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Try to take a more macro point of view. Jobs and output will be marginally higher if you buy on credit now and then make monthly payments on the debt than they would be if you made monthly payments to savings and then bought whatever it was a year from now.
Because the interest figures are just debt service - whomever is paying the debt is actually worse off.
Better them then me. Spending does make the economy flourish but I'm not going to make it do that at my expense. It's true, people need to keep spending all of their money to keep people in business. That is how the world is geared; buy now, pay later. That's why they always offer low interest rates on cars knowing full and well these people will be sweating out those payments when it expires.
If everyone was smart, the economy would be in the ****ter. Spend, spend, spend!!
Memory isn't the problem, it's foresight or lack of. Knowing if they can really afford it or not. Credit is just a tool.
However, Unfortunately those who have access to credit ( especially CC @ 20% interest compounding) have NO CLUE!! Making minimum payments puts you intoa bankrupting situation within a year!! Bankruptcy takes years to recover from..and gain access to credit ..Why the hell would anybody use credit for something they cannot afford or budget knowing full well their incomes??
I do blame predatory offers and access to credit..and YOUNG people BITE!! Next thing yu know..DEBT++ Garnishee Wages..unable to pay bills..loss of credit..It's a Mess young people have been dealing with for decades!!
I guess I was fortunate..brought up by parents who lived thru the "Great Depression" of the '30's..so was always taught frugalness/ live within your means etc.. So learned from giddyup ..Don't borrow unless terms suit you and whomever your lender is..NO Credit card usage, unless you can pay great portion off ..IF you can't Don't PURCHASE!!
They kept it pretty simple..and It worked for me! To date..I have Zero Debt except for VERY small mortgage..@ 2.76%..But I did live thru times with Mortgage at 10%+ back in the day!! BUT the Killer is Credit Cards 19-22 % interest that Lenders love it when you only pay minimum..LOL
Compounding interest over one year is a losing battle for the debtor..and a winner for creditor....Young People HAVE to realize there's no FREE money!!
Yes, the return of a healthy economy means people are spending on major purchases such as cars, home remodeling, and travel that require them to use credit.
Meh, maybe. Truthfully buying on credit (credit cards is what we're talking about) is really I can't afford it but I can make a monthly payment is how I can afford it. I'm not talking about the people using a cc and paying it off at the end of the month. That's just a person who (like me) uses the cc for convenience.
Quote:
Originally Posted by ncole1
How does people buying these things on credit help the economy in ways that buying them in cash cannot? Did I do the economy a disservice by buying my car in cash? How about paying for all my vacations in full?
Yes dammit you did a disservice. they don't get to make money off of you by extending you credit at 13-18% or more and hoping you will only pay minimum payment so they can make as much as they can off of you.
Quote:
Originally Posted by MLSFan
Less hands on the money? Less people working to earn it then
Not sure why you buy "in cash" vs putting it on credit and paying it off. Even if you pay it off that very day, you get additional protection and rewards. I buy on credit since I can let money compound in bank/stocks for a month first before letting it go to someone else
In cash can mean I'm writing a check. You can buy on credit as long as it gets paid off when the bill comes due. Now as soon as you didn't pay off that every month you got the interest added on. And they got you. The average consumer CANT pay off a cc in full every month. They just can't. The few that can are outnumbered by those that can't.
As for your technique of holding on to cash for a month before letting it go, unless you're talking about having just HUNDREDS OF THOUSANDS of dollars you're really gaining nothing. Unless you're spending tens of thousands. Which as most consumers you're probably not. Btw I would love to see how you beat the interest rates on the average CC's with your investments.
Quote:
Originally Posted by goillini8
Home mortgages, a car loan, a home improvement loan, for example, or some student and small business loans are the the type of "good" credit that should propel a healthy economy. But, simple revolving credit (credit cards) at high interest rates being used by people to buy stuff they otherwise can't afford isn't healthy in the long run. Yes, some people use credit cards responsibly, and a little decadent credit card spending is good - but not to the extent the US population has overextended themselves. Not even close.
No debt is really "good" debt. About the only debt I will say ok to is a mortgage and that's because you get some deduction out of it and since rates are pretty much about as low as whale poop using your money to buy cash (unless you're getting that great a deal by buying cash AND have the cash) A mortgage is IMO "good" debt.
Cars meh not do much. Most applicants don't qualify for the 0-1% that's offered as a teaser to get you in. I don't want to get in a car buying on cash or credit which is better. I don't like car debt because a car I not a good investment. It's a tool like a lawn mower
Last edited by Electrician4you; 09-15-2016 at 09:49 PM..
Credit is a very significant part of any healthy modern economy. These in fact run on credit. It is credit tightening that hurts economies, no matter what old-time tent-revivalists may have had to say about the matter.
Does that apply to 18% credit created while buying things that rapidly depreciate to zero?
After years of credit tightening, I've seen the local mortgage spigot come back on. Looks like we're getting ready for some more fun
This is all Fed's fault. Interest rates should never be at zero. The Fed lured millions and millions of Americans into more debt. instead of limiting debt and raising rates they did the opposite and lowered rates, encouraged more debt. Instead of making debt more expensive, and to encourage Americans to pay of their debts, the FED lowered rates and encouraged Americans to double down on debt, take more debt.
American workers haven't seen any meaningful pay increase in decades. All what American workers got was CREDIT. Americans are using credit cards to buy groceries and pay bills, using credit cards to survive every month. Instead of receiving higher pay working class Americans got easy credit and a lot of debt.
It's the nature of our political system to make things better now at the cost of making them worse in the future. In the future, when we have stagflation, and millions of bankruptcies, it's likely to be a different administration and different congress. It will be their problem, not the problem of the present politicians. Therefore, in line with the nature of our political system, it makes perfect sense for interest rates to be as low as possible, and for people to borrow as much as possible.
It's the nature of our political system to make things better now at the cost of making them worse in the future. In the future, when we have stagflation, and millions of bankruptcies, it's likely to be a different administration and different congress. It will be their problem, not the problem of the present politicians. Therefore, in line with the nature of our political system, it makes perfect sense for interest rates to be as low as possible, and for people to borrow as much as possible.
It should be the other way around; take short term pain for the long term gain. So in other words, raise rates, let the defaults and bankrupcies run wild, cleanse the system, allow our economy to restructure and come back to normal, reward savers (responsible people) and punish debtors (irresponsible people).
There is nothing normal about ZIRP. The Fed members and their collaborators need to be prosecuted for treason!!!!
Credit is a very significant part of any healthy modern economy. These in fact run on credit. It is credit tightening that hurts economies, no matter what old-time tent-revivalists may have had to say about the matter.
You are full of crap! Running up massive debt just delays the normal slowdown of an economy. Gentle peaks and valleys are what you want, not massive over extensions and no equity. The housing market crash was a great example of a growing economy extended falsely and BOOM all the banks get a free ride on the working people. Biggest ponzi scheme ever.
You are full of crap! Running up massive debt just delays the normal slowdown of an economy. Gentle peaks and valleys are what you want, not massive over extensions and no equity. The housing market crash was a great example of a growing economy extended falsely and BOOM all the banks get a free ride on the working people. Biggest ponzi scheme ever.
No, I'm a retired economist. Which is why I understand that the normal state of an economy is slow and steady expansion in line with population and productivity growth. Rumors of any sorts of inherent cycle-like thingies are wildly out of tune with observable fact.
Meanwhile, credit in a modern economy is a more efficient means of financing transactions than any other. Which is why all such economies are dependent upon credit today. Put a few too many pieces of worthless paper into credit markets and the whole global economy can be brought into serious question. That's all the Great Recession was about.
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