thegreekdog wrote:I'm picking up what you're putting down.
But, just in case I'm mistaken, I'll pose one of my world-famous scenarios.
Bill earns $30,000 a year at his job. He takes out a credit card with a line of credit of $2,000. For the first few years, he decides to only spend about $10 a month on his credit card and he's able to pay off the credit card every month without paying interest. Bill has two children to whom he pays an allowance of $100 a year.
Last year, Bill's children begged him for a television. He told them he could not afford it. But they wouldn't stop. So Bill, in an effort to placate his children and get elected... I mean... stay dad, decided to buy his children the television by putting $2,000 on his credit card.
Bill found that he couldn't make the $2,000 payment on his credit card each month. So interest started to accumulate. Bill figured out how to pay for the interest, but he still had to buy all the other things his family needed: food, rent, car payments, etc. Bill looked at his children basking in the high definition of his new television and, even though he thought he could take the television back and pay off his credit card, he wanted to keep his voters... I mean children... happy.
As the years passed, Bill's credit card was maxed out and he couldn't make any payments except the interest. His children wanted an X-Box 360 and a PS3 (BOTH!). Once again, Bill gave in, this time taking out another credit card (from China) with a higher interest rate. He purchased both game systems and his children were happy.
As the years continued to pass, Bill found that he started not being able to pay the interest on his two credit cards. So, he decided to stop paying his children $100 a year in allowance, instead opting to give them only $75. Sure, it was a modest tax increase... I mean reduction in allowance... but his children fought against it. Bill reminded them that kids down the street had it way worse. The reduction in allowances helped Bill pay the interest on his credit cards, but he couldn't make a dent in the principal balance.
The next year, Bill's one child got sick. Bill needed to pay for medical care, but didn't have any money to do it. So he took out a loan against his car (assuming he could do such a thing). He used the money to pay for his child's care, but used some additional money to pay for a fancy new suit for himself (Bill should get a nice kickback after all!). Bill's child continued to be sick and, because he didn't have enough money from his allowance, he couldn't pay for his healthcare himself (remember, Bill took away $25 of his allowance last year).
At the end of this year, Bill was in major debt, his car was mortgaged, one of his sons was sick, and neither of his sons made as much money as they used to. Sure enough, Bill's other son got sick. What was Bill to do now? Well, Bill took away all the allowances from both sons to pay for the doctors' bills. Now neither son made any money and they stopped working around the house. Now Bill had to do all the housework, work at his job, and he couldn't pay the credit card bills.
What a vicious cycle! What could Bill do? Well, Bill stopped feeding and caring for his sons, and they left. Bill couldn't make his credit card payments, so the credit card companies repossessed the television and game systems, but they also took Bill's clothes and other personal items to pay for the interest. Bill's car was repossessed as well.
In sum, because Bill wanted to placate his children, he spent too much money, including his future earnings (and his sons' future earnings). The credit card companies eventually got their money and it left Bill a shell of his former self.
In reality sum, if we continue to keep spending and mortgaging our future (which is what we're doing, regardless of political affiliation), the shit is eventually going to hit the fan. And it's not a gradual spending of money, the increases of spending themselves are increasing at an alarming rate. It should get interesting fairly soon.
Sorry greekdog, but that is just upper class BULL.
Are there idiots out there.. OF COURSE! And plenty of them bring in millions.
Anyway, set aside this does not seem to be BBS question,
Here is what REALLY happens.
Bill makes 40,000. He puts various things on his credit cards.. several, not one, because it seems every time he shops he is given offers for signing up. Mostly, he pays off the balances within the month, but some of the larger balances he lets accumulate, though he pays them off in time. His interest rate is around 12%.
Then Bill gets married. He has good credit, so he gets a house. The house needs appliances.. not to mention a few things to do with the wedding (the couple is older, so they pay themselves and its a very modest wedding, but still, $2K, with the honeymoon on the card. The credit card company offers a new rate. "No", he says, I prefer my old card, with a fixed rate of 12%... long story short, he gets told "well, sorry, we are discontinuing that card" (or maybe he just succumbs to their speil... 1.99% fixed rate, whatever.). The wife has a job, too, of course. They pay off the balance ahead, even manage to put some money aside into 401K and Roth IRA.
EXCEPT... stuff happens. The furnace goes.. and, of course its mid winter. Or, maybe there is a leak in the roof. Maybe there are medical complications (wife pregnant? have issue? That can REALLY get expensive!). Maybe one or the other partner loses their job or something.
Bills mount. They are good people, so they keep up with the payments. Its hard, but they do it. They have most payments set up on automatic payment. BUT... well, it turns out that the payments were set for once a month and the payment date got swiched around. They call the credit company... "gee, hmm, well we did send you out the notice, didn't you see it.. you know, that teeny tiny print in with your credit bill??".
SO... that magic rate suddently goes up, now its 23%. Payments are now MUCH higher. So, they go take out a short-term loan. Rates are high, but not quite as high as the new credit card. They get a couple hundred extra and still have a lower payment for a shorter term than paying the credit card would have met..a nd yes, the credit card goes into the shredder. The money is put aside for future emergencies.
EXCEPT... something else happens. Reread the list, maybe insert "child gets sick" or something of that sort, because by now they have kids. NOTE.. no big screen TV or other idiocy. Yep, let's go with that one. While in the hospital, it turns out that the spouse went and bought something-- nothing extravagent, maybe a kid's birthday or Christmas present. Anyway, forgot to mention the charge. Normally, this would be caught, but with the kid in the hospital.... they find out less than 24 hours after the payment is due, its short by less than $5. "So sorry... not our fault.... we won't charge your account, though, due to the circumstances". EXCEPT.. this does go into the credit report. Another phone call "oh, yes,I see... we'll take care of that". But, the other credit card companies have all seen that report and so they boost their interest rates. In the end, they all go up to now 27.99%
And, suddenly... Bill is having great difficulty paying. He has a few choices. Go bankrupt, lose the house (in PA you don't get to keep the house), etc. Cut WAY back, keep paying, look for lower interest rates.
If you are like me, you keep paying, sell things, look for lower interest rates and a new job. But... a good many people just give up and go bankrupt. A good many others get depressed, run up the cards fully and then go bankrupt, probably divorced as well.
THAT is much more like what is happening across the country to average people.
