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Everyone keeps referencing credit card debt, but did anyone actually read the link posted by the OP? In short, it states that "Household real-estate assets rose by $454.3 billion, most since third quarter of 2016" and "Figures released Wednesday showed Americans put away their credit cards in January, as revolving credit outstanding rose by the least since early 2015"
I read this as people took out equity in their homes to purchase more real estate. That may or may not prove to be a financially savvy move on their part but I don't see it as people carelessly spending money and racking up credit card debt.
Is this true? I thought it was better to be at a $0 balance and to maximize available limits.
Was at a car dealer last month with an 815+ credit score (don't recall the bureau)... Are you saying that if I keep a balance, my score will improve?
I mean at this point I don't really care since my score is high enough.
But when I missed a closing date and showed a $5K balance my score (on my Transunion credit monitoring site) dropped. And that is with an available limit of $90K+ across my cards.
It's not about giving the credit card company before it's actually owed... either way you're not paying any interest.
You are just delaying your payments 1-2 weeks later and showing a balance... Are you telling me you are successfully arbitraging your cash by "waiting"?
Now if what you are saying is true, that keeping a balance should raise my score even more and I shouldn't care about keeping it at zero, then I'd love to a see a source, and then maybe I won't be so neurotic about showing a $0 every month
Edit: I'm wondering if the score drop occurs because carrying a balance requires a payment that adds to ones monthly "obligation." Like the month I carried a balance I think I now had a new monthly obligation $50+
Yes, your score will go up if you look like you're keeping a balance on your credit cards (provided that balance on each card is under about 20% of the card's credit limit - go higher than that, and your score will drop). Credit scores are based on how well you to manage the loans you take out; if your credit cards always show a zero balance at closing, then to the credit agencies it looks like you're not using them (since it's that closing statement balance that gets reported to them). What the agencies want to see when they look at your credit cards is a low but revolving balance with a long-term record of on-time payments. This trick gives you the "revolving balance" without you actually running up a balance and paying interest on it.
And to be clear, I'm paying the balance on my cards off in full either on or slightly before the due date. Remember, the payment due date can be as much as three weeks AFTER the monthly statement closes! (This is a holdover from the days when we used to pay all our bills by mail; obviously it wasn't possible then to pay the bill on the same day the statement closed, and they had to allow a reasonable time after they mailed the bill to allow the customer to receive it and mail a paper check back.) That delay gives my money two or even three extra weeks to earn some interest (granted, it's not much in the current interest rate environment), and since I only make more than one payment a month on my card if I've charged more than 20% of the card's limit, the closing statement that the agencies see will pretty much always show money owed. Which is how I want it to look: a small amount of money owed at all times, plus consistent on-time payments.
(With your high credit score, this is an academic discussion for you. But it's a trick worth knowing for folks with not-so-high scores who want to boost them in a painless way.)
Okay, so that's interesting. If some amount of credit card debt that is not carried month to month is included in the consumer debt totals... how do you correct the figures?
I believe those figures are correct on their face. My understanding is that the Survey of Consumer Finances conducted by the Federal Reserve specifically excludes households that pay off their balances every month. The language used by the Federal Reserve is: "Use credit cards for convenience only/do not carry a balance."
The Survey itself itself asks these questions:
Section B: Payment Methods and Credit Cards
Payment Methods/Interactions with Financial Institutions
Paper Check
Online Banking
Automatic deposits/payments
Reloadable prepaid debit cards
Government benefit card?
ATM/Debit card
Credit/Charge cards
Types (Bank Cards, Store-Branded Cards, Charge Cards)
Number of cards
Amount of new charges last month
Balance after last payment
Credit limit (Bank Cards)
Interest rate (Bank Cards)
Institution (Bank Cards)
Usually pay off bill each month?
Everyone keeps referencing credit card debt, but did anyone actually read the link posted by the OP? In short, it states that "Household real-estate assets rose by $454.3 billion, most since third quarter of 2016" and "Figures released Wednesday showed Americans put away their credit cards in January, as revolving credit outstanding rose by the least since early 2015"
I read this as people took out equity in their homes to purchase more real estate. That may or may not prove to be a financially savvy move on their part but I don't see it as people carelessly spending money and racking up credit card debt.
That's certainly less alarming than the alternatives. I think the painful lessons learned in 2008 haven't been completely forgotten by most people yet.
I believe those figures are correct on their face. My understanding is that the Survey of Consumer Finances conducted by the Federal Reserve specifically excludes households that pay off their balances every month. The language used by the Federal Reserve is: "Use credit cards for convenience only/do not carry a balance."
Well, I threw out that argument and several in here chimed in that their credit reports show a carried balance because it's reported each month before the payoff date. So how does the Fed know when balances are carried, and not?
Well, I threw out that argument and several in here chimed in that their credit reports show a carried balance because it's reported each month before the payoff date. So how does the Fed know when balances are carried, and not?
Depends on where the Fed is getting their information. The banks know what percentage of their credit card customers carry a balance. The credit scoring agencies don’t.
I think the real picture looks quite different. This is the first recovery where household debt service as a percent of disposable income has gone down and stayed down. The data series started in 1980 and we're at pretty much the lowest point since then.
Q1/1980: 10.6%
Q4/2007: 13.2% [the peak]
Q4/2009: 9.9% [the low]
Q3/2017: 10.3% [latest reading]
So we're lower than at any point from 1980 through 2007. A very benign debt service burden, you may call it historically benign. Debt deleverage as percent of income is very real for households.
I think the real picture looks quite different. This is the first recovery where household debt service as a percent of disposable income has gone down and stayed down. The data series started in 1980 and we're at pretty much the lowest point since then.
Q1/1980: 10.6%
Q4/2007: 13.2% [the peak]
Q4/2009: 9.9% [the low]
Q3/2017: 10.3% [latest reading]
So we're lower than at any point from 1980 through 2007. A very benign debt service burden, you may call it historically benign. Debt deleverage as percent of income is very real for households.
A lot of this logic unfortunately flies over the heads of several posters in this thread.
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