How One Law Accidentally Started A Debt Nightmare

[@HamishHodder]

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[@isocarboxazid]

Can I pay for it with a credit card

[@afonsodeportugal]

@@isocarboxazid 😅

[@Leo9ine]

Your next video should be about the horrendous data security and issues around these companies selling your DNA. Thanks to the 23&me breach you can now buy the genetic information on any number of groups, correlated with names, addresses, SSNs, and more! 🎉

[@jesse7631]

We use our credit cards to purchase pretty much everything. But we do it because 1) We only purchase what we have money for, and pay off our balances each month, and 2) We only use credit cards that offer cashback for purchases. Literally all of the credit card companies we are members with are paying us money to use their card, because we never keep a balance - so we never pay interest on what we buy. But I know that most folks do not operate this way.

[@BusArch42]

Same

[@frequentlycynical642]

Same. I stopped carrying change a few months ago, and I've had a few lonely singles in my wallet for the last month. Never need either.

[@Valicroix]

We do that as well. In fact I have Bank of America do it all for me. I just watch the emails go by at the end of every month.

[@FelipeGutierrez-me9th]

​@@frequentlycynical642wish I could, cant in mexico

[@carlos_takeshi]

I do this too, except the difference is I pay off my credit cards whenever I get paid, so every two weeks. Because I never carry a balance, their very high interest rates are never applied, so the effective interest rates are zero. Actually, this is not quite accurate, since because they are rewards cards, and the companies pay me for using them, the interest rates are technically slightly negative.

[@JayTemple]

I have to love the irony that before I could watch this video, I had to watch a commercial for a credit card.

[@jamesalec1321]

I'm amused, that everytime someone complains of ads while viewing youtube, it turns out that they have not a clue about ad-blockers. I never see ads. uBlock, Ghostery, Ad-block plus.

[@DexterHaven]

Yeah, the ad break in the middle should scream, "What's in your wallet?" out of the blue.

[@winterwierdo]

Same here. I got one at the beginning and one in the middle. I also received a preapproved credit card offer in the mail this week. I don’t need another, thank you

[@VintageToiletsRock]

Thanks AmEx!

[@DexterHaven]

@@winterwierdo I love the letters that tell me "You already won!" For some contest I never even entered.

[@pokeypickle3]

Instant gratification is a good friend of credit cards.

[@afonsodeportugal]

In other words, human nature is a good friend of credit cards?

[@runningfromabear8354]

A little reductive. Rarely used my cc and paid it off at the end of every month for 20 years. Only thing was I always used every penny of my spending money every month. Every penny of my grocery money every month. If I budgeted for it, I spent all the cash, nothing leftover. Staying at home, I've since switched to just using my cc with emergency cash for back up. I'm better with a cc. Keeping a running tally in my head over the month, I'm more cautious. I saw cash as money I'd as good as already spent once taken out of my bank account. More often than not, we have money left over from our budget every month that we can put towards retirement or kids college. I'm just a lot more cautious with a credit card than I am with cash and it has improved our long term savings. I can see how this might not work if you have a very tight budget to start with. But if you have a more generous budget to work with, it can be it's own game.

[@_PatrickO]

That is why they still make it super easy to get a credit card and they do absolutely nothing to verify your identity. This is why we have laws that says a bank cannot hold a customer responsible for more than 50 dollars in a case of fraud. Banks purposely make it easy to open fraudulent accounts and fraudulently bill legit accounts. They do the math and decided eating fraud still makes them more money than having stronger checks that slow down getting a new credit card or make it harder to fraudulently bill.

[@antontsau]

@@afonsodeportugal human stupidity, yes. Total impossibility to predict the neares grim future, result of own dumb actions.

[@danielcockerspaniel]

Deregulation and Oligopolies that force people into poverty are also good friends of credit cards. Thanks Reagan

[@earlborah9402]

My biggest complaint with this video is it makes it sound like it was all caused by the Supreme Court. That's simply not true. It was federal law - legislation passed by congress and signed by a president - that did this. The Supreme Court merely said "yes, federal law applies as written."

[@unsignedmusic]

What about State’s rights?

[@earlborah9402]

@@unsignedmusic What about them? Congress passes laws all the time that step on states rights. If the Senate was appointed by state legislatures, as the original intent was (before the 17th amendment), perhaps there's be more pushback against stepping on states rights, but that ship has sailed. Federal laws overrule state laws - see Article VI, Section 2 - and the federal legislature said they wanted these laws. Now, anything the federal legislature does, the federal legislature can undo, if you can only get enough politicians to vote to return that power to the states (because politicians giving up power is POSSIBLE, even if I can't site any real-world examples). There was nothing stopping Congress from stepping in just after the Supreme Court decision cited here was released - or at ANY time since then - to say this is stupid and they want to pass a law to change it, or to set their own usury limits, or whatever else. All you have to do is convince them to do it. I would argue it makes some sense to have national standards rather than state standards, as it makes it easier - but it's not like big banks can't manage 50 separate sets of laws if they had to. I would also argue that some usury limitations are a good and healthy thing - but then you cost low-income/high-risk people access to credit and up encouraging illegal loan sharks, so even good laws can have negative consequences.

[@briandeschene8424]

Correct. The Supreme Court enforced federal banking laws which concentrated federal authority over state authority and was enacted by a Republican party controlled legislative session by a Republican president. So much for Republican claims of wanting smaller government. I’m not even American and I know these historical facts. How come Republican voters don’t know their country’s own history?

[@ronniedale6040]

This is something that irks me about anything blamed on the supreme court. Any decision they make is basically telling the legislative branch they need to write or change a law so it's clear what the law states. But congress has done such a great job of abdicating all responsibility to govern they're just like "awe shucks that's too bad....., OK onto the next meaningless hot button non issue that will help me get reelected or earn some sweet sweet campaign contributions."

[@throckwoddle]

@@unsignedmusic States are explicitly barred from regulating interstate commerce. This is a right reserved solely to the Federal government.

[@boomergames8094]

Getting out of CC debt and not paying CC interest or fees was life changing.

[@adamv242]

Just tell me how

[@boomergames8094]

@@adamv242 Cut expenses down to barely anything. Only essential foods, no alcohol, no tobacco, no new phone, no new clothes, no new car. Etc. That and more education to get a better paying job. How is it life changing? Paying 20-30% interest means that buying anything is going to cost 20-30% more than you pay. Fees can be as much or more than interest. So put all cards on autopay. Look up the avalanche method to pay off debt.

[@cynthiabauer5763]

@@adamv242 War economy. Live as if the world had ended. Stop consumption of everything non-essential. Sell everything you have which costs money to upkeep and you don't need to use to work. I lived like this for 2 years, it was quite bad but I'm never again going into debt for anything.

[@petepete3985]

@@adamv242 Figure what you owe, what it will take to pay it off, and live below your means for as long as it takes (no going out to eat (or having food delivered)), no ordering unnecessary crap from Amazon, etc. Very important: Let your family/friends know you are concentrating on this so they won't expect much out of you financially- they won't be ashamed, they will be proud that you are tackling this. Pay off the smaller balances first, freeing up available cash as you go so you can apply it toward the larger bills. If I can do it (and I did), anyone can...

[@mjab5652]

"Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants, but debt is the money of slaves" Norm Franz.

[@---uc5un]

Great quote!

[@MisguidedPolicyIsBurdensome]

It just so happens that the vast majority of currency is directly produced via the creation of new debt instruments. Though one does wonder, say people were to demand their bank deposits (loans to the bank) be paid in the form of physical currency, I wonder how this would change the debt and currency landscape of the United States.

[@pcpxbotendorastermace9948]

KZbin comments are the ocean of conversations.

[@katieandkevinsears7724]

​@@MisguidedPolicyIsBurdensomeToday's currency will make wonderful toilet paper when the system collapses.

[@williamchamberlain2263]

That's a lie, and historically inaccurate throughout human history.

[@mirandasmith6856]

I’m Gen Z & so many of my friends use credit cards for fast food & vacations. My friend, Ivy League finance graduate, was having an issue where they couldn’t pay rent after months of traveling abroad… I suggested using a credit card in this emergency, but he already maxed it out traveling…. Caleb Hammer’s financial audit shows what is really being spent on credit cards. Junk, fast food, clothing & fun vacations. Very rarely is it for needs

[@cautiousoptimist1926]

I hate consumer credit because it inflates prices. Those consumers who are willing to go in debt and pay usurious interest rates are the customers who set the prices for the rest of us.

[@raiden031]

I would agree

[@HaviccB]

Yep if people weren't so comfortable with debt, houses wouldn't be 700k+

[@FutureNaught]

This has been happening with car prices ever since 2020.

[@thelight3112]

You are correct. Every industry explodes in price after easy & large credit becomes available. College wouldn't be $25k/yr if banks couldn't lend that to 18 year olds, cars wouldn't be $50k if 84/96 month auto loans weren't a thing, and homes wouldn't be what they are if people couldn't mortgage half their gross income. Hell, you even see it with crap like lawn tractors and furniture.

[@majorlagg9321]

Retailers pay a fee for that credit card usage, which is built into the price. If someone pays cash, they still pay the 3%.

[@markneilson1044]

I started out as a responsible user of my credit card. But ran into trouble and maxed it out at $7000. Took me a long time to pay it off. Once I did i took a pair of scissors and cut it up. Never to use one again that was 18 years ago.

[@aspensulphate]

My story is similar. I hated the feeling of having that high-interest debt hanging over me. Lesson learned. I now use my two credit cards as tools of convenience, and haven't paid interest on any credit card for 3+ decades.

[@_PatrickO]

Credit cards can be used and paid off immediately. You can use it for points or air miles while never holding a balance.

[@MrSupernova111]

Then you never learned your lesson. Self control has nothing to do with cutting up your cards. I have close to $50k in available credit. However, I only use one card to pay for daily stuff which I pay in full each month. In return, I get hundreds or more in rewards each year and pay zero interest. At the same time, I build a better credit score. Been doing this for many years without issue. The problem isn't the cards.

[@lauriivey7801]

My second husband maxed out my card at $14,000 ... I got rid of the husband, but it took a lot longer to get rid of the debt. I still have my card, but I'm a lot more careful with how it's used.

[@throckwoddle]

​@@MrSupernova111 I do that too. But we still are, of course, adding to the relative inflation rate via the credit card merchant fees that are baked into prices. It's a prisoner's dilemma. If we all stopped using credit cards we would get back more than our points in lower prices. But if just a few of us stop, we give up the rewards and the prices stay high anyway. After a Supreme court ruling it looks like most states are now allowing dual pricing, but it's a hodgepodge of different rules, really can't apply to internet transactions, varies with varying interchange fees, and outside of gas stations doesn't seem to be used by many merchants.

[@wsudance85]

This is one area where Brazil has the US beat. Everyone has credit here, and practically everywhere you go allows you to make large purchases in installments without a credit card and with no interest. Companies try to work around this by offering lower prices for items purchased outright, but the cost difference is usually negligible.

[@damonroberts7372]

That sort of thing used to be common in Australia, too... we call it "lay-by". To the best of my knowledge, all department stores here still offer the service on request. It's losing ground to credit schemes like Afterpay, because when you lay-by an item, it stays in the retailer's stock room until fully paid for.

[@madison_kr]

@@damonroberts7372 That used to be really common in the US as well but has gone by the wayside for the most part. We called it layaway and same as you mentioned, you couldn't take the item home until it was fully paid for.

[@brendanwiley253]

The fun fact about interest rates is that they don't matter if you just pay what you own

[@davidroddini1512]

The interest rates do apply if you can’t afford to pay the balance in full by the end of the month and have to roll some of it over to the next month. Given how many people have to use credit cards for daily living expenses, they probably wouldn’t be able to pay it off at the end of the month.

[@Mo4Honesty]

​@@davidroddini1512so the OP is correct then?

[@COOLARUL]

Once you learn the lesson that buying more stuff does NOT make you happier you can then start to build a more meaningful life. Treat the advertising industry and online influencers as your enemy not your ally. If you have to use a credit card or debt to buy it, you cannot afford it.

[@blade86ca]

Using Credit card or debt is fine AS LONG AS one can pay it off asap or within a very short amount of time.

[@COOLARUL]

@@blade86ca This it incorrect, it is not ok. The reason is psychological. Once you have extra credit, you spend more and pay more than without credit. Even if you pay it off on time. you end up buying more than if you have to wait, i.e it leads to overconsumption. You also pay full price rather than waiting until the price drops (as often happens with lack of sales). So overall, having available credit is bad for your wealth even if you pay off the credit on time.

[@blade86ca]

@@COOLARUL "Once you have extra credit, you spend more and pay more than without credit" , your statement is illogical. The price of an item does not go up just because you have credit. That why I said it is fine as long as it is paid off asap that is why there is the 0% interest Grace period all Credit cards offer. Price Inflation occured due to Gouvernment terrible decision making and poor decision making by people with credit but that does not mean credit is bad for your wealth.

[@COOLARUL]

@@blade86ca We humans are irrational. It may seem illogical but that is exactly what we do. Our cognitive bias at work. 2 books I recommend, Predictably irrational by Daniel Ariely and Thinking fast and slow by Daniel Kahneman.

[@reubenmorris487]

@@COOLARUL What are you talking about??

[@tovsteh]

The record credit card debt has multiple reasons behind it: - Our education system no longer teaches kids about money/debt, and its consequences (especially when it comes to student loans). - Social media impose the need for luxury goods/lifestyle's on more impressionable kids. - The banks themselves who will literally throw credit cards your way regardless of your financial situation. I have been automatically approved on multiple occasions by my bank and am repeatedly notified of how much credit I can access, which is tempting for the vulnerable person. - Lack of willingness to take personal responsibility in modern generations. - Inflation and subsequent wage stagnation created by our governments/federal bank monetary policy.

[@Al-yu6bq]

And low salaries

[@appsbroadhurst5500]

​@@Al-yu6bq No. That's commie nonsense. Productivity failure. If you add value. You get paid.

[@robertewalt7789]

A good list of reasons!

[@neilkurzman4907]

I went to school in the 70s and they didn’t teach it to us then. How far back are you going?

[@highbread817]

Fantastic comment I had to explain to a 22yo woman that loan interest rates compound each year. Your rate isn't 30% for every $ you owe, your rate is 30% of every $ you owe * years it takes to pay it off. She's got a credit card, student loans, and a car on finance This girl is one year away from graduating college and didn't realize that interest compounds each year.

[@tHebUm18]

Short of a couple utilities, rent, and payments to the gov't that charge an extra fee way higher than reward points using a credit card, I legitimately cannot remember the last time I paid for something not using a credit card. Over 15 years and have not once paid so much as a penny in interest, pay off in full every month.

[@devinlowe5505]

Same. I even do the whole credit card shuffle thing where I get 4% for gas, 5% for groceries, etc. Credit cards are great for those who are intelligent.

[@reubenmorris487]

I spend LESS with credit cards because I don't end up with $hundreds of pocket change sitting around. I hate pocket change...

[@janentomenkafka]

Around here (Belgium) people mostly use their debit card. And I only use my credit card for online purchases or when abroad. And even then, I use it as a debit card. Every month the bill is settled. Some people don't seem to realise that a maxed out credit card (and only paying back partly) means they give a fifth of their salary to the bank...

[@EHamden-q1g]

Same here as well. I don't use cash at all...nor checks either. Pay EVERYTHING with plastic, then pay the plastic completely off at the end of the month. Been doing so for over 20 years. If money gets tight...I stop it at the source...the register...so I don't ever run into issues or carry a balance. The connection of my money through the card is NEVER lost and I treat it the same as cash in my wallet. If it ain't there it ain't spent. Perks of doing it this way also have many many benefits that afford the frivolous things I normally wouldn't buy but will because they are now basically free.

[@antilogism]

@@reubenmorris487 I spend less using a card since I have a record of it that I have to review. Cash flows through my fingers like water and leaves no trace.

[@rafaelm.2056]

Credit standards for a credit card at the time was extremely high. The reason being was that the electronic systems we have now didn't exist at the time. The threshold for calling for authorization was $25 dollars or more. A rogue customer could do a lot of damage to a bank with small purchases. There was also a problem with fraud and altered cards where the numbers were flattened and a new number stamped in its place. Women weren't allowed to open accounts and if they had an account then their husband's name was on the card.

[@MARKCRASTO]

The last one makes sense.

[@mikekelly6603]

Good video. The 1.2T of CC debit numbers don't include the various buy now pay later schemes that have grown significantly in the last few years. I don't think there is good data yet on how big that number is, but if I am wrong it would make for an excellent video :)

[@pelqel9893]

And thus, 1978 began the "new decadence" of the 1980s and shopping-mall culture... My friends and I all had new credit-cards back then and racked up huge balances buying clothes, dinners out, and music. My best friend filed for bankruptcy at age 22... as his debt was higher than his annual income. I let mine go into collections and worked out deals with them to somewhat save my credit rating. We all entered our 30s a little wiser.

[@Slider_84]

I think another issue is that you are taught to get a couple cards/lines of credit with different kinds of payments to get a good credit score

[@tHebUm18]

Taught completely correctly, but having a good score necessitates paying it properly.

[@MisguidedPolicyIsBurdensome]

An absurd idea, isn't it? You have good credit because you take personal loans to buy items you should be able to handle without loans? This is how to establish creditworthiness? No. If loans are taken, surely these should be for capital-like items and creditworthiness shown by how well these capital-related loans are contractually adhered to. Very clearly, this "lesson" is to encourage people to not use tools like physical currency or their savings to handle purchases. This "lesson" also means payment processors get to collect a very handsome amount of information about customers. This "lesson" does not appear to benefit you very much at all.

[@tHebUm18]

@@MisguidedPolicyIsBurdensome No, showing your ability to handle credit responsibly does make sense that it builds your credit. Not having any credit indicates nothing of your ability to responsibly handle credit/money because no lending institution has any insight into whether you're responsible or not, it just means they have no data. Even before formal credit scores existed, that is how it worked at the individual bank level because they weren't stupid and only wanted to give money to people they trusted to pay it back. Credit score could doubtlessly be improved to include things like rent (some landlords have started doing this) and utilities (I think some have started) to build a track record of showing you're responsible with money without needing credit, but regardless it's fundamentally logical that credit score can only include traceable data and, no, "just trust me bro" does not suffice when lending $10,000's or $100,000's or $1+ million.

[@antilogism]

Good thing to teach, along with budgeting. That score is like gold when buying a house or anytime a load is needed. In fact, for the best score, you need a bit of utilization. My banker some years ago said about 4 or 5 lines of credit and about 4% utilization is ideal. I usually bounce between 840 and 850 and that's probably from the utilization at the moment they crunch the score. That doesn't mean carrying a balance either. If you need a long-term loan work with a bank.

[@BusArch42]

@@antilogismWe paid off our house in 2011. The only debt we have is using credit cards that are paid in full every month. Zero actual debt. Pay cash for cars. Saved money for kids college. Almost 5 million in retirement savings. 490k income. Credit score is 750. Yet we are very very good credit risks. This is my biggest complaint of how FICO is used.

[@Derpy1969]

It’s not the high interest rate alone that resulted in huge CC debt. It’s the minimum allowed payment that some guy suggested that sucked people in, also. And a lack of financial literacy.

[@ylysergic1749]

My issue is that institutions realized they can charge far more than what they're worth because they know people can pay it with debt. Just look at how expensive college and housing has gotten. If people were paying out of pocket these prices would have to be lowered because no one could afford them.

[@kaseyboles30]

Housing,Education, and transportation has risen more than 50x in 50 years. Compared to general interest being closer to 8-10x.

[@hollisterlasers-ion8939]

Oh no, the poorest people might lose access to almost the worst type of debt, that would be awful! 🙄 If people lost access to credit, they'd probably start thinking about their purchases. Sure, some of them are going to get payday loans to pay their rent, but a lot of people would benefit from not being able to use credit cards.

[@notroll1279]

The worst type of debt are loan sharks - and pawn shops almost match their interest rates. The only endearing feature of both is that they are too labor intensive to be practical at the volume covered by credit cards.

[@tomsydney2430]

Hmmm.. nanny state! The state should not allow people do things that MAY be dangerous if used wrongly. Thy should ban parachuting, skydiving, car racing - actually ban cars totally, as this is the most dangerous activity most people do. They should walk, much healthier,.... Really? Really?

[@dannydaw59]

Payday loans need interest rate caps too.

[@notroll1279]

@@dannydaw59 I don't like them, either... but they're labor intensive and not really risk-free. If they were a terribly profitable business model, they'd attract competition which would drive rates down.

[@dannydaw59]

@@notroll1279 There's lots of payday lenders out there. If there was a cap on interest rates then there would be less risk because the high risk borrowers couldn't qualify.

[@ronlee2776]

You know what, there is this concept called self discipline. My wife and I had a debt problem but we pulled back and paid it off and were very careful about using credit cards going forward.

[@throckwoddle]

There's also a concept called temptation. It's why entrapment is illegal, and is an affirmative defense against civil or criminal prosecution.

[@matthewryan3335]

But you did have a debt problem, so even you were tricked. And the tricking will continue for everyone

[@Leo9ine]

You're so close to connecting the dots and achieving empathy, but you swerved at the last moment

[@andreaslack8379]

The other thing that started to take hold back then is how people aren't responsible for their actions. I would also add the education system started to fail in teaching students about debt. Usury laws had their own negative effects, namely preventing people from getting access to credit used for good purposes. A 12% interest rate cap back at the time was also problematical given inflation rate was in double digits and even got higher than 12% meaning loans would lose money. I been there myself with credit cards at one time carrying just about 100K in credit card debt. Working out of that wasn't easy and I am quite aware of the abuses, but taking away agency of individuals, limiting their choices to protect them is a bigger problem in my opinion.

[@newmobile1455]

I remember in school knowing how to write a check and balance a checkbook was required to pass to the next grade

[@gunnaliteswafford3842]

That's the point of regulations. If it is a net bad, get rid of it. If it's 50/50, regulate the thing to make it more good than bad. If it's good, no need to regulate. By your logic, all drugs should be legal. No need for drivers licenses. No need for certifications to build skyscrapers. No school for doctors. Etc etc.

[@JoelReid]

for about 3 years i was responsible with a credit card. using it then paying it back in a day, thus getting ample rewards. But as soon as I hit financial difficulty, that credit card became a crutch, and sent me on a downward spiral (I got out of that spiral by consolidating and negotiating with banks, plus changing spending habits) Credit cards are like a tiger... it is completely safe as long as it is small. but if it grows even slightly large, it bites your head off.

[@ryanwolf4101]

The Equal Credit Opportunity Act of 1974 required banks to issue credit cards to women. Doubled the customer base.

[@katedaniels9623]

That was necessary and helpful for divorced or single women to create the credit score needed, NEEDED, so they could buy a house, or rent a home, or buy a car…. Only men had credit and only their wives maybe had a card that could be taken away.

[@rustler160]

credit cards have ruined many respectable households

[@HamishHodder]

sadly yes

[@thedude5040]

Then they weren't very respectful to begin with. Respect your future self so much that you say NO, I'm not buying this.

[@hariranormal5584]

You don't say. Where I live, we have a service where every transaction can be paid as a long term loan. Such services are just so bad that encourages horrible spending limits. I can't believe how people fall into all of this. No wonder people seem to have way better everything in terms of luxury, and they earn less than us.

[@reubenmorris487]

Their bad habits and relationship with "money" ruined them long before credit cards came across their path...

[@FritzSmith-h4g]

@rustler160: "credit cards have ruined..." Correction don't blame the credit card companies for the stupidity of those who can't manage their money. I use my credit card for all online purchases and payoff the balance in full every month. I also pay more than the balance when I expect to buy extra stuff I occasionally need online, sort of keeping my payments level and predictable each month. I can't understand those who say they can't afford not to use credit cards because they don't have the money to buy stuff, but they can afford to pay the high interest rate charges every month. That's total idiocy! If you can't manage the money you are getting, why the hell are you trying to spend more than you make? As I said, don't blame others for your stupidity about managing your money. As Shakespeare said it so correctly "The fault dear Brutus lies not in the stars (or credit system), but in ourselves".

[@christyler6234]

Credit cards aren’t all that bad if you’re responsible. For ten years now I’ve paid everything I can with my credit cards. I will take a cash back card with a 12 to 15 months interest free introduction rate and will use it until the introductory rate is about to expire, get another card with a 0% introductory rate and close the old card out. I keep two cards that I use sparingly that have large amounts so as to keep my borrowing power high and to keep my credit age reasonable. I make approximately $1500 each year in cash back and pay absolutely no interest. If you pay your bills on time and make sure the card is paid off before the interest rates kick in, you come out the winner. It all comes down to being responsible.

[@Psylliumhead]

Here’s some education. Total US consumer debt, credit cards, mortgages, loans total 17 and a half trillion. Our national debt is 35 trillion and growing daily. Not counting our unfunded liabilities which total about 200 trillion. We are screwed as a country,

[@markpfeifer1402]

Its a difficult lesson I needed to learn years ago: Use you debit card ONLY. Don't buy something if you don't have the money.

[@CZpersi]

The problem in some places is that you need a "credit history" to even rent a home. So, even if you are responsible adult, who lives without debts, you are punished and forced into taking debt. I am glad to live in Europe, where _debit_ cards are much more common. These allow you to spend only the money that you have in your account.

[@madison_kr]

I wish the US would go this route. There has been talk of a law that would effectively lower transaction fees which would get rid of most of the credit card rewards. I think that would be good for the consumer long term but people are really mad about the potential of losing their "miles." There needs to be a cultural shift here on debt normalization to see any real change.

[@SteelStrung]

Wild that there are Capital One and Amex credit card ads on this video

[@jonnelson9760]

So why are interest rates not below 18% even if you have good credit? That used to be high interest. The mafia was the only ones charging that high.

[@raiden031]

People with good credit usually don't pay it

[@jonnelson9760]

@@raiden031 Well I have excellent credit and the interest rate on my credit card is 19%. It didn’t used to be that way.

[@JoeFabeets]

If you slowly creep the interest rate up you can charge whatever you like, especially if you are paying politicians to keep the laws that way they are.

[@patrickhenigin4805]

I know of cards that charge much less.

[@randeknight]

If you are the type to have good credit, you are rarely going to be carrying over a debt on your cards and thus don't pay that 18% interest.

[@ChrisLivingInYork]

I was born on the 18th December 1978 and had no idea it was such a significant date

[@RobFRC]

"Using as an extension of income" - Can't get a raise, but can always get another credit card😵

[@jamesodell3064]

It isn't just people who have bad credit who pay extremely high interest rates. One widow I know replaced her heating/cooling system and the company set her up with a credit card at over 30%. She has a high credit score. When she told me that I got her to go to a credit union and she got the interest rate lowered to under 10%. That over $100 a month savings makes a big difference in her life. A lot of people just are not financially sophisticated. People who are pay interest on credit cards and car loans should check the rates against what their local bank/credit union would charge.

[@patrickhenigin4805]

@jamesodell3064 I was deep in the doo but qualified for a personal loan at a fraction of the interest I had been paying. All you have to do is miss a couple of payments, and you may never be able to get out.

[@Constantineopulos]

That is insanely predatory. Glad to hear she got it sorted better.

[@jamesodell3064]

@@Constantineopulos She is saving the money but sadly many others continue to pay predatory rates on credit cards and auto loans when they could get much better rates with just a little effort .

[@davidcox3076]

30%??? Ouch! I had never worked with a credit union. But just paid off my wife's car through one. Good interest rate and no problems.

[@dannydaw59]

She was living beyond her means if she didn't have enough liquidity for emergencies/bad luck.

[@crusherven]

"Most economists are against interest rate caps." Interestingly, Adam Smith, the granddaddy of free-market economics, was in favor of capping interest somewhere in the range of 6-10%, depending on market factors. He argued that allowing higher interest rates would lead to loans being taken for consumption, squandering the nation's wealth. He wanted capital to be focused on investments with a long-term payoff.

[@Youtuberkt]

the problem with these graphs - not adjusted for inflation, growing population/household size. The value of dollar has depreciated, everything costs more. so, it seems natural to have a "larger" debt in non-normalized terms.

[@goobda_]

I dont get using a credit card without repaying it a month later. Why would you even do it.

[@hariranormal5584]

Like, seriously yeah? Are people THAT short minded where you are like "I'll wait a month, that will come next decade" I can't even buy eggs without thinking why am I overpaying for these, could've gone there and got it for cheaper

[@thebes118]

Some people use them for emergencies. Many do not save for an emergency fund, or cannot because they are scraping buy.

[@antilogism]

@@thebes118 That's a great use for them and I've done that---but then I'll also shop for a deal on renting cash to pay them back. A personal loan is like half the cost. Secured loans are even cheaper. Usually no reason to carry a balance except for the convenience.

[@throckwoddle]

For the same reason people take out mortgages or small business loans. You do this when you're trying to ratchet yourself up to a point where you can pay it all off. The alternative is that you stay debt free, but you don't build the skills or base you need to work your way up.

[@antilogism]

@@throckwoddle Mortgages are secured so the rate is comparatively better. Business loans can be OK too. I've used a personal loan from my credit union to pay my card before being assulted by interest. That loan was less than half the card rate. There are SO many cheaper places to rent cash from.

[@JosieDrake1995]

I treat my credit cards like a luxury. I did recently game the system a bit and got a new card to benefit from zero percent interest in order to update my furniture. But I am quickly paying it off before it ends

[@antilogism]

Nice! I put the down on my F150 using a MC, then used an AMEX balance transfer check at 0% for a while. This was years ago and I was surprised that the dealership accepted it.

[@elissas3243]

Great piece! Can you source your graph showing the history of credit card debt? What happened in 2010 that caused the balances to spike so aggressively? Was that just the GFC, or was there a policy change?

[@aurorathekitty7854]

I don't think any organization should be able to create value out of nothing then charge you for doing it.

[@casualmtg6675]

I partially agree, they are providing a service and deserve a reward.... however theres a line beyond helping via service and abuse. Not sure where that line is exactly but certainly credit card rates are well into the immoral side of the spectrum

[@DanaX09]

If your interest rate were 10%, even if you carried a balance you could still make a payment on your account and have some of it apply to principal. When the interest rate is nearly 30%, even if you make a payment, little or none of it is applied to principal.

[@Love2Cruise]

Capping interest rates is a bandaid for those who are carrying a balance. Don’t have a balance? Keep it that way. That’s the real solution.

[@DanaX09]

@ - paying the bill off every month is the best thing to do, but honestly charging people interest rates close to 30% is really disturbing. It won’t stop poor people from using credit (as the credit companies wish it), but it will make it impossible for them to pay it off. I think Shakespeare had it right “Neither a borrower nor a lender be”.

[@johngaltline9933]

You might want to actually read your credit card statement, as it's been federal law to tell you, right there, how long it will take to pay off, and to tell you a payment that will pay it off in a reasonable time. in 2006 the law was changed to make minimum payments about double what just the interest added was, so as long as you are paying minimums you will eventually pay the card down. Prior to 2006 it was possible to just pay minimum payment and be paying just the last month's interest.

[@NihilistSolitude]

Glad to be one of the few with 0 credit cards

[@BusArch42]

They carry a lot if protections for purchases. We use one regularly and pay zero fees and zero interest

[@stugurjar1681]

Awesome video, mate! Really well-researched.

[@lawrence1960]

22% interest is criminal.

[@scottweisel3640]

Two entities are strangely left out of the predatory lender conversation are universities and credit card companies. The high interest rates should be illegal. They exist not only for greed, but to cover the costs of defaults. I remember my first charge card in 1985. It was at Sears and the only way I could get one was to commit to a piece of merchandise. I needed a washing machine at the time. A few ears later they were handing out cards to college students like candy. The uncapped rates, made it more attractive to extend credit to higher risk customers.

[@williamwilson6499]

My outstanding credit card debt: $0 My outstanding mortgage debt: $0 My total outstanding debt of any type: $0

[@throckwoddle]

This isn't about personal badges, it's about structural issues that encourage bad behavior. Bad behavior which has serious effects on our entire country. Saying you don't have the problem is like an adult in Eswatini (Swaziland) going around saying they don't have HIV. Good for you? It's still a serious national problem.

[@louiselebow6643]

I'm 60, when I was in High School we had a one term required sociology class that taught you about credit, bank accounts and budgeting ( as well as other things). By the time my kids were in High School that class didn't exist.

[@morrismonet3554]

My local credit union charges 13%. But I have never paid a dime in interest. I pay the balance off each month. Stay away from banks.

[@GeeEee75]

I do the same thing using my bank-issued credit card. It doesn't matter what the interest rate is or who issues your credit card if you are diligent about paying the balance off every month.

[@mattm597]

Approximately $7,500 for each adult in the country. I'm surprised the figure is that low.

[@Ferdinand208]

It is an average. Some people have 0 debt. Others will have 30000 CC debt.

[@mattm597]

@@Ferdinand208 Yes, average.

[@tHebUm18]

I found it surprisingly high. It's probably artificially inflated too if it's just total debt, not revolving debt. Because total debt also includes everyone who pays credit cards off in full every month. So for me, it'd count for like $600-1000 in an average month, despite never having not paid a credit card off in full every month for the entire 15+ years I've had a credit card. Total credit available to people drowning in credit card debt is likely not super high on a per person basis.

[@jonathantaylor6926]

I have zero. My bother has zero. My wife has zero. Both my parents have zero… that’s a lot of zeros to average in.

[@mattm597]

@@jonathantaylor6926 I have zero!!!

[@MichaelChengSanJose]

That $6,300 average balance is interesting. Out of all the friends I know, only one has credit card debt, but he carries a lot. So, once his $80-90K in balances is spread out amongst everyone else, I suppose we’re averaging right at the national rate. I’ve been using credit cards for over 30 years and have never carried a balance.

[@mikeloeven]

The biggest issue is that there needs to be some sort of cap where interest cannot accrue past a specific percentage of the principle after a company has made their investment back from interest there must come a time when the borrower should be allowed to halt interest and pay down the principle but its eaisly possible to get into a situation at least in America where interest exceeds the ability to repay and it becomes theoretically impossible to pay down a debt. Bankruptcy is not really a good or valid solution.

[@modtwentyeight]

Waiting for the "bubble " to burst like the housing disaster.

[@David_Baxendale]

I remember way back my parents couldn't get a credit card as they were not credit worthy enough. Later (much later, moving on from the late 70s to the late 90s) it was kind of obvious that the main target of credit cards were the people who can just barely pay them off but might not, carrying that balance over and paying the interest. They won't default but can't clear the debt. People need to realise that once your balance hits a magic number (based on the interest rate) that minimum payment will never clear the debt. Added to all this is the fee charged by the payment provider (VISA etc) for the transaction. It's no wonder it has exploded, it is worth a lot of money.

[@Pisti846]

I can't imagine carrying a balance. The interest on my one and only is around 22% and I pay my balance off every month. It really is criminal. There should be a cap.

[@kf1439]

In the 1980s and 90s, you did not receive preapproved offers in the mail, you received actual cards and all you needed to do was activate it. I remember my father had a whole drawer of them in his office. They stopped that and just moved to offer letters by 2000 though.

[@kennethoram4292]

Once upon a time, there was store credit or "layaway" with the alternative being some form of "Shylock". From there to here in time, the poorest are still the most exploited.

[@eksaus42]

The ad for Capitol One directly under the video is so funny.

[@jeremybeaverson7167]

Point is even with a 780 credit score all my cards are over 30% interest wean advertising 19.99 to 30% now how dose that work they show a range to make you feel safe and then give the highest number anyway

[@antilogism]

Call your card's bank to see what's up and what they can do. My MC was 18.74% on the last statement, though that's still way higher than a normal loan. My penalty APR would be 29.99%! Personal loans are more like 12 or 13% and secured loans are even better at around 6 or 7% at credit unions.

[@cameronf3343]

The worst part is you can do everything right, but the best scenario most can be in is debtless. In order to truly ride out downturns, you have to be debtless and rich. To be debtless and little savings… eventually the decline in money reaching your account will take its toll all the same.

[@caryphillips4885]

Ha, only 5 years after the end of the gold standard, they started printing tons of money, imagine that!

[@sct4040]

I applied for my Amex after getting my 1st apartment in 1991, and was always responsible with it. It never occurred to me to spent money I couldn’t repaid by due date. Growing up poor was the reason.

[@williamhanna4823]

I remember seeing tv commercials for BankAmericard as a kid.

[@xxOmponxx]

Payday loans make credit card companies look like charities

[@joshklaver47]

An interest rate cap would be a good start. The sooner we can largely eliminate credit card use, the better. The people using credit cards are usually the ones who can least afford it.

[@johngaltline9933]

Are people too stupid to just not apply for a card they don't think they can afford? Maybe they are, but that's an education issue, not an access to credit problem.

[@joshklaver47]

@johngaltline9933 Yes they are, and not allowing unethical credit card companies to exploit them is a reasonable measure. It's no different from shutting down pyramid schemes, loan sharks, or any other scams.

[@cavalieroutdoors6036]

Access to credit *should* be limited. At least in the form of credit cards. It's a tool, yes. But one that if used irresponsibly does far more harm than it does good. So capping the rates would not be a net negative outcome.

[@jerzsubbie]

Delinquency rates approaching those of 2009 are concerning!

[@karlineschlenkerbein131]

The whole idea of teaching people to use credit cards responsible always comes from people, who are educated and able to understand the system, but that doesn't work for everybody. Not everybody is able to make responsible decisions and these are the most vulnerable people, when it comes to these issues. Yes, you have to save some people from their own stupidity, as hard as this sounds. Because they are not able to understand complex issues and are easy to dilute, but they can't help - they lack the capability. But these people have a right of not being abused by the system as well.

[@thebes118]

Nailed it.

[@antilogism]

It's not stupidity for most. I know a PhD who's a pro at making bad financial decisions. My boss has all sorts of debt and he has several degrees and >$200k coming in. Over-spending seems more like a bad habit. Much like smokes. What starts out as a touch of consumer greed turns into a way of life. I've felt the draw of it myself at times. That rush I get when that toolup order comes in is like a drug!

[@michaellee1268]

My younger brother was working as a internal auditor for a major oil company and traveled for work over 40 weeks a year. He accumulated hundred of thousand of free airline miles and hotel points enough to took our widowed mother to your both South America & Germany.

[@Tunda2]

“Accidentally” is hilarious my guy.

[@williambaldwin9346]

I have $12,000 in cred card credit limits over three cards. I owe NOTHING. Some montly bills are auto billed to one and when they are all are charged for the month I pay all of it off.

[@geuse_chandesu4273]

Debt Collectors and Credit Bureaus are definitely happy about this And making credit repair illegal and banning them

[@patrickbuick5459]

Now, it seems it doesn't matter what your credit history is. You pay massive interest regardless.

[@patrickbuick5459]

Dont forget to mention credit bureaus and their pernicious hold on all lending despite often being wholly inaccurate.

[@howardmallisonii503]

About 14:59: Better financial education starts with people learning, and understanding, the word "NO".

[@dannydaw59]

What would the downside to interest rate caps be? The riskiest customers don't have an opportunity to get into debt if they're rejected by the banks.

[@prismbrandingrealestatebra6301]

The interest rates on some credit cards is as high as a pay day lender.

[@Valicroix]

I'm always unsure about quotes detailing "credit card debt." When people use the term "balance" that can be interpreted two ways. Are we talking about the average owed at the end of the month or the average not paid off at the end of the month? My bank just paid itself $8,400 (I made an unusually large purchase and I had both my banks sending me emails about it) on my credit card leaving me with a $0 balance. So if I was included in the average would it be $8,400 or $0?

[@bonniegaither3994]

Those who understand interest, earn it, those who don’t, pay it

[@thebes118]

I disagree totally with you. There should be usury laws. High interest makes it much harder to pay off any loan. Despite education, human nature is what they prey on.

[@jaredroussel]

Fantastic, informative video. Thank you for creating this!

[@Drunken_Master]

I still cannot understand why are people spending more than they have?

[@aegisofhonor]

before credit cards there were "credit coins" basically an IOU for groceries you bought at grocery stores. You'd get groceries one day, and you'd get the store's credit coins equal to your balance you owe to the grocery stores and pay it back the next week when you got paid or when the harvest came in and you were able to sell your yield. This allowed people to buy food and other nessesities before their income to pay for it was available and these grocery credit coins can be considered the very first "credit cards".

[@thomashenden71]

The worst thing is that whatever happens with the economy in the USA, it heavily affects the rest of the world, too…

[@edletain385]

Alcohol can be fine if used responsibly, a weekly lotto ticket can be harmless fun, but as we all know some people for whatever reason are not able to keep to that responsible use, leading to addiction and ruin.

[@polloman15]

14:46 I differ from you, when you have an irresponsable/immature population, self accountability stops working. The credit card interest rate cap is just the symptom, a testament of “We tried alternatives first and they didn’t worked”.

[@johndefalque5061]

I was unemployed for 2 mos. this year, no income. I survived only on dumpster diving for cans. it was very stressful but at least i didn't dig myself into a hole. I also almost did get evicted and came close to losing my piano though. I wish the millions of invisibly disabled Cdns. like me could just get MAID and end our miserable lives!

[@throckwoddle]

I sincerely hope you're trolling. MAID in Canada is a monstrosity when juxtaposed with public and private charitable support (or lack thereof), and has turned off foreigners who used to be in favor of MAID. MAID is not a solution to these societal problems. It's just a solution to the personal impact of these problems. And so the problems themselves never get tackled. I'd rather the millions of disabled Canadians camp out on Parliament hill in Ottawa. Or outside the mansions of the business owners who ended your employment. Put the problem in the face of the people who could address it if they chose to.

[@EatRawGarlic]

Surprisingly, I side with Trump on this one. I would go even further than he does. Credit availability contributes to positive feedback loops in the economy, making it inherently unstable and leading to boom/bust cycles. Not to mention that it leads to exploitation of human weaknesses. Historically, the (social) cost of these exploited weaknesses will be distributed over the many, while the exploitation itself will only benefit the few. Risk taking is for entrepreneurs, not for consumers, consumer credit should be strongly discouraged.

[@MyExcellentOpinion]

Initially it sounds good but I am against it. First it makes no sense to be temporary, either permanent until a new law is passed or not do it at all. I agree with the disclaimers afterwards would say it would likely be replaced with high fees or some other mechanism for the banks to get their money. I think a better solution would be education of how credit cards, debt, and interest bankrupt individuals. The American education system did not teach that at all much less to people who dropped out of school. I think the town should advertise and have a counselor or something for free to teach this amongst other important things. I say this with an open mind not just as a Trump hater. Trump has legitimately bankrupted every company he attempted except land/real estate and even those are riddled with fraud or crazy lawsuits.

[@MyExcellentOpinion]

I pausedt the video when I replied. Cool that he mentioned financial education is being part of a solution.

[@EatRawGarlic]

@@MyExcellentOpinion I'm afraid that you overestimate the effect of education. As Western Europeans, we do receive such education. However, this doesn't change the distribution of intelligence amongst our population. Nor does it fix the low impulse control in certain individuals. Now take a guess which characteristics set apart the group with problematic debts from the general population... Isn't there an English saying like: "You can't fix stupid."? In some (maybe even all?) EU member states, the interest rates on creditcards are already capped below 15% without it leading to extra fees. I don't see why a law limiting rates wouldn't be able to forbid extra fees at the same time. This seems like a non-issue. I'd still rather see the consumer credit card industry perish altogether. They serve no real economic purpose.

[@OopsFailedArt]

I am almost always on the side of open markets. Interest rates are, however, the area where I deviate. I really like the point brought up in a recent comment though that this makes no sense being temporary. I would add to that. I think we need a permanent rate cap, tied to the fed funds rate. It needs to be introduced slowly, however. If we go cold turkey, the very groups that we’re trying to protect are going to be hurt the most. I don’t agree with the idea that education is enough of an answer. It’s not an education issue. These people are, very often, brilliant and fully aware. The problem is self control and desperation. My parents are a great example. To this day, I can not convince them to cut up the damn things. They went into credit card debt shortly after moving across the country when they caught a bad short term break. That was 27 years ago. They both have their masters in mathematics. It’s always been too easy to push off getting off these leeches until next year to get them out for good. I refuse to touch these. Too dangerous! (At least for going on a balance)

[@reubenmorris487]

Trump wants to limit his interest rates to 10%. Maybe they see him as a high risk, and his credit rating in JNK...

[@lauriivey7801]

Self-control is a necessity with credit cards ... unfortunately, that is in short supply in our current world.

[@antiquehealbot6543]

Don't spend money you don't have. Isn't it that simple? The fact that you have a high credit limit doesn't mean you need to use that limit. I hope the word 'limit' is clear enough.

[@gavriloprincip11]

that's my birthday, from the thumbnail for this video i thought you were going to blame me !

[@afonsodeportugal]

Interesting video, thanks!

[@circuitdotlt]

There should be rules for getting and continuing to use credit cards. Similar to buying a house, where you need certain income. To me, an european, credit card is a weird thing. Never had one and donmt see a point in it. I mean, if I can't buy something small with cash I already have, I probably should not buy it. From smartphone to pizza. A house or a car is different story, but you should not use credit card for it.

[@reubenmorris487]

There are rules for maintaining credit cards and credit lines. Haven't you been reading about people's credit card limits being reduced, and at times, credit card accounts closed? Financial reviews, constant credit monitoring...they're watching...

[@bladder1010]

I had to watch an ad from Capital One Mastercard before this video started. 🥴🥴🥴

[@BillZBubb]

It seems to me credit scores were the next predatory step in this evolution. You need a good credit score to get a home mortgage, or even to get into a rental, so people turn to credit cards to build a credit score. Then they have you hooked. All American life has become pay to play.

[@sm5574]

11:28 I question the accuracy of that study. I use my bank card as a "credit card" when making purchases because I don't want to use my PIN. That counts as a credit transaction, but it acts the same as a debit transaction.

[@PascalGienger]

I use credit cards because of the protections and I pay the off at statement date or before (to prevent to much debt reported to the bureaus). Why not the debit card? If the debit card is stolen/card data is leaking - purchases immediately limit your checking account. Until the charge can be successfully disputed - your account may be locked to a small amount. With a credit card it does not get out of your checkings account. You have all the time to dispute and to do a charge back without limiting your daily life.

[@douglaskeen873]

People choose to get into debt. No one is forced into debt. A financial education, self-control, and long-term perspective prevents getting buried in debt.

[@chrisupton31]

Debt to GDP is out of control... Solution: %0 interest and money printing... Inflate away the debt.

[@cautiousoptimist1926]

Is that possible with this level of debt? I don't think it can be done without dangerously devaluing the dollar.

[@MisguidedPolicyIsBurdensome]

Do you address the structural deficits? As in, as you increase revenues via monetary inflation, do you keep expenses capped or do you continue to allow them to move with the devaluation of the currency you are essentially robbing of value? Further, do you embark on this plan with the knowledge that the current US economy relies on a substantial amount of imports? Do you enable imports to become unaffordable due to the destruction of the purchasing power of your currency or do you succumb to the pressures to essentially subsidize the imports your own policy makes far less affordable? As you devalue your currency, do you keep the same denominations of physical currency? If you do, you may be imposing additional handling costs due to currency that requires high volume to retain the same amount of buying power.

[@aspensulphate]

@@MisguidedPolicyIsBurdensome I think the OP was using sarcasm.