7 ms·

Nearly 25% of Americans are going into debt to pay for necessities like food

74 points by spking 7y ago

ApolloFortyNine 7y ago
People are often not very apt at admitting their own mistakes. A self reported study like this probably isn't entirely accurate. You would have to analyze each of their expenses, such as what car are they driving, the size of their apartment, what they spend on entertainment, etc etc, in order to have a truly accurate account.
- frankbreetz 7y ago
  Why is this an increasing issue, since credit cards have been around for decades? The article states "Middle-class life is now 30% more expensive than it was 20 years ago.". I think this may be the major contributing factor to this.
  - Kye 7y ago
    Likely explanation: Costs of living went up, wages did not.
dsfyu404ed 7y ago
No shit. Why buy gas, food and other line items that don't change much month to month in cash if you get cashback and rewards points for putting it on a card? If you have the self discipline to not spend more than you make putting everything on a card and paying it down to 0 every month makes a lot of sense. Sure you could screw up and wind up making monthly payments if you spend more than you make but that's not fundamentally any different than if you bought all the essentials in cash then put the rest on credit. The article is intentionally misleading by talking about people "paying for things" with credit cards and then talking about credit card debt (no mention of how much gets paid back before the end of the month) implying that the month to month balance people are carrying is a result of necessities rather than large purchases. This entire article is one large assertion followed by flimsy support after another.
- frankbreetz 7y ago
  I think "credit card debt" implies they aren't paying it off at the end of each month. Also in the article, it says the average credit card debt is 6,506, this is more than the typical American can afford to pay down on their credit card each month.
  - dgzl 7y ago
    > I think "credit card debt" implies they aren't paying it off at the end of each month. Maybe in the context of this article, but that's not what it logically means.
- izzydata 7y ago
  Are they considering all credit as debt? I don't think credit that gets its full balance payed on time is debt. Once you pay interest on a balance it becomes debt.
  - Simon_says 7y ago
    Your definitions don't match conventional understanding.
    - izzydata 7y ago
      Well that doesn't tell me much of anything, but I love that sentence.
      - dgzl 7y ago
        Credit is having the ability to obtain debt. Once you use the credit, you have debt, regardless of when or if you pay it off.
        kazinator 7y ago
        You're not in debt if at all times while you are using this credit, you actually have the cash to pay it off. Then you're using credit for convenience, not as a loan because you don't have money. People using crdit strictly for convenience, always paying their bill within the interest-free grace period, are not in debt (on account of that credit card). Even people with significant loans are not necessarily in debt. If you borrowed $300K to buy a $400K home that is now worth $500, you still have a loan, but that is offset by equity in the property. It's not the same as borrowing to buy food, which is consumed and gone.
Causality1 7y ago
>In CNBC Make It’s survey, 32% of people said their discretionary spending was the No. 1 cause of their current credit card debt. I'm never so glad to be an introverted technophile as when I find out how much my coworkers spend on amusement. They spend $200 a month on cable and Pay-Per-View while I watch Youtube and Netflix. They pay $65 for videogames and spend thousands of dollars a year on vacations. They sink hundreds of dollars into Candy Crush and Pokemon Go. They get the newest Galaxy Note every year despite only using their phone for Facebook and texting. If you're a casual consumer in the 21st century companies and culture will eat you alive.
- _bxg1 7y ago
  > They spend $200 a month on cable and Pay-Per-View while I watch Youtube and Netflix. They pay $65 for videogames and spend thousands of dollars a year on vacations. What do these things have to do with being an introvert? My strategy is, instead of budgeting or being as austere as I can, I set a mental threshold for how much fun or peace of mind or happiness a dollar is worth to me. If something is above that threshold, I spend money on it. If it's below that threshold, I don't. If I'm spending too much money, then instead of making a budget, I raise my mental threshold. I'll spend money to have my lunch delivered because the saved time and mental energy is worth it to me personally. I will not spend money on a car that does anything more than get me around and run AC, because I'm not someone who gets great enjoyment from the car I drive. I am into gadgets and will spend money on the latest tech - even if I don't strictly need it - because I get proportional enjoyment out of it. I won't shop recreationally on Amazon for things I only kind-of want, even if they're very cheap or on sale. Etc.
- deleted 7y ago
  [deleted]
_bxg1 7y ago
> Basic necessities and healthcare costs may be sending some people into debt, but more people point to spending on non-essential items like clothing and entertainment as the main culprit. In CNBC Make It’s survey, 32% of people said their discretionary spending was the No. 1 cause of their current credit card debt. > Another 9% say the majority of their debt comes from paying for travel. Americans spend an average of $483 a month on non-essentials such as dining out, entertainment, luxury items and vacations, Schwab’s 2019 Modern Wealth report found. I wonder how this compares to past generations, and if it's more true now, I wonder what the cause is. More aggressive advertising? Propping up one's mental health in the face of a stressful socio-political climate (its effects greatly amplified by social media)? FOMO (also amplified by social media)?
- supergauntlet 7y ago
  Isn't it more likely that economic inequality is the primary cause? https://i.imgur.com/2kfyBPt.png https://i.imgur.com/2kfyBPt.png
  - leetcrew 7y ago
    if 32% of people say that discretionary spending is the number one cause of their debt, doesn't that cast at least some doubt as to whether economic inequality is the primary cause of this particular issue?
  - _bxg1 7y ago
    Why would an increase in economic inequality increase discretionary debt? The wealthy would pay it off, and the poor would be tightening their belts (or at least not loosening them). The broader problem definitely has to do with inequality, but this slice of it is surprising and really probably doesn't relate to that.
  - anthuman 7y ago
    I suspect rising income inequality and increasing housing costs are the primary drivers of CC debt. You generally can't pay rent with a CC and if rent goes up but income doesn't, then I could see people using CC to make ends meet. Of course for some, overconsumption is the culprit, but I doubt it is for most people.
cbanek 7y ago
"American have an average of $6,506 in credit card debt, according to a new Experian report out this week." Although credit reporting agencies have a funny way of calculating debt, which is used for your credit score as well. It's just your current balance, even if you pay it off every month and aren't in "debt". It's hard to tell from the report how they are calculating debt, but I bet it is the amount of money on the credit line waiting to be repaid, even if it isn't costing interest. Plus, if you wait until the statement due date (which is basically a free extension of the loan, so a good idea, as long as you have automated bill pay that will make sure it makes it right under the deadline), this means that number is likely your past statement plus whatever your current purchases are. You don't control when the credit companies look at your balances, and for mine I was surprised that they were basically reporting 2x my normal revolving credit card usage over the month. I use my credit card for everything if possible, since I get 2% cash back on my Fidelity card (which is great, BTW), as well as great fraud protection and the ability to automatically get an electronic record of every transaction. The real question is how much of the accounts are delinquent. In the linked report (https://www.experianplc.com/media/news/2019/state-of-credit-examines-credit-scores-decade-after-financial-crisis/ https://www.experianplc.com/media/news/2019/state-of-credit-...) 6.7% of people are 90 days late on their payment.
- magicnubs 7y ago
  > The real question is how much of the accounts are delinquent Wouldn't how many people are carrying a balance each month (and thus paying interest, implying they very likely can't afford to pay off the balance each month even if they wanted to) be a better measure? The average worker in the US barely nets $6,500 in three months, they're definitely not charging and paying that much off every month.
  - cbanek 7y ago
    Sure, you could look at that, but just because you carry a $6,500 balance isn't too terrible as long as you are paying it off. If you're just paying the minimum payments and not charging anything new, it could take many years to pay off that debt. The number might also look very similar for many years, even though you are paying it off. I think that's why people who can't even pay the minimum or aren't paying is a truer sign of economic distress. If you aren't paying off your credit card, it's likely you aren't paying off other debts as well, things like rent or mortgage - or will be soon if things don't improve.
chrisseaton 7y ago
Using debt to pay for basic routine monthly expenses makes a lot of sense in my mind. There are extra consumer protections when you do this, and benefits from credit providers to do it that can add up. I use debt to pay for all my expenses except for my mortgage payments, which is just servicing of another big debt.
lr4444lr 7y ago
How many of the 25% have a smart phone released in the last 12 months and premium cable? Go to bars every week? A statistic like the headline is meaningless without a lot more qualification. Some people are simply irresponsible and bad with money. It should be quantified.
- partiallypro 7y ago
  People also use cards to accumulate points, and credit cards are easier to fight against fraudulent purchases vs debit cards. So it's not even a fair measure.
- bqqyz 7y ago
  "25% of Americans simply make no money and are going to starve" is the reading the press wants us to make to make us click. The truth is probably closer to what you say.
povertyworld 7y ago
I make less than 20k a year. Somehow I am able to eat healthy food while living in one of the more expensive metro areas. I have no debt, and even have a little extra at the end of the year to speculate with sometimes. Luck I suppose. It would still be cool to have a full time job, but we can't all have those, apparently.
- frankbreetz 7y ago
  I'd like to see a breakout of your budget. I know I couldn't do this. I live in the midwest and have trouble keeping spending around 20k post-tax. I have a wife and child through.
- x2f10 7y ago
  Do you have roommates? Do you own a car? Do you have a child?
  - povertyworld 7y ago
    Roommates. No car. No kids.
    - chrisseaton 7y ago
      When an American says they have roommates, do they literally mean they share a bedroom with another adult they're not romantically involved with? Or does 'room' mean the whole apartment?
      - povertyworld 7y ago
        Shared kitchen and bathroom. It's not ideal, but it's also not worth paying twice as much in rent for exclusive use of those two rooms that I only need for an hour a day or less.
      - dgzl 7y ago
        Typically roommates have their own rooms. Sometimes that's not the case.
hawaiian 7y ago
People generally underestimate their food budget. You go "into debt" buying food because you didn't expect it to cost so damn much. But the real problem is rent (also mentioned in the article, but not the headline), which erases up to 2/3 of our income. Without much headroom, it's easy for costs to blow way past limits. The article also relies on those with debt to assess the cause of their credit card debt, but those with debt are rarely financially literate. >In CNBC Make It's survey, 32% of people said their discretionary spending was the No. 1 cause of their current credit card debt.
RickJWagner 7y ago
"In CNBC Make It’s survey, 32% of people said their discretionary spending was the No. 1 cause of their current credit card debt." This is maddening. There's no helping people who don't want help (or lack the smarts to recognize the source of the problem.)

74 points by spking 7y ago

People are often not very apt at admitting their own mistakes. A self reported study like this probably isn't entirely accurate. You would have to analyze each of their expenses, such as what car are they driving, the size of their apartment, what they spend on entertainment, etc etc, in order to have a truly accurate account.

frankbreetz 7y ago
Why is this an increasing issue, since credit cards have been around for decades? The article states "Middle-class life is now 30% more expensive than it was 20 years ago.". I think this may be the major contributing factor to this.
- Kye 7y ago
  Likely explanation: Costs of living went up, wages did not.

dsfyu404ed 7y ago

No shit. Why buy gas, food and other line items that don't change much month to month in cash if you get cashback and rewards points for putting it on a card? If you have the self discipline to not spend more than you make putting everything on a card and paying it down to 0 every month makes a lot of sense. Sure you could screw up and wind up making monthly payments if you spend more than you make but that's not fundamentally any different than if you bought all the essentials in cash then put the rest on credit. The article is intentionally misleading by talking about people "paying for things" with credit cards and then talking about credit card debt (no mention of how much gets paid back before the end of the month) implying that the month to month balance people are carrying is a result of necessities rather than large purchases. This entire article is one large assertion followed by flimsy support after another.

frankbreetz 7y ago
I think "credit card debt" implies they aren't paying it off at the end of each month. Also in the article, it says the average credit card debt is 6,506, this is more than the typical American can afford to pay down on their credit card each month.
- dgzl 7y ago
  > I think "credit card debt" implies they aren't paying it off at the end of each month. Maybe in the context of this article, but that's not what it logically means.
izzydata 7y ago
Are they considering all credit as debt? I don't think credit that gets its full balance payed on time is debt. Once you pay interest on a balance it becomes debt.
- Simon_says 7y ago
  Your definitions don't match conventional understanding.
  - izzydata 7y ago
    Well that doesn't tell me much of anything, but I love that sentence.
    - dgzl 7y ago
      Credit is having the ability to obtain debt. Once you use the credit, you have debt, regardless of when or if you pay it off.
      - kazinator 7y ago
        You're not in debt if at all times while you are using this credit, you actually have the cash to pay it off. Then you're using credit for convenience, not as a loan because you don't have money. People using crdit strictly for convenience, always paying their bill within the interest-free grace period, are not in debt (on account of that credit card). Even people with significant loans are not necessarily in debt. If you borrowed $300K to buy a $400K home that is now worth $500, you still have a loan, but that is offset by equity in the property. It's not the same as borrowing to buy food, which is consumed and gone.

Causality1 7y ago

>In CNBC Make It’s survey, 32% of people said their discretionary spending was the No. 1 cause of their current credit card debt. I'm never so glad to be an introverted technophile as when I find out how much my coworkers spend on amusement. They spend $200 a month on cable and Pay-Per-View while I watch Youtube and Netflix. They pay $65 for videogames and spend thousands of dollars a year on vacations. They sink hundreds of dollars into Candy Crush and Pokemon Go. They get the newest Galaxy Note every year despite only using their phone for Facebook and texting. If you're a casual consumer in the 21st century companies and culture will eat you alive.

_bxg1 7y ago
> They spend $200 a month on cable and Pay-Per-View while I watch Youtube and Netflix. They pay $65 for videogames and spend thousands of dollars a year on vacations. What do these things have to do with being an introvert? My strategy is, instead of budgeting or being as austere as I can, I set a mental threshold for how much fun or peace of mind or happiness a dollar is worth to me. If something is above that threshold, I spend money on it. If it's below that threshold, I don't. If I'm spending too much money, then instead of making a budget, I raise my mental threshold. I'll spend money to have my lunch delivered because the saved time and mental energy is worth it to me personally. I will not spend money on a car that does anything more than get me around and run AC, because I'm not someone who gets great enjoyment from the car I drive. I am into gadgets and will spend money on the latest tech - even if I don't strictly need it - because I get proportional enjoyment out of it. I won't shop recreationally on Amazon for things I only kind-of want, even if they're very cheap or on sale. Etc.
deleted 7y ago
[deleted]

_bxg1 7y ago

> Basic necessities and healthcare costs may be sending some people into debt, but more people point to spending on non-essential items like clothing and entertainment as the main culprit. In CNBC Make It’s survey, 32% of people said their discretionary spending was the No. 1 cause of their current credit card debt. > Another 9% say the majority of their debt comes from paying for travel. Americans spend an average of $483 a month on non-essentials such as dining out, entertainment, luxury items and vacations, Schwab’s 2019 Modern Wealth report found. I wonder how this compares to past generations, and if it's more true now, I wonder what the cause is. More aggressive advertising? Propping up one's mental health in the face of a stressful socio-political climate (its effects greatly amplified by social media)? FOMO (also amplified by social media)?

supergauntlet 7y ago
Isn't it more likely that economic inequality is the primary cause? https://i.imgur.com/2kfyBPt.png https://i.imgur.com/2kfyBPt.png
- leetcrew 7y ago
  if 32% of people say that discretionary spending is the number one cause of their debt, doesn't that cast at least some doubt as to whether economic inequality is the primary cause of this particular issue?
- _bxg1 7y ago
  Why would an increase in economic inequality increase discretionary debt? The wealthy would pay it off, and the poor would be tightening their belts (or at least not loosening them). The broader problem definitely has to do with inequality, but this slice of it is surprising and really probably doesn't relate to that.
- anthuman 7y ago
  I suspect rising income inequality and increasing housing costs are the primary drivers of CC debt. You generally can't pay rent with a CC and if rent goes up but income doesn't, then I could see people using CC to make ends meet. Of course for some, overconsumption is the culprit, but I doubt it is for most people.

cbanek 7y ago

"American have an average of $6,506 in credit card debt, according to a new Experian report out this week." Although credit reporting agencies have a funny way of calculating debt, which is used for your credit score as well. It's just your current balance, even if you pay it off every month and aren't in "debt". It's hard to tell from the report how they are calculating debt, but I bet it is the amount of money on the credit line waiting to be repaid, even if it isn't costing interest. Plus, if you wait until the statement due date (which is basically a free extension of the loan, so a good idea, as long as you have automated bill pay that will make sure it makes it right under the deadline), this means that number is likely your past statement plus whatever your current purchases are. You don't control when the credit companies look at your balances, and for mine I was surprised that they were basically reporting 2x my normal revolving credit card usage over the month. I use my credit card for everything if possible, since I get 2% cash back on my Fidelity card (which is great, BTW), as well as great fraud protection and the ability to automatically get an electronic record of every transaction. The real question is how much of the accounts are delinquent. In the linked report (https://www.experianplc.com/media/news/2019/state-of-credit-examines-credit-scores-decade-after-financial-crisis/ https://www.experianplc.com/media/news/2019/state-of-credit-...) 6.7% of people are 90 days late on their payment.

magicnubs 7y ago
> The real question is how much of the accounts are delinquent Wouldn't how many people are carrying a balance each month (and thus paying interest, implying they very likely can't afford to pay off the balance each month even if they wanted to) be a better measure? The average worker in the US barely nets $6,500 in three months, they're definitely not charging and paying that much off every month.
- cbanek 7y ago
  Sure, you could look at that, but just because you carry a $6,500 balance isn't too terrible as long as you are paying it off. If you're just paying the minimum payments and not charging anything new, it could take many years to pay off that debt. The number might also look very similar for many years, even though you are paying it off. I think that's why people who can't even pay the minimum or aren't paying is a truer sign of economic distress. If you aren't paying off your credit card, it's likely you aren't paying off other debts as well, things like rent or mortgage - or will be soon if things don't improve.

chrisseaton 7y ago

Using debt to pay for basic routine monthly expenses makes a lot of sense in my mind. There are extra consumer protections when you do this, and benefits from credit providers to do it that can add up. I use debt to pay for all my expenses except for my mortgage payments, which is just servicing of another big debt.

lr4444lr 7y ago

How many of the 25% have a smart phone released in the last 12 months and premium cable? Go to bars every week? A statistic like the headline is meaningless without a lot more qualification. Some people are simply irresponsible and bad with money. It should be quantified.

partiallypro 7y ago
People also use cards to accumulate points, and credit cards are easier to fight against fraudulent purchases vs debit cards. So it's not even a fair measure.
bqqyz 7y ago
"25% of Americans simply make no money and are going to starve" is the reading the press wants us to make to make us click. The truth is probably closer to what you say.

povertyworld 7y ago

I make less than 20k a year. Somehow I am able to eat healthy food while living in one of the more expensive metro areas. I have no debt, and even have a little extra at the end of the year to speculate with sometimes. Luck I suppose. It would still be cool to have a full time job, but we can't all have those, apparently.

frankbreetz 7y ago
I'd like to see a breakout of your budget. I know I couldn't do this. I live in the midwest and have trouble keeping spending around 20k post-tax. I have a wife and child through.
x2f10 7y ago
Do you have roommates? Do you own a car? Do you have a child?
- povertyworld 7y ago
  Roommates. No car. No kids.
  - chrisseaton 7y ago
    When an American says they have roommates, do they literally mean they share a bedroom with another adult they're not romantically involved with? Or does 'room' mean the whole apartment?
    - povertyworld 7y ago
      Shared kitchen and bathroom. It's not ideal, but it's also not worth paying twice as much in rent for exclusive use of those two rooms that I only need for an hour a day or less.
    - dgzl 7y ago
      Typically roommates have their own rooms. Sometimes that's not the case.

hawaiian 7y ago

People generally underestimate their food budget. You go "into debt" buying food because you didn't expect it to cost so damn much. But the real problem is rent (also mentioned in the article, but not the headline), which erases up to 2/3 of our income. Without much headroom, it's easy for costs to blow way past limits. The article also relies on those with debt to assess the cause of their credit card debt, but those with debt are rarely financially literate. >In CNBC Make It's survey, 32% of people said their discretionary spending was the No. 1 cause of their current credit card debt.

RickJWagner 7y ago

"In CNBC Make It’s survey, 32% of people said their discretionary spending was the No. 1 cause of their current credit card debt." This is maddening. There's no helping people who don't want help (or lack the smarts to recognize the source of the problem.)