I hear ya! It's just common sense. You got too many people living above their means via credit. Then they become slaves in order to pay it all back, plus interest. But in the meantime, too many people get too much stuff they didn't pay for, YET. But it costs money to manufacture the stuff you buy on credit, so the companies buy THEIR goods on credit, because too many people used credit so there is not enough money... How is an economy like that supposed to work??? The whole world is living like trailer trash - gotta have all this stuff you can't afford, so you got maxed out credit cards, maxed out payments to the bank. Multiply that by all the other people who did just the same... It's how the world runs. It really makes no difference HOW much money they print. It all just gets absorbed into the big capitalistic sponge. There's not enough money to pay for it all anyhow...
Credit isn't the problem any more then guns are the problem concerning increased crime rate with guns. It is the way people use (or in most cases) abuse it that causes these problems. If you put yourself in a position that you can't afford to pay back the credit and interest, then you are screwing yourself, 'credit' didn't do it.
Actually credit does do it. We see nothing wrong with getting something and paying for it later. But if ENOUGH people get something to be paid for later, then it ends up too much stuff being got and not enough money changing hands. Damn, if I were a drug dealer, I can't front out my drugs indefinitely! Even if some of the customers start making payments, if I front out TOO MUCH, I won't have the money to buy more. So then I have to get MINE fronted too, and so on up the ladder. If there ain't enough money changing hands all the way to the top, things are eventually gonna fall apart. Credit is too easy. It's like the proverbial carrot waving in front of the horses nose. But the ultimate result is SLAVERY plain and simple. I'm somewhat of an authority on living without credit. My dad did not believe in credit, yet we owned and operated a 150 acre farm. I was raised that if you can't come up with the bux to buy, you don't. Funny thing, it works. If I can't buy, I trade. If I can't get the money for something at all, I figure out a way to get along without it and start saving my pennies. Yet, I still have a car, own my own home, and so far have electricity and phone and internet... But I'm FREE, not a slave to a job I hate and the credit card in my wallet (not!) And that's just one person. And if MOST people lived like that, there would not be an economic problem. No matter how much paper with numbers gets printed, if that paper actually represented WORK or GOODS, rather than a wish and a promise, the economy would work. The PROBLEM is thinking that paper has to be backed by gold. Heck with all that! That just gives a poor excuse for why all this credit is just OK.
I don't agree with you conclusion at all, although you are right about people being able to live without using credit, it is just that most people use it improperly. The problem with credit isn't that it exists, its that people use it in a manner that doesn't match their ability to repay. We use credit all the time for various things here without any problems at all, for the simple reason it is used for items that pay for themselves as they are paid off. Even getting here in the first place, was an exercise in using credit in an intelligent manner. I renovated houses using almost total credit while I built up equity, again without any problems. As an example, on a building that we borrowed 16k for, we have payments of 311 a month on it, and an income of just under 1500, after all expenses, we are left with more then 400 in profit. In addition to the monthly profit, we are also gaining more profit as the loan is paid of and our equity increases. All because of wisely used credit.
Ha haaah, ain't that the truth! We have been using credit improperly, and yet it is our conscious decision to do so, which is why I'm suggesting a shift in behavior on the part of each individual who is been presented with the choice. Think globally, act locally. And we're not gonna make any changes by expecting the government to help, I mean whos side do you think they're on, anyway? The banksters, of course. We all wanna point our fingers at the banksters when in reality we are to blame for our recklessness in a culture of over-indulgence and instant gratification. They are merely a reflection of us. If we all decided to stop using credit, the banksters would be out of business, or at least their operations would get smaller and no longer "too big to fail," then we wouldn't end up having to subsidize their sorry asses. Don't get me wrong, I'm all for using credit as a financial vehicle. I use a credit card, but I pay it off in full every month. Credit card companies hate guys like me, they call us "dead beats", 'cause we get all the perks, but we don't pay for them. I also have a mortgage, but it's manageable. I once met a guy whos mansion I was building when I did construction in college. He had been a business owner, and he told me the only way to make it in business is never to over-extend yourself financially. Always make sure you have the assets to pay off whatever you owe, that way you never over-extend yourself and you always have the freedom to make your own choices when it comes to finances. Otherwise you run the risk of someone else shutting you down, and they'll do it in a heart beat when they can profit from it. The guy seemed pretty arrogant, but he had a good point, one which I haven't forgotten in the twenty years since.
The biggest trouble I see with credit, aside from the fact that it gets "abused" is that you have to pay INTEREST. So in effect, paying more for something than what it was originally worth. And considering a lot of stuff is ALREADY costing more than it's worth WITHOUT the interest charges, by using credit regularly, we support inflation. But that reasoning is very SELF oriented. And I'm looking at the greater picture. I swear, I have played with the idea of maxing out a credit card just for the hell of it. Just to see how the "other half" lives... BUT my credit is already shot (doctor bills) from many years ago, so I couldn't get a credit card if I wanted to anyhow. but I'm NOT at all into supporting this broken system of things any more than I have to, and DEFINITELY not into being a slave for anyone but myself, so it's only a passing fantasy. Hey, if you, on a personal level, have no problem with always owing money to some institution, paying back more than what you borrowed, and having to be beholden to the system to stay afloat, go for it! But it does nothing for the economic "meltdown". Which is all about THOUSANDS of people doing the same. Thing is, I find it is easier to make a go of life without being in debt. I work hard, see the fruits of my labors relatively instantly, and if there is money to be made, it's like the icing on a cake. But I DON'T have to spend the majority of my life working a job I hate just to have food to eat and a roof over my head. Nor do I HAVE to answer to any boss except the four seasons and the weather. I do something I LOVE every day in order to live comfortably, owe no man (or woman) or BANK, and actually can help feed and shelter others less fortunate. And That is not contributing to the "credit crisis", whatever that really is.
As with most things, there is a moderate middle ground with credit. I don't see any problem with having a Visa or MC and using it responsibly, but ringing up a debt that rivals the gross national product sure as hell creates problems. Personally, I hate debt. I really hate it. And so everything I own is paid for ... my house, my car, my kids college tuition, everything. I decided a few years ago that I really had no need for my credit cards, so I got rid of them. I have just a debit card now and use it for pretty much everything, because I also dislike writing paper checks. The only time this arrangement was ever a problem was when I was traveling and the freakin' bank suddenly canceled the debit card without warning. I was in the middle of nowhere in Nevada, trying to get gas, and suddenly the card was declined. I was not happy. Other than that, my debt-free lifestyle works beautifully for me.
I realized I should say that by far, being debt free is the best way to be. It's just the credit is not a thing to be blamed for anybodies problems. Credit is fine if used properly. Using credit cards if paid off every month as was mentioned is a great way to use credit. Using it to buy things that you couldn't otherwise afford, that pay for themselves with profit (ie, mortgages on income properties, or things that you can't afford right now, but can reasonably over the time of the loan, are other examples of good things to do with credit. Things not to do include considering it 'extra' money, using it to buy things like gifts that you can't afford to pay off before the month is out, or buying a home that requires you to slave everyday to pay for for the rest of your life. It always amazed (in a bad way) me when I saw friend get a job that paid 200k a year, and then promptly went out and bought a house that just be barely within their means of paying back even if everything goes well. By the same token (related to but not about credit), the other people who pay 5000 a month to rent a place in order to get a paycheck of 6000 a month. How are they better off then someone who pays 500 a month and makes 2000 a month? I think it all comes back to the fact that we don't learn or teach much to do with money and credit with children. It is something that permeates every aspect of our society, and yet it is almost taboo to talk about in most circles. Unless of course its to brag about how well you are doing because of your Jag in the driveway...
I've always been taught credit cards are evil with high fees and compounded interest rates. Most people cant handle the instant gratification, accounting and discipline needed to manage credit cards. On the other hand I've been taught 'credit' is good and needed for things like vehicles and house purchases. So, I guess its the scale and intent of the credit. Theres a big difference between the two.
Absolutely, assuming intent is well understood between the lender and the borrower. Maxing out credit with the intent of declaring bankruptcy is equally sleazy as predatory lending. There's no harm in financing something of inherent value like land, farm machinery, solar panels, ya know, solid goods, infrastructure, assuming the value of what you've got exceeds what you borrow. I have a mortgage myself, but I never default on my payments, and I could pay them back all the money I owe tomorrow if I had to.
I agree, credit cards are evil, HOWEVER, in today's world, you need to establish credit. here's what you do. Start around 18 years old. get THREE credit cards (3 looks best on your credit report and enables you to get more benefits later on). make sure to shop around for good interest rates. Use them just a little, but pay it off immedietly! Do not pay interest. Pay it before the end of the month to avoid paying interest. this is where they get you! By using the credit cards however, and paying them off, you're establishing good credit. Its important to establish good credit early on so later you can get car loans, a home, etc. Stay with your credit card companies for some time; you may have to call them and talk with them, but eventually they can increase your credit limit, give more benefits, etc. Also, I've heard consolidated loans look good on your credit as well. Don't sign up for too many credit cards at once; this brings down your credit score, especially if you're rejected. Always keep up to date with your credit score. There's plenty of ways to get a free copy of your credit report. TrueCredit has a free trial and once you get your credit report it tells you how you can improve your score.
You can do a lot of things with no (or bad) credit rating. None of my deals were ever done through a bank or mortgage company, so it never mattered much to me one way or another. Having said that though.... Now that I am done flipping houses and moving, I have discovered an issue with not having it. Our current mortgage is held privately at a higher then normal interest rate. If I had a credit rating that didn't make banks laugh, I could refinance it at right around 3%. That would reduce our monthly payments 48%. Turned back over into extra payments, that could reduce the length of our payments by 44%, savings us 5 figures in interest. So embarks my new quest of actually building a good credit rating... lol It's really sad in a lot of ways, except for my credit rating, we look awesome financially speaking. We already have over 25% equity, our debt/income ratio is awesome, I have well over a decade of successful private loans and mortgages (none of which count...lol). None of that matters, if you don't have a good credit rating (or worse, have a bad one). One of my big bitches about credit, is the lack of education that goes towards it. This should be a main subject throughout our school years. When we need to know it most, is when we are starting out. Dealing with it after you have ignored (or destroyed) it for decades, isn't an easy thing. That isnt to say that everyone should learn about it in order to use it. Just that they should know how it all works, in order to make better decisions from the start, whether that is avoiding it altogether or using it in a responsible manner.
I must admit I also have a credit card, though I only use it as a vehicle to make my finances easier, I pay it off in full every month, and I get free stuff every year for using it. Plus, it insulates me from fraud, since I can contest any fraudulent purchases, without having to worry about someone directly tapping into my bank account. So you're basically being punished for not having used credit. It's almost as if they're making you pay for the credit you didn't use when you were younger. Maybe after a few years you can refinance on better terms after you've established a history.
Within a few years (3 at the outside) I will be able to refinance at pretty much any bank. If everything fell into place just right, I could probably do it in a year, but I never expect best case scenarios to work out... As for being punished... I would say it is more accurate to say I am being punished for my lack of knowledge and foresight when I started out. I can't say as I regret the path my ignorance started me on though, the end result is I am exactly where I want to be, I just have to polish a few aspects here and there that got tarnished along the way...
I found a really interesting link y'all might wanna check out. I warn you it's a long movie at around two hours, but the first part is relevant, and it's not too long. The idea is that debt is money, the two are one and the same, because every dollar represents a dollar's worth of debt owed by someone to someone, and debt is the only product that a bank produces, it doesn't have any intrinsic value, yet it is the most lucrative "product" there is, by definition. The reason the economy is so screwed is because of credit. The reason industry and governments get away with inflicting so much misery on the people of the world is because of credit. Credit is the reason powerful corporations and the politicians they own have so much control over us. The reason there is such a lack of education when it comes to credit is the creditors don't want their victims to be educated. They just want you to borrow as much as you can so they can control you for the rest of your life. Before the burst of the housing bubble it didn't matter, because banks were making money hand over fist selling foreclosures, and foreclosures were profitable. Not to say that all credit is bad, it's really a matter of degree. If you have a mortgage with a local bank, there's a good chance some of that money goes back into the community, and that's a good thing. However, you gotta be careful, because if you're like me your mortgage might get swallowed up by a mega bank, now I gotta refinance. BTW that movie was put out by the Venus Project, whose objective is to do away with currency altogether and redistribute the world's resources equally. It seems pretty crazy, but then there doesn't seem to be a way to rid ourselves of man's inherent greed, so maybe it's the only solution.
Credit is money. Time is money. They are both resources. The thing is its so easy to get screwed because most people are ignorant to the way of compound interest and fees, and penalties that drive the banks. Besides a mortgage I dont use credit cards, except for business trips. For big ticket items like tires and appliances I wait till stores have 90 day same as cash programs. My income is not stable enough to predict when I can pay credit cards off and I get penalized. Sucks! They need to offer better terms.
We all get penalized, that's just a matter of degree as well. I get good rates 'cause my credit history is good, but that would change in the blink of an eye if I get behind on my payments, so while I'm stoked what I owe doesn't cost me too much in interest payments, I don't take it for granted. And yet I didn't get bailed out like everyone else because I didn't get carried away buying a bunch of crap I couldn't afford. It's almost as if people are getting rewarded for living beyond their means, though a lot of those folks were victims of predatory lending, where the terms weren't clearly defined up front when they took out their loans, then once the credit companies got them on the hook they switched the terms, adding on fees and additional interest until there was no way for them to get out from under their debt. Imagine getting a mortgage statement double or triple what it was the month before. The federal government reached a settlement with the big banks to fork over 25 billion for predatory lending, a drop in the bucket compared to the damage they've done, window dressing to make us think they've done something about it. If you lost your house to foreclosure you might get a check for two grand if you're lucky. Gee thanks, but I'd rather have my house back. Don't spend it all in one place folks. And you thought we abolished slavery.
My second mortgage the lender tried to get me to throw in my student loans, old debt,CC balances into my new mortgage. I knew that I did not want to pay for these things for 15 years on compound interests. But that's what made the brokers money. The higher the mortgage the more they made. Lots of people did this and that's how their mortgages got jacked up so much. Lots people wiped out their debt by putting it into a new mortgage. Then started over with the clean CC's and new debt, thinking in 5 years or so they'll remortgage again. I knew that paying on CC debt or even student loan debt for 15 or a 30 year mortgage was bad business. Why pay interest on these for all those years? Tom, Hows that refinancing plan working out?
