
Nearly 25% of Americans are going into debt to pay for necessities like food - spking
https://www.cnbc.com/2019/05/23/nearly-25-percent-of-americans-are-going-into-debt-trying-to-pay-for-necessities.html
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cbanek
"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-...](https://www.experianplc.com/media/news/2019/state-of-credit-
examines-credit-scores-decade-after-financial-crisis/)) 6.7% of people are 90
days late on their payment.

~~~
magicnubs
> 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
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.

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dsfyu404ed
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.

~~~
izzydata
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
Your definitions don't match conventional understanding.

~~~
kazinator
They absolutely do. An interest-free loan that you know you will pay off on
time is only "debt" academically. It's just shuffling money between accounts,
effectively. After each credit card purchase, in theory, you could log in to
your online banking and pay off the balance immediately with cash you have on
hand in another account. You could do that even before the purchase
transitions from pending to posted to your account. Basically, you're not __in
debt __.

You're "in debt" when your liabilities exceed your assets. You have negative
equity, and so these debts are claims against your future income.

That's what "in debt" means, in a nutshell: your future income belongs to
someone else.

If we are going to write a story about how some population segment is "in
debt", but we label everyone as "in debt" if they have any credit card
balance, that is blatantly dishonest.

~~~
chrisseaton
You are 'in debt' to the credit card company. They're 'in credit' to you.
That's why they're called a 'credit' card company. When you spend your credit
you're creating debt. When you pay your card off you're paying off debt.

~~~
kazinator
"In debt to X" is not "in debt"; it's not how language works.

"In debt" is a loaded phrase which means that the interests against you exceed
your assets. It's a common term, for which the more formal word is "deficit".

That's the interesting thing if you want a story on lots of people being in
some kind of financial strain.

A temporary loan purely for transactional or cash flow convenience does not
represent any sort of financial strain.

------
lr4444lr
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
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.

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_bxg1
> 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
Isn't it more likely that economic inequality is the primary cause?

[https://i.imgur.com/2kfyBPt.png](https://i.imgur.com/2kfyBPt.png)

~~~
anthuman
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.

~~~
_bxg1
In the article, it says for 32%, discretionary spending was the primary cause.
That's all I was talking about.

------
chrisseaton
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.

------
Causality1
>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
> 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.

------
hawaiian
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.

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povertyworld
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.

~~~
x2f10
Do you have roommates? Do you own a car? Do you have a child?

~~~
povertyworld
Roommates. No car. No kids.

~~~
chrisseaton
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
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.

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RickJWagner
"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.)

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ApolloFortyNine
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
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
Likely explanation: Costs of living went up, wages did not.

