Credit Card Debt Explained With a Glass of Water

[Nikonzen]

That's a good reminder. After the data of American economy have been massages into fancy diagrams and some weird averages have been calculated it really looks for a moment as if every American has a wallet full of plastic and spends like nobody's business. Now, if my comment seemed to echo this then it was not intended. Rather it was a sarcastic remark about the banking industry and their handling of debts.

A good track record would show zero debts, looking from an old-school point of view. I recall some friends of mine working in US and having some trouble getting phone lines and other things - simply because they had no track records with credit cards. Salary slips and other documents showing really existing money did not work, only proofs of debts that had been made and repaid... So one needs to make debts to get recognized and rewarded.

There is a healthy segment of our population carrying significantly heavy debt because consumption has indeed consumed America's psyche. And guess what? When I was a kid everything was made in Japan and made in Hong Kong. Now everything is made in China or made in Mexico. Their growth and rise is fueled by our consumption to a great degree. Many here feel that they have brought us down a few notches in order to raise those folks up. Some sort of equilibrium that is disrupted by globalization. Whether true or not it is hard to tell.

Ah yes they want to see your behavior how you manage your debt. They want to know your debt to income. You can get a cosigner. Even folks with no credit have to go into debt to some reasonable point in order to establish a history of behavior. If you are not educated about this or have had it thoroughly explained to you it can be fairly easy to get yourself into trouble with your credit. Some people are geniuses at it and they use it to there advantage and are usually more successful financial wise than most.

 

[kandinsky]

Yeah, my family has the habit of paying the CC bills off in full each month.
When the interest is a whopping 24% pa, it'd be insane not to.

 

[kei1309]

True American style would be to bundle the debts of your family and the entire neighborhoud and sell it off to someone else - not without some flowery description of future returns and give the entire crap a fancy and catching name.

HAHAHA :bsmilie:

love the way you put it :bsmilie:

 

[brapodam]

HAHAHA :bsmilie:

love the way you put it :bsmilie:

But he forgot the part about the rating agencies ;p

 

[Octarine]

But he forgot the part about the rating agencies ;p

Feel free to add

 

[Octarine]

Usually if one pays in cash, you get a better price..

Not necessarily, not always. Example: ESSO gives 20% discount on fuel if you pay with DBS or Citi credit card. As long as you pay the cc bill on time you enjoy 20% off for the fuel.
The cc companies bet that you won't pay back on time. If they win, they will earn from the interest rates.

There are many more examples where cc companies act as bill collectors, be it utility companies, telcos or others. The billing companies offer discounts for payments via credit cards and lose a few points of profit - but they don't need to chase customers for late payments. The monthly efforts for maintaining these customer chasing activities are higher than what they give away with cc payment discounts.

 

[Bukitimah]

It is impossible not to be on credit given today's environment. For example housing, you will never be able to buy that home without credit unless you got a big mountain behind you. Running a biz also requires credit.

Credit cards are so convenient, you don't have to carry lots of cash around. Yes, if you spend more than what you can afford, whether credit card or Ah Long you end up the same.

 

[donut88]

It is impossible not to be on credit given today's environment. For example housing, you will never be able to buy that home without credit unless you got a big mountain behind you. Running a biz also requires credit.

Credit cards are so convenient, you don't have to carry lots of cash around. Yes, if you spend more than what you can afford, whether credit card or Ah Long you end up the same.

It's all about self discipline.

Junk food is everywhere. Someone get obese and die early, can only blame himself. Junk food outlets are not to be blamed

 

[mexican88]

my momma always told me to pay my credit card bills in full, and i always do

 

[Nikonzen]

It's all about self discipline.

Junk food is everywhere. Someone get obese and die early, can only blame himself. Junk food outlets are not to be blamed

I agree entirely. Go to China. She is lean and mean and hungry. Citizens slim and trim. Come to America. She is fat and slothful and has a sweet tooth. Most citizens are fat and dumpy (one only has to look at people of Wal Mart to find evidence of this)

Guess what folks? McDonald's and Wal Mart and western decadence are being used to conquer the world as we speak because everybody wants to be be like the Jones. Foolish Earthlings...

my momma always told me to pay my credit card bills in full, and i always do

Momma is always right. What can I say?

 

[ArchRival]

There is a healthy segment of our population carrying significantly heavy debt because consumption has indeed consumed America's psyche.

Don't worry, our debt-gdp ratio is now worse than USA :bsmilie:
See the big profits by the big banks lately? Where did that come from?? :bsmilie:

Household debt swelled 500% since the past decade.
Non-performing loans are sitting on banks' balance sheets, so to shore up the balance sheets they have to give 1-3% interest for saving accounts :bsmilie:

The sg govt think high gross debt is ok, because they are investing the CPF and not squandering it, so they can pretend that part of the debt doesn't exist. But if investments fail, ho ho ho, suddenly the debt will become real debt.

And the fat years are over. Now is the time for 7 lean years. Before 08 govt budget surplus is 4%, 6% sometimes 8-10% of GDP. After 08, it's like 1-2%. Including 2014, there are 2 years with deficits. In future there will be lower surpluses and more years with deficits. Wait till the reserves are depleted, then deficits will turn into real debt :bsmilie:

Bottom line, when interest rates rise (maybe middle of 2015), there probably wouldn't be a housing crash or fire sale (as a certain property developer warned). The banks will probably be safe in spite of all those NPLs. What is more insidious is the gradual, under-the-surface erosion of savings and living standards. The debts wouldn't kill you, but neither can you spend. Already since 2010, there has been gradual decline in consumer spending. Don't believe? Just look at the consumer data from REITs. :bsmilie:

 

[Octarine]

And the fat years are over. Now is the time for 7 lean years. Before 08 govt budget surplus is 4%, 6% sometimes 8-10% of GDP. After 08, it's like 1-2%. Including 2014, there are 2 years with deficits. In future there will be lower surpluses and more years with deficits. Wait till the reserves are depleted, then deficits will turn into real debt :bsmilie:

Singapore has caught up with the other nations: at a certain point the growth slows down to small numbers. While there are many factors underneath it and no two countries are alike, it is still a common sign or trend for leading industrial countries.

Already since 2010, there has been gradual decline in consumer spending. Don't believe? Just look at the consumer data from REITs. :bsmilie:

I still remember that when I arrived here 10 years ago, the weekend crowds in shopping mall was legendary. During the last months I spend quite some time in the IT malls to get various items. It was very obvious that the legendary weekend crowd does not exist anymore. There might be many reasons (financial reasons being only one aspect), but obviously the concept of 'shop till you drop' does not work any longer.

 

[ArchRival]

Singapore has caught up with the other nations: at a certain point the growth slows down to small numbers. While there are many factors underneath it and no two countries are alike, it is still a common sign or trend for leading industrial countries.

:bsmilie::bsmilie:

Yeah, right.
Sg's industry is dominated by foreign mncs and govt-linked companies (i mean this in the broadest sense, i.e. include listed companies where temasik hold a large chunk of shares). You sure this is how a true leading industrial country should be? :bsmilie:

 

[ArchRival]

What is more insidious is the gradual, under-the-surface erosion of savings and living standards. The debts wouldn't kill you, but neither can you spend. Already since 2010, there has been gradual decline in consumer spending. Don't believe? Just look at the consumer data from REITs. :bsmilie:

News report q3 Sg domestic consumption spending crashed to two-year low. :bsmilie:

Those of you with large debts, and those of you seeing the value of your asset-enhanced home dive, i know its hard not to penny-pinch. But hang in there. The worst is yet to come.

Ho ho ho :bsmilie:

 

[Simon_84]

Yeah, my family has the habit of paying the CC bills off in full each month.
When the interest is a whopping 24% pa, it'd be insane not to.

actually real cost of loan is higher than 24%

 

[Simon_84]

Already since 2010, there has been gradual decline in consumer spending. Don't believe? Just look at the consumer data from REITs. :bsmilie:

well you cannot deny that retail reits are still having the 2nd highest dpu than any other reits.
the only reit sector that can beat retail is healthcare which the rental is pegged to CPI.