't make good business sense. Therefore, high-risk borrowers would be shut out of the market.

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 7:20 PM
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@speedwell, avatar of snark: That's exactly what just happened, where have you been?

Its all well and good for someone to want to own a house - but if that isn't financially possible, they need to do something to MAKE it possible or deal with life without it. That's called responsible saving & spending.

You don't NEED a house. A roof over your head, yes, but a house? No.

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speedwell (!)
January 12, 2009 7:29 PM
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@Oranges w/ Cheese: You're preaching to the choir, actually. I have been patiently saving my cash for years in order to be able to start building my own home WITHOUT A MORTGAGE, because I don't believe in calling the bank's house \"my home\" and treating it like I actually own it.

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Andrew Dorsett
January 12, 2009 7:09 PM
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Needs a third choice \"Already knew that lesson\".

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Sarah of Get Cooking
January 13, 2009 8:05 PM
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@Andrew Dorsett: I came here looking for the exact same option. As are many who bother to read a blog like this, I imagine. I am happy, though, that other people are learning this lesson and trying to make up for past irresponsibilities.

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Cat_In_A_Hat
January 12, 2009 7:14 PM
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@Andrew Dorsett: Amen, ever since I was younger dad taught me how to manage money and spend appropriately. Now while I can't say I'm completely debt free (student loans, car loan), I can be proud to say I have $0 in credit card debt and will never spend beyond my means monthly to build up cc debt. Lesson learned.

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AnonymousFinger
January 12, 2009 7:12 PM
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I have been (unsecured) debt free for years now. It's really easy to save up and pay cash when you are not making credit card payments. I still owe on 2 vehicles and my house, but I owe less than their worth on all 3.

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Theseus
January 16, 2009 9:37 PM
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@AnonymousFinger: Agreed. Was blessed to have an Italian family who raised me to save and buy only what i could afford, and who was so generous as to pay my tuition and free me from college loans.

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BlackMage is doing the Time Warp agaaaaaaain!!!
January 12, 2009 7:16 PM
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1:00 PM, Central time: the poll is broken. Clicking on the vote button or the results link doesn't do anything.

Anyway, I would have voted for \"What Lesson?\" I should first clarify that I currently have no outstanding debts, and have an *ok* emergency fund.

I definitely spent WAY too much money on myself this holiday season in the form of an Xbox 360 Arcade, LCD TV, and upscaling DVD player. Couple that with having to pay my car insurance in November, spending way too much on food, having to pay for my (hopefully) last class at college in March, paying rent, and ever increasing food prices will make this month's payments interesting.

Now, which one of my cards has the lowest interest rate...

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 7:23 PM
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@BlackMage is doing the Time Warp agaaaaaaain!!!: Poll is broken for me, too. I also would've clicked on \"What Lesson?\"

I still owe on my car, but it is worth far more than I owe and I have money in the bank to cover it anyway. So I'm not in debt.

I will admit I spend too much money on stuff sometimes, but I always pay for it on time and never run up an insurmountable mountain of debt. I think the most that's ever been on my credit cards was $1,000 for my computer, which I paid off in two months.

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pollyannacowgirl
January 12, 2009 7:16 PM
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JGKojak: My sympathies go out to your friend. I know firsthand that a serious illness can drain the resources of wealthy people who have GOOD insurance. Unless you have really deep pockets, any illness or accident can wipe you out financially. I don't think anyone here would judge your friend by the same yardstick we'd use to judge real deadbeats.

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CocktimusPrime
January 12, 2009 7:17 PM
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Is a free two-liter enough to entice someone to sign up for a new card? Don't most places at least offer no interest or payment financing for an into period? I don't even think this offer would get me to shop at Walmart, let alone open up financing.

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gladeye
January 12, 2009 7:27 PM
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I've never had any debt either, even though I have a modest income, live in L.A., and have a wife and two kids. I've never understood how so many people can only think in the short term and getting what they want NOW, without regard to the financial consequences down the road. Not only that, but who needs the stress and embarrassment that comes with owing money you don't have?


Or maybe a lot of people heavy into debt don't stress over it or feel embarrassed or ashamed.

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oneandone
January 13, 2009 10:34 PM
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@gladeye: It's difficult when there's very little encouragement - or even the suggestion - that you save up to buy something, instead of putting it on a credit card. Especially for younger people, who may not have started working full time yet and probably don't have serious drains on income like a home, children, etc. Budgeting & personal finance aren't taught and probably aren't understood completely by people mking spending choices for the first time. Give them something like a high-limit credit card and there's a world of damage they can inflict on themselves without realizing the consequences.


Making bad decisions, and learning from them, is part of the growing up process. It's unfortunate that regarding credit card debt, it's possible to make incredibly bad choices with huge ramifications.

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Raekwon
January 12, 2009 7:29 PM
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The only debt I have ever been in was for my car which I should have paid in full in a couple years. The only debt I plan on later is a house. I hate debt and avoid it. I see too many friends buried under student loans and credit card debt and it is sad.

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Urgleglurk
January 12, 2009 7:29 PM
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If enough people learn this lesson, Wal-Mart and many other retailers will be put out of business. Mr. Scott had better pray that Americans have not learned this lesson well...though it is a good lesson to learn from the consumer's viewpoint.

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Ash78 ain't got time to bleed
January 12, 2009 7:32 PM
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I used credit card debt wisely (promotional 5% rate, life of balance, for some home improvements 2 years ago). Been paying it down on a schedule to be free&clear this Fall.


However, I fell victim to Chase's whims when they raised our effective APR to more than double via a \"monthly fee for users of promotional rates.\" They also increased the minimum payment by 2.5x. While neither of these were financially painful to me, they did reneg on what I felt was a mutually beneficial agreement that was paying as agreed.


I protested loudly, but they barely budged on it (settled for 8% and no monthly fees). They are effectively using their lowest-risk customers to pay for their losses now.


Word to the wise: F*ck Chase credit cards. Don't learn the hard way!

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johnva
January 12, 2009 7:55 PM
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@Ash78: If you had/have good credit still, I'd just find a 0% for a year offer somewhere else and transfer the balance (doing the math on any fees, etc vs. interest saved). I'm still getting a bunch of those 0% offers, so I think they're still offering a lot of them to the people who are very low credit risks.

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Ash78 ain't got time to bleed
January 12, 2009 8:02 PM
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@johnva: I'm sort of looking around, but having to weigh the idea of opening a whole new line of credit (this Chase card was in my wife's name for 11 years...which is why it's so hard to believe that they're effectively running us off!).


A lot of those deals have dried up, and many of them have pretty steep transfer fees--that's hard to recoup when I'm going to have it paid off so soon. But good advice. I've got my eye on bankrate.com on almost a daily basis.

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johnva
January 12, 2009 8:15 PM
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@Ash78: Yeah, obviously whether or not this is a good idea depends on the exact numbers involved, so you'd need to compare carefully and do the math (and on your self-discipline to not abuse the availability of additional credit, but you sound quite responsible so that's why I even brought it up). As long as you can get it, there's not much long-term downside to getting more available credit. If it were me, I'd just work the numbers on a calculator or spreadsheet and go for it if it turned out I was going to save about $100-$200 or more after accounting for the fees (that's about my threshold for what it would take me to open a new credit account, YMMV according to your own views).

And yeah, the 0% offers are much fewer and far between lately, and many of them are for shorter time periods like 3 months or 6 months. But I know I've still gotten solicitations this week for ones that last a year, so they're definitely not gone entirely. If you've got credit in the 750+ range, you might well be able to come out quite a bit ahead depending on how much your debt is. Also look carefully for cards that have capped BT fees if you use one for this purpose.

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morganlh85
January 12, 2009 7:49 PM
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Does this mean they will bring back layaway?

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johnva
January 12, 2009 8:04 PM
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@morganlh85: I've never quite understood the point of layaway or why people do it at all. Why start paying someone else now for something you can't afford yet and will get in the future when you could just save up the money and buy it later (making interest on the savings in the meantime)? At least with credit card financing you're getting the item up front. Moreover, nowadays with things like electronics constantly coming out with new models that are better than the old ones for the same price or cheaper, it makes even less sense than it probably once did. Saving up on your own vs. using layaway probably means that you'll also get a better item, in that case.

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Penny Dreadful
January 12, 2009 9:50 PM
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@johnva: I've never quite understood the point of layaway or why people do it at all. Why start paying someone else now for something you can't afford yet and will get in the future when you could just save up the money and buy it later (making interest on the savings in the meantime)? At least with credit card financing you're getting the item up front.

A couple of years ago, I worked at a large chain store that sold mostly clothing and housewares, and they had a layaway department - which was, now that I think about it, the only one I can remember having seen in years. That was never my department, so I'm not sure what the thinking behind its existence was - especially since the company who owned the chain also offered a Visa that could be used to earn gift certificates that were good at that or any of the six or so other chains they owned, which the loyal cult- I mean, customers lapped up like kittens to cool cream. You'd think that they'd be keen on getting as many people as possible to sign up for the Visa, considering the potential interest charges. But, though I'm not sure, I think it may have had something to do with offering an additional payment option to people who may have not had traditional credit available to them, as this was in an area with a very high immigrant population, a large percentage of whom didn't have certain, um, paperwork, and a large percentage of transactions were cash-based - and because I moved and transferred to a store in an affluent area that had no layaway and lots of credit-based transactions. Plus, a large degree of the chain's success came from the fact that it was all very \"here today, might not be here tomorrow\" - since it was all off-price, they had a lot of odds and ends that made up the stock that could just as easily not be there the next time you were there, so you'd best get it now.

This is all just aimless theorising on my part, though. Layaway was rarely even open, so someone always had to be rung for to go into the room and set up the transaction. They didn't even bother training me for the department, since there was so little call for it. In an average week, there might be one or two customers who needed it. I had trouble understanding fully even at that point what the point was.

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johnva
January 12, 2009 9:58 PM
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@Penny Dreadful: I totally get that some customers can't get traditional financing. That makes sense. I don't get why they wouldn't just save up their money in an envelope until they can afford something instead of using layaway (outside of a few cases where they really might not be able to get something in the future). I can see why a store might like this idea...it's an interest-free loan and a future sale. I don't see why any customer would want to go for it.

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floraposte
January 12, 2009 10:35 PM
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@johnva: Because the thing might be gone. I suspect that this practice operates very differently with different kinds of goods--I grew up with it as a standard in women's apparel, and that really is a here-today-gone-tomorrow kind of market, where the odds of finding the size and color you want if you come back in two weeks when you're paid really aren't very good. So if you can't use plastic without heating it to the melting point, layaway gets you what you want without risking a loss of that item you've set your heart on.

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johnva
January 12, 2009 10:41 PM
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@floraposte: Yeah, I can see that it would make sense for that sort of item. But then again, I still have to question the logic of buying things you can't afford yet, at all, when it's something as ephemeral as that.

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floraposte
January 12, 2009 9:31 PM
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@johnva: It works okay with houses and cars and educations.

Seriously, I think it's a question of psychology. To people who don't carry a credit card balance, there's probably not much advantage. To people who have a hard time avoiding the notion of plastic as free money, there's a lot to be said for holding something until payday when you have the cash rather than piling up things when you don't.

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ludwigk
January 12, 2009 10:37 PM
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@floraposte: That's the difference between consumer debt, and.. er, whatever the other kind of debt is. Consumer debt, where credit is used for general consumption, can be a dangerous habit that raises the effective price of everything.

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johnva
January 12, 2009 9:55 PM
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@floraposte: Except that for all of those things, you're getting the thing you're buying up front. You're not just giving someone else money to hold for free until you save up enough to pay for it.

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floraposte
January 12, 2009 10:31 PM
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@johnva: Yeah, I realized that after I posted. So it was a bad joke at that. But the rest of it is still legitimate, I think. It's the same reason why many people who can't stay out of debt on credit cards can handle a cash-based system. There's considerably more than logic involved in the handling of money, and it's good to have more tools that help people handle it thoughtfully.

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squatchie44
January 12, 2009 8:24 PM
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do it for the children. i loved watching my parents put something on layaway and then pay on it every week

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 7:56 PM
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@morganlh85: Weren't there like a bazillion articles about this already before Christmas?

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SadSam
January 12, 2009 8:18 PM
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We learned our debt lesson two years ago and paid off all non-mortgage debt in 2007 (not that our habits were bad in the first place). We have manages to stick to our no-debt plan for all of 2008. We bought a car in 2008 and paid cash. We are working on paying down our mortgage too.


The key for us, a spending plan, an allowance for all discretionary spending (anything without a bill), we don't carry (or use unless traveling) credit cards, all money that doesn't go to a bill or our allowance gets shifted out of our possession (i.e. investments, IRA, savings, etc.)

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JadoJodo
January 12, 2009 8:18 PM
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Humans are selfish and primarily think about themselves.

\"I don't want to wait; I want it NOW!\" is the thinking and will not go away. It might be less evident, but it will still happen.

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catastrophegirl chooses not to fly
January 12, 2009 11:47 PM
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@JadoJodo: \"yes, i would like my bread and my circuses please. and i'd like the 'just add hot water' type so i can activate them instantly. or the microwaveable kind is ok too.\"

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Oranges w/ Cheese hates what Christmas has become
January 13, 2009 4:58 AM
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@catastrophegirl: The I want it now phenomenon is why we're in debt and why we're fat.

At least use your debt to buy REAL food. Bleh.

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catastrophegirl chooses not to fly
January 13, 2009 5:44 AM
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@Oranges w/ Cheese: hehe, my current debt is owed for insulin. it's a leeetle bit important to me.

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battra92
January 12, 2009 8:19 PM
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One would hope that people would, at least for this generation. I also hope that it ushers in the \"buy better quality and keep for the long term\" mentally that people had 50 years ago.

As for me, I'll be having fun living within my means and buying high quality vintage items that will far outlast many of their comporable Walmart versions and are much cheaper than the higher priced Williams Sonoma equivalents.

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mythago
January 13, 2009 3:29 AM
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@battra92: \"50 years ago\" was 1958, an era notable for its consumer spending and Keeping Up With The Joneses attitude.

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battra92
January 13, 2009 2:09 PM
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@mythago: Yet they still had quality appliances. I suppose if you want to be anal 55-60 years ago had even better stuff but the consumer end of products really didn't start going to Hell until the 80s and 90s, at least IMO.

There is one kitchen appliance that is still supremely high quality and that's the Kitchenaid stand mixer.

@catastrophegirl: You know, it's the story that makes it turn from an ugly can opener into an interesting conversation piece.

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johnva
January 12, 2009 8:32 PM
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@battra92: I've always had the \"buy better quality and keep for the long term\" mentality that you mention. I *always* carefully research any major purchase to make sure it will last a long time, and I spend a bit more up front in order to get it (for example, if I buy a laptop, I buy the next to the highest-end model from the best makers and plan on keeping it for 4-5 years with an upgrade after 2-3 years). Of course, our economy kind of depends on having a lot of mindless consumer drones, so we're in a bit of a tough spot.

I think this is why I manage to live better than a lot of other people I know who make much more money than me.

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battra92
January 12, 2009 9:13 PM
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@johnva: Dittos for me.

The problem that I have is that there is NO good toaster on the market. Seriously, whether you buy a Cusinart, Kitchen Aid or Durabrand, they will all stink.

I toyed with the idea of buying Hobart appliances for the home but decided that I wasn't that worried.

You can live like a king (or at least middle class) on a pauper's budget if you plan your purchases wisely. Spend $7 on that cheap Durabrand mixer that will most likely die in a year or spend $3 at a yard sale on a vintage Sunbeam Mixmaster hand mixer which may die in a year but will most likely keep running for years.

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catastrophegirl chooses not to fly
January 12, 2009 11:51 PM
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@battra92: i moved recently and downsized a lot of possessions. the electric can opener that my parents got for a wedding present in 1972 was part of that. still works perfectly, with a knife sharpener and everything. sadly, it's ugly so it stayed on the thrift store shelf long enough for me to accidentally visit it a few times.

[www.flickr.com]

\"they\" really DON'T make things like they used to....

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johnva
January 12, 2009 9:26 PM
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@battra92: I ran into that same toaster problem too, and had several supposedly nice ones fail within a year (toaster ovens are even worse, it seems). I researched into it and it seems that a lot of the previously good U.S. brands of small appliances have now been sold off to crap no-name manufacturers based in Asia, who are just rebranding their terrible products with the \"nice\" brand name. I gave up on the toaster ovens, and I think I now have a Oster (sp?) slice toaster which has lasted a few years. But yeah, it sucks. Even previously reliable brands of stuff like this are often garbage now, because of the common corporate practice of just selling the brand names and calling a completely different product made by a completely different company the same thing. It can be really difficult to research, too, and often the only alternative is to buy really high-end stuff.

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RurouniX
January 12, 2009 8:27 PM
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I doubt it. After the credit crunch is over people will resume spending and living way beyond their means.

That way the few responsible people will have to bail them out again. What you're being threatened with foreclosure again because you bought another house you should have gotten in the first place? Tough shit. You just took your family on a all inclusive vacation to Disneyland and now you have to declare bankruptcy? Tough shit...

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johnva
January 12, 2009 8:42 PM
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@RurouniX: If we apply the \"TS\" mentality to the borrowers, we should also apply it to the banks and investors who lost truckloads of money by loaning it to these people. Most of the bailout money isn't really going to the irresponsible homeowners (although some is, which does irritate me) but to the bankers and investors who got to profit massively off of the huge rewards associated with subprime lending when things were good, but want the government to cover their losses now that their bad bets came up short.

I think what really should happen if we really think we need to bail out our bad debt is that a) any bailout money given to homeowners for principle writedowns, etc should be applied EQUALLY to all homeowners in the country, not just the irresponsible ones, and b) that any bailout money for banks should be contingent upon the existing banking practices, companies, and executives not remaining in a position to do this again. Anything else just encourages future irresponsible behavior. The government should seize control of all the failed banks, remove their execs and boards, and break them up into a network of much smaller regional banks that are no longer \"too big to fail\". They should also probably place much greater barriers between business banking and consumer real estate banking so that failures in one credit market don't automatically spread to the other and tank the economy so badly. But none of this will ever happen because it would hamper the banker's ability to rob the taxpayers blind.

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snowlock
January 12, 2009 8:43 PM
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people tend to forget that many can only afford what some consider life-essentials
by burying themselves in mountains of debt via credit cards, car loans and the like.

i know i would amass thousands upon thousands in debt within a few years
if i had to pay all of my own bills by myself with my current salary.
tens of thousands if i wanted the same lifestyle quality i'm accustomed to.

such is the american way, at least economically.
my ninth grade economics class taught me some things about the payment plan
and how it revolutionized the united states' population economically.
ie. people could, then, actually own refrigerators and, nowadays, cars.

i don't know ANYONE personally who can, technically, \"afford\" a new car.

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floraposte
January 12, 2009 9:44 PM
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@snowlock: I think the issue there is \"if I wanted the same lifestyle quality.\" It is tough, because there's a lot telling people that they should have, need to have, are losers if they don't have, certain standards of living. On the other hand, most of us manage to ignore a fair bit of that, because it's self-serving BS by companies who exist to profit from such beliefs. But when desire and not income drives people's lifestyle, we pretty much end up...where America is right now.

People don't need to afford a new car (assuming you mean genuinely brand new), so it doesn't really matter if they can or not. But certainly I and many people I know could buy a reliable car, most likely used, without having to take out a loan (if that's what you mean by \"afford\").

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thehumidity
January 12, 2009 9:36 PM
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@snowlock: As Carl Weathers or Dave Ramsey might tell you, only suckers buy NEW cars. See, what you do is: you keep driving your old car after it is paid for, then put the money you'd spend on car payments into savings every month, before long, baby you got a stew goin'! (Or, if you're \"filthy rich\", buy a new car). Google \"dave ramsey car buying\".

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econobiker
January 13, 2009 4:47 PM
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@thehumidity: Or pay cash for a new car and run it into the ground... My premise is that if you keep a car for a minimum of 10 years, then buying new allows it better longevity in years 5-10+. You know the maintenance history, recalls, accident repairs, etc. But you must pay cash for it.

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Oranges w/ Cheese hates what Christmas has become
January 12, 2009 9:09 PM
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@snowlock: I could. I'd have no money left over afterward but I have enough saved up at the moment to buy a reasonably priced car.

So you're saying the only way you can survive is by using a credit card and burying yourself in debt?

Dude, you're doing something wrong.

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snowlock
January 13, 2009 1:03 AM
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@Oranges w/ Cheese: wrong? probably we're just in different socio-economic places.

@thehumidity: that does sound like a great plan. i don't understand car loans.

@floraposte: lifestyle quality meaning not having to choose between fun or food.

the hatred for car loans thing might just be something strange and personal.

i assumed responsibility for a car payments once in my life when i was about 19.
i paid one payment on the 7-year-old car before i had a fender-bender.
both airbags deployed and insurance declared it a total loss.
after they paid the book value there was an $1100 balance remaining on the loan.
i paid it off and put <$100 in parts in the car and i'm still driving it, 7 years later,
having eventually spent a few hundred more for airbags and a bumper.

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Oranges w/ Cheese hates what Christmas has become
January 13, 2009 5:03 AM
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@snowlock: I doubt that we're much different.

Sure, I want to go out and see all the new movies, but if I did that I wouldn't have money to buy groceries, so I netflix and eat ramen.
Maybe I want a pizza but instead I have to pay rent.
And instead of going to the parks (I live in florida) I pay for my car.
Which makes for *greeeeat* relationships (boredom = not fun), let me tell you.

Sure it isn't omg fun, but I'm not drowning in bills and creditors calling day in day out either.

Simple lesson everyone needs to learn from this mess the banks have gotten us into is, if you don't have the money to buy it outright then and there, don't put it on credit.

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snowlock
January 13, 2009 8:41 AM
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@Oranges w/ Cheese: i dunno

financially, i'm sure we are different.
if i wanted the netflix, gamefly or a trip to the $2 theater i would have to charge it;
and that's not even considering any sort of car payment in the budget.
if you one in, i would have no money left for these \"groceries\" you speak of.

in reality, it would probably be phone service or some other modern \"utility\"
that would end up on the budget's chopping block in favor of entertainment.

luckily i don't pay all the bills and have never carried balances on credit cards.

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Jayrom Acorda
January 12, 2009 8:44 PM
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We'll he might be partially right, I'm sure some have already learned the value of debt, but the ones to come after probable have not... We'll see I guess.

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Penny Dreadful
January 12, 2009 8:45 PM
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\"Apply for a Wal-Mart credit card and get a free Coke!\"

Wow, two things that make me want to throw up in my mouth a little, for free! How can I lose?

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Scoobatz
January 12, 2009 9:09 PM
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To those who continue to be financially irresponsible, please enjoy the $600 of finance charges that come with your free 2-liter bottle of Coke. I will have no sympathy for you.

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OldElvis
January 12, 2009 9:22 PM
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Experience is something you get right after you needed it.

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meechybee
January 12, 2009 9:22 PM
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I shudder to think how much worse the situation would be is Walmart had gotten their way and chartered their own bank.

I know they have their own credit cards, but with their own bank, they would entice even more people into debt.

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ryaninc
January 12, 2009 9:24 PM
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Just today I paid off a previously high-balance credit card. I can't tell you how good it feels to be rid of that debt and I can promise that, baring a life threatening emergency, that card will never carry a balance again.

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Triborough
January 12, 2009 9:27 PM
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Mr. Wal Mart CEO: How many American jobs did you help ship off to Red China?

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dtmoore
January 12, 2009 11:14 PM
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thankfully I learned my lesson a couple years ago, it's really easy to not think about it and always put it off until later, until you are completely broke and paying $500/month in cc/loan payments. Glad I learned it when I did and still crawling out (almost there!).

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oneandone
January 13, 2009 10:42 PM
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@dtmoore: Same here - keep going!


Now that the end is in sight (3 more months!) it's becoming harder to resist the temptation to spend - especially since I keep thinking I 'need' new work clothes, and there are all these sales..... but there's nothing I could buy that I would enjoy more than being free of the credit card debt. And in time for my birthday! It will be awesome.

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Russ Seehafer
January 12, 2009 11:45 PM
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If the consumer won't (or can't) spend then the government is going to spend for us. The amount of debt we are racking up as a nation is what's scaring me. I'm putting everything I can into a roth 401k and roth IRA so that when the taxes sky-rocket to pay all this back the government won't be able to touch my money. paying 30% now will seem like nothing compared to what we're going to have to pay in the future.

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goatmale
January 13, 2009 1:36 AM
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Let's take advice from a man who gets paid about a million more dollars a year then most wealthy Americans.

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Sollus
January 13, 2009 2:01 AM
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In regards to the poll, I didn't need a lesson to be taught to me. I pay my balance off every month.

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TechnoDestructo
January 13, 2009 2:23 AM
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I learned that lesson over and over and over as a kid. College savings wiped out and everything.

:(

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TVarmy
January 13, 2009 4:42 AM
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Nevermind if debt is good or bad - Did WalMart's CEO just say he thinks the customers aren't coming back to spend money they don't have? Isn't that going to scare the shareholders?

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JojoWazoo
January 13, 2009 11:57 AM
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The poor, poor people. WalMart would love nothing more than to give credit to the poor fools who shop there. A lot of people can hardly pay the bills they already have. They will be using WalMart credit to buy groceries and necessities and getting themselves into more and more trouble. In short, this is predatory lending.

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oneandone
January 13, 2009 11:17 PM
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So I'm expecting no one will read this, since it's so far along in the comments, but I have a half sincere/half snarky question. It has a bit of an intro: I am a person with debt. Right now, about $3k in credit card debt and $20k in student loans. 2 years ago, they were each 3 times what they are now. I've been lucky with job changes but have also completely revised my spending habits, my attitude towards budgeting, and my overall lifestyle (like not flying home to visit family more than once a year - they live on a different continent and no way they can get here (US)).


I changed my habits for the better after a sharp wake-up call - tracking my payments and realzing how much I'd be paying in interest if I just kept on paying the minimums. It was startling, and to haul myself away from bad habits took quite a bit of work. I'm glad I learned my lesson early, with relatively small penalty, and never any missed payments.


So here's the question: I feel that going through a tough experience - or even just a reality check like mine - gives you valuable experience & helps you develop tools. Obviously, you can have good financial skills without going through personal hardship. But I do wonder about all the people, especially here, who are very proud to have never had any kind of debt, never owed any card of money to a credit card company, never spent beyond their means - will you know just how to act when something forces you into spending more than you should? I've already made my mistake, and learned how to recover from it - so when it comes time to buy a car, and maybe a house, and possibly take on all the massive expenses associated with children, getting older, and dealing with major illnesses (some of them sooner rather than later, I'm expecting), I feel like I can handle it. But what happens to the person who's never had debt when a terrible alignment of factors leads to you using up your savings / emergency fund and then pondering whether or not to put some huge bills on your credit card - will you know what to do? Will you end up going into debt? And if you do, will you be able to get back on track?


I feel good about my spending (and saving!) habits now, but even better about my capabilities for dealing with even the most unexpected and challenging life situations. I can't help but wonder if people who have never been burned even a little bit will be as capable and adaptable if similar things happened to them.

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metaslugx
January 16, 2009 2:45 AM
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Wow, i'd learn my listen if I had, you know, debt...

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