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Cheesus ,

Credit cards are great if you know how to use them. You should always use them then pay them off. You get better protection and perks like cash back over using a debit card or cash.

shortwavesurfer ,

Yes, but 99% of people cannot use them properly and will end up in a way worse off situation than if they had never touched them to begin with.

e_t_ Admin ,

I agree there are people who get into trouble with credit cards, but 99% sounds like a made-up number.

shortwavesurfer ,

Yeah, it is a made-up number, but it was to illustrate that tons of people do get into trouble with them, and very few do not.

sugar_in_your_tea ,

I highly doubt the “very few” number. I would hazard to guess that most people don’t get into trouble with them, though most probably end up paying a bit in interest at some point.

Don’t base your impressions on posts to personal finance forums, most of what you’ll see are people who either need help or fixed a bad situation. You don’t hear about the people who don’t have issues with it.

shortwavesurfer ,

True, but if so few people have trouble with them, why do we have big debt consolidation firms and payday lenders and all these other things that indicate that most people get in trouble with loans? At least from personal experience, everybody I know has gotten into trouble with cards, and most of the people I know are generally middle class. There was a time when I probably would have gotten in trouble with them as well, had I not put my foot down and said that I wasn’t going to live that way. But again, from personal experience, most people aren’t nearly as controlled in decision making as i am.

sugar_in_your_tea ,

That doesn’t indicate that most do, just that enough do to sustain a business. A lot of people get into trouble, but I doubt it’s a majority.

In my experience, nobody I know has told me that they’ve gotten into trouble with credit cards, other than one coworker (we were talking about PF) and one other coworker hinted at it (said they went through a bankruptcy). I’m sure a ton of people do, but most that I talk to have been able to manage their debt either by avoiding interest or having it only temporarily (e.g. many will say they finally paid off the cards after a hospitalization or whatever). I grew up middle class and am still middle class, and most of my friends growing up were my same income class or lower.

Most of the wealthy people I knew got into trouble with larger loans (e.g. buying toys like cars, recreation vehicles, vacation houses, etc), and most of the poorer people I knew stuck with cash and avoided investing. Neither got into trouble with credit cards.

I think my experience is a bit different because I don’t like to be around people who spend on consumer nonsense like restaurants, clothes, etc, and that’s where people tend to get into trouble with credit cards. I instead prefer to entertain at my house, visit friends at their houses, or go on outings like camping. So I self select people who tend to avoid credit card debt.

shortwavesurfer ,

Yeah, i think its primarily your peer group. Its not a subject most people discuss freely, but you can generally tell when someone is putting out more than they make. The people i know buy purses because they are pretty, or new iphones because "its only $40/mo and so on. I am the odd one of the people i know because i dont do those things or i wait until i have the money saved up to do them. I dont make much for sure, but i would bet decent money that i could not find a single person i know who can consistantly save 15+% of their monthly income like i do. When i do take “loans” they are low interest (~7%) because i am borrowing against assets i have built up and not with cards.

sugar_in_your_tea ,

Sure, and I generally avoid people who buy expensive things regularly because those things just don’t interest me. My in-laws are kind of like that, but they buy in cash instead of credit and avoid monthly charges, so they save up for whatever the expensive thing is.

I know a lot of people get into consumer debt, I just don’t interact personally with them. Most of the issues I see are overextension on very expensive, illiquid assets (car, house, time share, etc) and then a sudden financial change (job loss, hospital bills, etc) that causes things to spiral out of control instead of a steady squeeze from high interest.

I’m interested to know which perspective is more common.

shortwavesurfer ,

I think i read somewhere that the average person has $5k in credit card debt and something like 60% of people couldnt cover a sudden $400 expense without a credit card.

sugar_in_your_tea ,

I’ve seen those too, but I’m not really sure how dependable they are. For example, I probably have $5k credit card debt, but I never carry a balance. I also only have like $500 in a savings account, but I have several thousand in bonds, like tbills and ibonds. A lot of people don’t like to hold much cash, and would just cut unnecessary expenses to pay off an expense on time using a credit card and then return to prior spending.

How things are defined matter a lot, and it’s easy to narrow or widen definitions to sell a narrative. If you’re selling budgeting advice, you want to exaggerate debt and people being unprepared for emergencies. If you’re selling investments, you want to emphasize financial stability of other people so customers feel like they need to invest more. If you’re a government agency, you want to sell need for more funding for your agency. And so on.

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