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Americans spend $250 billion a year on credit card interest. That is one quarter of the trillion dollars spent annually on the national debt. Both are a considerable waste of money and will likely lead to not so good outcomes.
Why do people use credit cards as they do? Some claim it is necessary for living expenses, some just overspend, some may be subject to various pressures like keeping up with the Jones’s, still others make no provision for emergency funds and get trapped in debt.
I think it can be summarized in most cases as poor financial planning and irresponsible behavior. In any case, those interest payments are taking from their future.
Most people are underpaid. Many are trapped paycheck to paycheck. This includes many people who would otherwise be responsible if they could just have an opportunity to dig out of their debt. It’s easy to say, well they should have rented a smaller apartment, but maybe that’s not an available or realistic choice. A lot of people have to own cars. It’s not a choice to have to buy new tires and gasoline.
Even with Obamacare, a huge amount of debt and bankruptcy are due to medical costs. In most cases, the need for medical care is bad luck, not problems caused by personal responsibility. (And why is medical care so much more expensive in the US than other wealthy nations, like across Europe?) People should not be blamed for situations truly out of their control.
I’m not saying that a lot of people don’t handle finances well or that some need of medical care isn’t due to self-destructive behavior. But looking at the systems we have to negotiate, as capitalism gets less regulated, more individuals need to scramble to pay their way.
Credit cards are designed by our corporate overlords to make a profit. We own stock in banks and credit card companies. Why? Because we expect them to have high revenue streams of interest and fees and to grow. This is proof that the system is designed to suck money from creditcard holders and that we are well aware of this.
Underpaid, trapped, opportunity? There is a lot I could say about your perspective, but this is not the place. So let me summarize.
Every generation faces its own problems, challenges, obstacles and opportunities and now is no different except I would say there are more diverse opportunities.
I suspect every generation or part of it, has a set of excuses as well.
Some of the problems and challenges are created by the generation at the time.
Finally, it appears to me your comments regarding pay, investing and sucking money from consumers fail to understand that it’s all connected, each impacting the other, each driving prices, saving, our economy.
Each driven to a large extent by individual choice and responsibility.
Sorry, I guess I didn’t exactly summarize.
I agree that spending money on credit card interest is a waste, especially if you can avoid it. Early in my adult life, I ran up a credit card bill that took years to pay off. However, I did learn my lesson and, in fact, stopped using credit cards for many years (except for hotels and other places that required them). That all changed when I retired and could take advantage of cash-back rewards. These days, I estimate that I spend over $60K annually using credit cards. I have three, in fact. One for face-to-face purchases (retail/restaurant/gas, for example). I get 2% back on all purchases. Another one is used for on-line purchases, where I get 3% cash back but up to $2,500 in purchases (per quarter). This card gets compromised regularly so no long-term payments are made with this card. The third card is strictly for Amazon and Whole Foods, where I get 5% cash back. On occasion when necessary, I also use this card to make monthly payments (long-term) when direct deposit via checking is not allowed. In a given year, I estimate I get roughly $1,600 cash back. These days, it is nice that the credit card statement clearly show how much cash back you receive. At the same time, I pay $0 in interest or penalties since I pay the balance off each month (using autopay). Even if my checking account balance were to drop and could not pay the bill, our savings account is set up to cover that shortfall. Our savings account is also our emergency account and has a full year’s worth of anticipated discretionary expenses.
You should check out virtual card numbers for your second card. Citibank and Chase have it, I don’t know if anyone else does. I get a different card number for every online vendor and they can have their own expiration date, spending limit and lock to a particular vendor or only allow one charge and then auto lock. I haven’t had a compromised number in more than a decade. And I can email card numbers because only one charge is allowed, etc so no concern about getting it lost, etc.
I would like to know which card you have for 2% on all purchases.