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Brandon Killian @brandonkillian 6 years, 2 months ago

@Nbecerra how do you know what people spend their money on? Most people are in debt because they simply cannot afford the increasing costs of life in America. They are working for wages well below what would give them the means to live. Most people are forced below the poverty line because they cannot find work and are forced to purchase their basic necessities on credit. This is why we need to expand the social safety net, so that people are not put into credit card debt because of our societies low wages for average workers. Either we expand the social safety net, or we increase minimum wage to give people pay that will actually give them a means to afford basic necessities. We have talked about increasing minimum wage in California. And I hope we do. More skilled workers will come to California if wages increase, and then businesses will want to stay in California because the work force is so strong.

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Anonymous @ 6 years, 2 months ago

I acknowledge surely that this is a “problem”, however, like many “problems” in a free society, another “program” will not fix the problem. Consenting adults know the dangers of credit. There are libraries full of books and websites full of information that teach you that maxing out your credit by buying things you don’t need with money you don’t have is probably not a good thing for your overall financial well-being. However, I value freedom. If someone wants new rims on their car, they are making the decision that the benefits of having a good looking car outweigh the cost of the rim. It’s a simple, voluntary transaction like this in a free market which has lead to the vast amounts of wealth and high standard of living that we all enjoy. Another “program” to “educate” our adults will do nothing but waste money and prevent the free market from working as it should.

Surely people should be educated about their finances, and when they start racking up bills and paying their taxes I’m positive they will be the first one to start educating themselves.

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Two Cents @twocents 6 years, 2 months ago

@Nbecerra I completely agree that consumers need to be held accountable for their decisions and choices as consumers. As @CooperSmith pointed out, there are plenty of education tools out there for people to educate themselves on debt. But real life consequences are the best teacher of all. If people learn through experiencing a consequence, they are much more likely to change their actions than if they read or are taught about a consequence. This is why I get so frustrated when our government talks about forgiving debt. If we forgive debt, people do not learn that they cannot spend money they don’t have. People need to face the consequences (debt) of their actions (frivolous spending).

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Nico @nbecerra 6 years, 2 months ago

@julia-wowsy, I don’t mean this disrespectfully, but your argument doesn’t even make sense. First of all, you don’t “fall below the poverty line” by spending money, the poverty line, or better known as the poverty threshold, is based on household income. In the United States in 2012 for a family of four the poverty line was at $23,050 in annual income. Minimum wage in California is $8.50/hr. If the average family of four had two adults working only 40 hours a week, that household would bring in $35,360 a year. That’s $12K more than the poverty threshold. Or $1,000 a month more than the impoverished american. If you go to the IRS website to see the national standards for expenses (used when filing Bankruptcy) you will see the monthly average expenses for both the country and by state. For the sake of time, I won’t go into detail, but you should look at those numbers and see that living expenses aren’t as high as you would think. If you make minimum wage, you probably won’t be buying $900 shoes or drinking Souja juice that costs $8 a bottle. But you will be plenty fine if you shop smart. You won’t need a credit card and you probably wouldn’t be approved for one either, like I said, lending has been reduced. So, it doesn’t matter what people are buying on credit, because that wasn’t the point of my discussion, it’s the lack of education on what it means to buy something on credit, and your argument lacks support. As for trying to turn a discussion about credit cards into something about social welfare, well that’s a first in my experience. In CA, someone receiving aid through government subsidies has a better chance of paying off credit card debt than someone who actually does work a minimum wage job. But I think your social safety net argument serves a better purpose in a different topic.

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Nico @nbecerra 6 years, 2 months ago

@coopersmith, I must say your response is full of “buzz” words that may have teeth in a political discussion, but we’re talking economics and capitalism here, and “free society” and “free market” don’t work to support your argument that “we all enjoy vast amounts of wealth and a high standard of living”. I think you’re referring to a select group of individuals who aren’t worried about buying their “rims” on credit. You also mention a “program”, suggesting that this program has to be funded by tax dollars. The credit industry is a trillion, ya trillion, dollar business that loses billions in bad debt annually because people can’t pay their debts. The issue i’m speaking to above hurts all consumers. The more money the banks lose, the higher the risk and the higher the interest rates. There was some serious lobbying done back in the early 2000′s by the credit card companies that helped create “BAPCPA”, the Bankruptcy Abuse Prevention and Consumer Protection Act, that was passed in 2005. This is created the standard for the “means test” in a Bankruptcy proceeding. Creditors wanted to know that debtors weren’t just running from their obligations by filing bankruptcy. You talk about “educating themselves” because someone is holding debtors accountable, but that’s not always the case. There are people who rack up debt, file bankruptcy and do it all over again. Now you talk about a “free market” or a “voluntary transaction”. You are right, no one is forcing these adults (18 years olds and older) to buy these goods, however the banks do have a legal duty to educate their customers on the terms of their agreements. These debtors not paying back their debts is costing you and me, not just the banks. Do you have a credit card? Have you read your terms and agreements? Can you tell me the interest rate on your current card and the late fees associated with missed payments? Today, credit card statements are required to show you how much you would end up paying if you only paid the minimum payment, well I think the credit card companies should prevent bad debt through tutorials on their site BEFORE extending credit. They could require individuals to take an online tutorial explaining the risk of credit, the best way to manage their finances and also what to expect if they intend to pay over time. Now, libraries full of books and internet web sites with education. The FDCPA, which is the Fair Debt Collection Practices Act sets a standard called the “least sophisticated consumer standard”. You may think that the average consumer knows a thing or two about personal finance. Maybe in your 8th grade class you talked about credit cards and learned about amortization of interest and loan payments, but my school was pretty good, and I didn’t learn that until I took financial accounting in college. That’s another option I would propose, personal finance in a high school curriculum. When they teach micro-economics in high school, they could add a week long lesson on personal finances. Trust me, there aren’t people out there that are going to run to the library before they apply for a credit card, honestly it’s easier to get a credit card than it is to check out a book at your local library. And as for the internet, good luck going on google and searching anything that has to do with credit before you get very generous offers for extensions of credit. I’m not saying there is anything “wrong” with credit, i’m saying there needs to be more education as it relates to using credit. Not because I worry about your credit or your finances, but because bad debts hurt the economy in the form of high interest rates or reduced lending, all because you didn’t realize what you were doing when you swiped the plastic.

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Nico @nbecerra 6 years, 2 months ago

@twocents, see my comment to @coopersmith above. “real life consequences” of bad debt are what put us in the hole that our economy is in now. I agree that debt should not be forgiven because you are encouraging, what in my opinion, is very nefarious activity. Some might even say the debtors are even stealing. Debt is a very serious problem in this country, people are drowning in late fees and high interest rates. The biggest response is that “they didn’t know they would have to pay such high rates”. Banks are accused of having unconscionable contracts and are paying the price. I don’t want to learn the least sophisticated consumer’s lesson with them, I want to be able to rely on reasonable interest rates and access to credit. Have you tried getting a mortgage lately? It’s nearly impossible to survive the underwriting process. I’m not pointing the finger at the banks, I believe in holding debtors accountable for their commitments, and believe me Anti-Deficiency Statutes in states like CA don’t help the lending process either. The question I pose is should the banks do more to help prevent bad debt, and is there something society can do to help consumers be smarter about what they put on their credit cards or whether they can actually afford what they purchase. Not even afford it, but also just know what they are actually paying in the end. If you buy $1,000 worth of goods on a credit card with an APR of 22%, you’re looking at $220 in interest a year. If you’re paying a minimum payment of 3% of the balance, or $30/month, you’re only making annual payments of $360. So at the end of the year, you’re left with a principal balance of $860. The cycle will continue and you’ll probably pay up to 250% for the good you bought on credit. Bankruptcy is a tool to protect creditors so that there is fair and equal distribution of assets. Bankruptcy is not a tool to escape debt, and it shouldn’t be the hard lesson you suggest. I know a lot of people whose lives are ruined because they maxed out their credit cards at 18 years old buying anything and everything they could. They ruin their credit and it affects them and their family for a long time. This country is better off as a whole if we can prevent bad debt as opposed to just dealing with it after the fact.

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kimberly @ladylibertarian 6 years, 2 months ago

the average consumer in america is an idiot. I think it was best stated by george carlin when he said, “think of how stupid the average person is. and then realize that half the population is stupider” (i know stupider isn’t a word). our entire world runs on credit unfortunately. That, however, is no excuse for people’s irresponsible spending. It’s a pretty simple rule, don’t buy things you can’t afford. It should be taken into consideration though that the differences in the poor and wealthy in this country is far less stratified than it is elsewhere. Poor people still have sheets on their beds, televisions in their homes, and cell phones. I’m not saying that there aren’t families in the gutter struggling to survive, nor am i trying to be an elitist, but the credit issue is both a blessing and a curse. It allows people to afford things that their average salary would not normally afford them, but is also followed by heavy penalties for being unable to repay the money you owe. Don’t have enough money for rent? Don’t buy the ferragamo shoes you were drooling over in Saks.

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Gary @grand-vizier 6 years, 2 months ago

Your George Carlin quote is a keeper.
Lot of smart discussion above.
I really agree with Nico that a discussion about credit cards turning into a “social”issue is pretty far afield.

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mamajay @mamajay 6 years ago

Great suggestion from Nico that high school students get a week’s instruction in Personal Finance.


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