Letters to the Editor
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No help for these people
There are no figures to tell us how much credit card debt was consolidated over to a home equity line of credit. The common fallacies concerning credit card debt should be revealed. Unexpected health care costs may be the primary cause of non-discretionary credit card debt. Second on this list is home repairs. The rising costs of homes has pushed inflation higher into the home repair business. A new roof is simply going to cost you more than it did ten years ago. There is element of necessity in this, spending to repair a leaky roof, or adding a granny flat, because granny cannot afford a decent health facility.
I wish the Democrats would talk about this. Debtors are roundly villified for living a lavish lifestyle, while trying to work and live in an economy they didn't create. It's a myth that rising home asset prices, without an accompanying rise in wages and benefits, somehow benefits homeowners.
There is no certainty that even with a recession, that healthcare costs will drop, or that construction costs will fall as fast as housing prices. Looking at these figures may confirm this ugly truth, even if Bernanke drops interest rates to zero, and below, there is no help for these people.
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18% interest?
Hey, don't use your credit card, I will personally be only too happy to loan you money at 18%. I'm sure not getting that in the stock market or through CDs. I'll even give you a little plastic card if that will sweeten the deal.
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Visa - It's Everywhere You Want To Be
I love the Visa TV spots that make fun of people who pay with cash - like money is a fungus or something. Because only smart people put fast food and $4.95 coffees on their credit cards anyway, right? And have you ever been behind someone using a credit card and the computer system won't "take it?"
Employee: "It's not taking it."
Visa Smartee: "Try it again. I know it's okay."
Employee: "Okay, well now we'll have to wait for the system. Swipe it again."
Visa Smartee: "Oh, wait, I had it in there backwards. Now see.'
Employee: "Sorry, it's still not accepting it."
Visa Smartee: "Okay, fine! How much was it again? Let me get my change purse back out."
Employee: "$2.03."
Visa Smartee: "Okay."
Employee: "I can't break a 50, lady, see the sign."
Visa Smartee: "Geesh! (to her partner) Here, hold this while I get into my purse."
Meanwhile, cobwebs are being spun off the customers behind Visa Smartee because they were silly enough to think if they got into the Express Lane it acually meant something!
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How does one know how this debt is spent?
Unexpected health care costs may be the primary cause of non-discretionary credit card debt. Second on this list is home repairs. The rising costs of homes has pushed inflation higher into the home repair business. A new roof is simply going to cost you more than it did ten years ago. There is element of necessity in this, spending to repair a leaky roof, or adding a granny flat, because granny cannot afford a decent health facility.
This is an excellent point. But how are we to know the degree to which non-discretionary spending forms a major portion of borrowing? In my personal experience, out of the 20 or so neighbors that I know personally, one bought a Cadillac Escalade, another bought a new power boat, and the other is adding an entertainment room onto his house; all paid for by credit cards! I was dumbstruck.
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Why?
Why is it that any and every little problem is blamed on the current administration? The first comment posted starts placing the blame of credit card debts on the health care system? Are you even living in this world? Take a drive around south Florida and look at the cars, jewelry, and everything else that people have and are filing foreclosures at the same time. While I don't doubt that many home equity loans are paying off cards, those same people are also charging those same cards right back up. I find it ashame that you can't see past your political bias and try to see a spade for a spade. People spend wrecklessly, don't try to blame it on what you believe to be a bad health care system.
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You can't sell your debt
You may put up the money for a Cadillac using a credit card, but you aren't going to carry it on your balance. That's where these figures are deceiving. On the non-consumer side, people tell me small business lending rates are brutal.
Rising home asset prices in this enviroment actually punish the homeowner. Assuming home prices drop 50% and your employment situation doesn't change, (as they didn't change much on the way up) your percentage of equity, assuming you have some skin in the game, goes up. All the standard metrics in this economy don't work. You can always sell that Caddy, but you can't sell the debt you owe on hospital care, or home repairs. If you're a politician you have to assume that debt is not going away.
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Nor...
does a credit card usually have the limit to pay for hospital bills and such, as you suggested earlier. The health system and credit card debt have no correlation.
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I'm sorry to argue numbers but I don't get it.
You may put up the money for a Cadillac using a credit card, but you aren't going to carry it on your balance.
This particular neighbor claims to have walked into a used-car dealer and put a late model $25k Cadillac on his two credit cards. Aside from the fact that he would be a fool to carry it at such a high interest rate, why isn't this possible? Incredibly, his rationale was that he's been wanting one during the housing boom but he waited too long to re-finance. But he wanted it so what the heck, he got it anyway.
Rising home asset prices in this enviroment actually punish the homeowner. Assuming home prices drop 50% and your employment situation doesn't change, (as they didn't change much on the way up) your percentage of equity, assuming you have some skin in the game, goes up.
Sorry for being dense but how is this again? If I owe $100k on a house that's worth $400k, that's $300k equity @ 75%, right? If prices drop 50% and I now owe $100k on a $200k house my equity is $100k or 50%. Seems like my percentage of equity goes down when prices drop, as expected.