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Maybe.
Or maybe (many) poor people are acting rationally given their economic circumstances.
See ["Reframing the Debate about Payday Lending"](http://libertys
Maybe.
Or maybe (many) poor people are acting rationally given their economic circumstances.
See ["Reframing the Debate about Payday Lending"](http://libertystreeteconomics.newyorkfed.org/2015/10/reframing-the-debate-about-payday-lending.html http://libertystreeteconomics.newyorkfed.org/2015/10/reframi...) (a pop summary of ["Interest rate caps and implicit collusion: the case of payday lending"](http://www.inderscience.com/info/inarticle.php?artid=58089 http://www.inderscience.com/info/inarticle.php?artid=58089), DeYoung & Phillips), or other articles linked [this episode of Freakonomics](http://freakonomics.com/podcast/payday-loans/ http://freakonomics.com/podcast/payday-loans/). These articles are about payday loans, not credit card debt, but (1) some (but not all!) of the same concerns apply; and (2) I suspect much discussion of “poor people” and “credit cards” lumps together these forms of debt anyway.
I've seen other comparisons of payday loans to banking services for low-wealth individuals. (I don't have these at hand. I think Bannerjee & Duflo's _Poor Economics_ may cover some of this.) The banking services and fees that middle-class individuals see aren't available to the poor, so it's easy to draw false conclusions if you're generalizing from your own circumstances instead of studying theirs.
I agree that “the system” is screwing poor people. It's less obvious to me that this is because the poor aren't good at personal finances (let alone that they're “stupid”), and therefore that education would largely address this – although, according to some studies summarizes in the DeYoung & Phillips work, it might make some difference.
Yep. This whole thread is full of cringe. TFA was about how silicon valley & Washington are The Elites -- out of touch with the working class and what are everyday problems for a huge swath of America. And the top 3 comments from the elite are:
- Poor people are stupid
- Poor people are bad at personal finance
- More/better education (government) will help
Did everyone suddenly forget all the un/underemployed college graduates we've got? Are they stupid, too?
Just a shocking lack of empathy here.
>Did everyone suddenly forget all the un/underemployed college graduates we've got? Are they stupid, too?
I think you'll find the HN consensus is that they're stupid (or were tragically misled) for going to college in a major other than computer science or engineering.
There are plenty of CS/engineering majors who end up un/underemployed too.
Here in Austria, you have to behave really bad to not make a decent living if you can code, or at least pretend to be able to code. Developer conferences are _flooded_ with recruiters and CTOs trying to recruit.
That's true here too, but it's not true of every part of the US. If you're stuck somewhere with a weak labor market and unable to move, that's pretty much the only way you'd end up unemployed with a CS degree at this point in time.
I don't imagine it will continue like this forever, obviously, but the labor market is tight enough that I know multiple people who changed tired for a living, were waitresses, etc and went through a bootcamp and now make a solid living as an engineer. For those who actually have Computer Science degrees, the demand is infinitely higher.
The UK seems to have a particular problem with this: https://www.studyinternational.com/news/uk-computer-science-has-the-highest-rate-of-unemployed-graduates/ https://www.studyinternational.com/news/uk-computer-science-...
Ok, I will bite. I do not think blanked statements "CS or fools" make any sense, but I think a number of folks who dedicated 4-8 years of their lives to getting a liberal arts degree did this without a clear idea of what they can realistically expect at the end and making backup plans.
A PhD in English or French culture may make sense, but one must realize that professional opportunities outside academia are sparse and number of positions in academia is small.
You are twisting my words. I never said poor people are stupid or the other way around.
I said the US credit card system puts people without insight into finances in a serious disadvantage. No sorry, it rips them off. And nobody is talking about it, because it seems everybody thinks it's normal.
Explain your credit score to a European for example, and you will be met with a blank stare or disbelief.
> It's less obvious to me that this is because the poor aren't good at personal finances
Yeah, I'm not sure "good at" is the right framing. It's an arms race between asymmetric competitors. When exploiters have much more time and money to hone their exploitation, I don't think the problem is really with the exploited person.
> You know when US people use their credit card? Every day. You know when Europeans use their credit card? When abroad.
To me, that's just evidence of how backwards many Europeans are in their approach to credit cards.
You seem to have an attitude that credit cards are inherently evil. They're just tools, which can be misused (and put you into debt) or used for maximum convenience (accruing rewards and protections along the way).
I challenge you to explain why the easy availability of credit and a highly functional credit market is a bad thing instead of throwing out blanket statements like that credit scores are "crazy."
We use debit cards though. I don't see credit cards often, but I do see everyone with debit cards. I pay almost everything with it since it's free, I can't screw up (debit cards have limits, or in any case the total amount of your bank account), easy, etc. I've been offered credit cards by my bank, but I do not trust them so I prefer to use a debit one. Also, Fnac or even supermarkets do offer cards, but I don't see the point of having them, and I'd say most people do not pay attention to this offers.
I live in Spain, and I've seen a similar situation in other countries except in Germany.
What do you mean by "a European"?
https://www.economist.com/news/economic-and-financial-indicators/21578669-household-debt https://www.economist.com/news/economic-and-financial-indica... : Household debt to personal income, 2012; the United States is below the OECD average and very much below some northern European countries.
https://data.oecd.org/hha/household-debt.htm https://data.oecd.org/hha/household-debt.htm France and Germany seem to be the only major economies much lower than the US in household debt, and the US deleveraged after 2008; it is now in the same ballpark.
http://www.businessinsider.com/eurostat-data-on-household-debt-2016-3/#1-denmark--26511-standing-head-and-shoulders-above-the-rest-of-europe-danes-have-by-far-the-most-debt-of-anyone-on-the-continent-and-in-fact-the-world-however-the-governor-of-the-danish-central-bank-lars-rohde-isnt-worried-in-a-2014-interview-he-said-that-the-threat-to-financial-stability-posed-by-high-household-debt-is-not-serious-23 http://www.businessinsider.com/eurostat-data-on-household-de... That's a hell of a URL, and the pictures are funny.
https://data.oecd.org/hha/household-net-worth.htm#indicator-chart https://data.oecd.org/hha/household-net-worth.htm#indicator-... On the other hand, if you look at household net worth as a percent of disposable income, the US looks better than any OECD country except for Japan, Belgium, and The Netherlands.
Now, this is household debt, which includes mortgages as well as consumer debt. I haven't found any data that separates out the latter.
A European may not be familiar with a credit score, but they're more than a little familiar with credit.
> This is a really bizarre assertion: my bubble is such that I've literally never met someone (that I'm aware of, just as with your claim) who _doesn't_ pay their credit cards off in full each month.
That's one hell of a bubble. Almost no one does this. Source: worked customer service for an issuer for 18 months, ~150 calls/day, saw a broad cross-section of the customer base, and it was a rare day in which I talked to a monthly PIF.
Not so incidentally, that experience is also the reason why I so assiduously avoid revolving credit. If you're comfortably upper-middle-class or higher and assured of enough liquidity to cover whatever balance you choose to carry, it's a game you can play and win. If you're not, you're subsidizing those who are, not least because you're ineligible for the low-rate, high-credit-line points card products that monthly PIFs tend to qualify for.
And even if you're in the former category, it's still a hell of a risk to take, because if anything happens that negatively affects your liquidity in a significant way, you're suddenly a lot more screwed than you would be if you hadn't been using credit the way you were. A few times, I dealt with people who had found themselves in just that hole. There were worse kinds of calls to take, but not all that many.
We’re really trading off bubbles for bubbles here, aren’t we? It seems really unlikely customer service attracts a representative cross section.
I am also in the “don’t know (many) people who do anything other than autopay in their credit cards” bubble.
I’m aware that many people struggle with credit cards, but they’re not in my social circles.
> That's one hell of a bubble. Almost no one does this. Source: worked customer service for an issuer for 18 months, ~150 calls/day, saw a broad cross-section of the customer base, and it was a rare day in which I talked to a monthly PIF.
Yea... That's why I went out of my way to call it a bubble. The point of mentioning my bubble was that "I've never met anyone who doesn't carry a cc balance" isn't a sound basis for to making a claim about all credit card usage the way the parent comment was.
> even if you're in the former category, it's still a hell of a risk to take, because if anything happens that negatively affects your liquidity in a significant way, you're suddenly a lot more screwed than you would be if you hadn't been using credit the way you were.
I'm pretty sure you're messing up your math here. How could the addition of liquidity (plus deferment of payment by 30+ days) at zero cost possibly be making me more screwed, in the event of a serious liquidity crunch?
Talking of individual finance here. As long as you're sufficiently liquid again to PIF before your bills go past due, you're fine. If you're not, then not only do you accrue late fees - usually easy to have waived by just calling and asking for it, if you've been a highly diligent customer prior - but you also start accruing interest on the balances you're suddenly carrying, and you almost certainly lose preferred rates on those balances and find yourself paying north of 15% APR.
> Hi magnetic, nice to meet you! Out of curiosity, where would you say you developed your money management skills? Was it from your parents, from school, or just organically as you started taking on more responsibility as an adult?
I am not so sure I know the answer to that, but I've had to "live on my own" at 16 as my parents were living abroad and I was living by myself in an apartment while going to high school. They'd give me a monthly "budget" and I had to manage the money to deal with life expenses. Perhaps this helped.
One thing I always strived for was to not purchase something unless I could afford it cash. I couldn't do it for my house so it was the only thing I really got a loan for, and even that I worked really hard to pay it off faster than the required schedule (which isn't necessarily a smart thing to do financially speaking, but it has a "peace of mind" value to me that is worth it).
The other thing that helped is that I'm not extravagant with purchases and - except for the times when I had a mortgage to worry about - my income would usually be high enough that I wouldn't have to go through mental gymnastics to figure out whether I should worry about the end of month.
So I developed a mechanical "pay the credit card in full at the end of the month" process, and that was it. The rest would go to savings, and once the savings had enough (a few months worth of living expenses), the overflow would go into more risky investments (like stocks, etc).
I don't like automated payment systems so I avoid anything that gives automated access to my money to a third party, but I do like reminders for bills, and most online banking systems will provide reminders to you in due time and let you pay your stuff online easily.
I also try to keep the amount of accounts to a minimum: I have very few credit cards and bank accounts. It simplifies the management of money.
Lastly, I am from Europe, and the credit card madness isn't something I was exposed to when I grew up, so when I came to the US I didn't feel like I needed a CC. It was hard to get one in the beginning anyways, since I didn't have any credit history.