Those that carry CC balances: Why?

[Turbobuick]

ahh... folks buy stuff on credit because they need or want something and don't have the immediate cash. Life happens. Not a difficult conclusion. 

[tacpoly]

---

@Anonymous wrote:

With mortgages I think it's a little different.  Say your looking at houses that are around $300k just to throw a number out there.  You know you can afford a down payment (no PMI) and a mortgage for a house priced at $350k, so you're essentially trying to give yourself a $50k buffer.  When looking at houses, it's natural to see what that extra $50k can get you.  You find youself looking at $339k-$349k houses because you see that the extra $40-$50k gets you 2-3 more things on your wish list.  And, after all, you can "afford" it.  A house is a pretty major purchase and usually one you want to be happy with for a very long time, so I think people squeeze out as much as they can and/or max out their budgets as a result.

---

I wasn't talking about price creep.  I was talking about people who do 100% financing (some even put the closing costs in) to buy a house.  They saved nothing yet they take on major debt (mortgage) with no consideration of what would happen if there was a downturn.  And they're starting out with negative equity on the house.  The question to ask is if a person can't save enough money to put any down payment towards a house, then isn't he pretty much living on the financial edge when he takes on a mortgage?  If not, he would have some savings, wouldn't he?  What happens when the economy tanks or a major personal financial crisis occurs?  Where is the cushion that would allow him to stay in their house -- or do we have another foreclosure crisis? 

Anyway, my point is that the same thought process (or lack thereof) that allows a person to carry cc balances probably takes place when a person takes on a mortgage when they do not have any down payment.  That is, they don't consider the additional costs involved with immediate gratification vs waiting and saving. 

[sarge12]

---

@tacpoly wrote:

---

@Anonymous wrote:

With mortgages I think it's a little different.  Say your looking at houses that are around $300k just to throw a number out there.  You know you can afford a down payment (no PMI) and a mortgage for a house priced at $350k, so you're essentially trying to give yourself a $50k buffer.  When looking at houses, it's natural to see what that extra $50k can get you.  You find youself looking at $339k-$349k houses because you see that the extra $40-$50k gets you 2-3 more things on your wish list.  And, after all, you can "afford" it.  A house is a pretty major purchase and usually one you want to be happy with for a very long time, so I think people squeeze out as much as they can and/or max out their budgets as a result.

---

I wasn't talking about price creep.  I was talking about people who do 100% financing (some even put the closing costs in) to buy a house.  They saved nothing yet they take on major debt (mortgage) with no consideration of what would happen if there was a downturn.  And they're starting out with negative equity on the house.  The question to ask is if a person can't save enough money to put any down payment towards a house, then isn't he pretty much living on the financial edge when he takes on a mortgage?  If not, he would have some savings, wouldn't he?  What happens when the economy tanks or a major personal financial crisis occurs?  Where is the cushion that would allow him to stay in their house -- or do we have another foreclosure crisis? 

Anyway, my point is that the same thought process (or lack thereof) that allows a person to carry cc balances probably takes place when a person takes on a mortgage when they do not have any down payment.  That is, they don't consider the additional costs involved with immediate gratification vs waiting and saving. 

---

I think a lot of times people are unable to save enough for a down payment because they are paying high rent, creating equity in a house someone else owns. If you have a 30 year mortgage the payments are often very high at first but later, as everything else goes up with inflation including salary, the mortgage stays the same. Rent however, will often increase along with inflation. If your options are 100% financing on a house, or paying rent that will go up and never have equity, I would choose buying every time. If you have no down payment though, you may have to start with a less expensive house until it has enough equity to provide the down payment on your dream house.

[2b2rich]

 I Only ever carry a balance when ive had to use the card for an emergency, (which is one of the main reasons i hvae them), but only then i use my lowest interest card and i dont take my time paying it off either. It may take me a couple of months, but its also where all of my extra $ goes until it is.  (And yeah, i was once there too, where i didnt know better.  I used the snowball effect to get out from under it and dont ever want to go back.  When i realized that i could be spending that $200 - $300 a month on something else, that i was paying for interest, it was a real eye opener).

[Enjay]

I've had a lifelong emotional spending issue. When I'm upset, I don't drink or have promiscuous sex; I buy stuff. I have it under control now, but I've twice run up huge balances only to have to go all Dave Ramsey for a year or two to pay them off. I've been fortunate that my income has allowed me to do this without it having a negative effect on my credit.

Here's to hoping that I've learned my lesson. I think I have but time will tell. This is also a reason that I don't chase CLIs or open new cards very often (I've opened 1 in the past 9 years).

[Anonymous]

---

@Gunnar419 wrote:

---

---

I carried balances of between $2k and $4k for many years. It was on a low-interest card and I no longer do it since getting a MyFico education.

---

I hear that!  There are probably quite a few people on these boards that possess that train of thought at this point.

[Anonymous]

---

@tacpoly wrote:

---

---

I wasn't talking about price creep.  I was talking about people who do 100% financing (some even put the closing costs in) to buy a house.  They saved nothing yet they take on major debt (mortgage) with no consideration of what would happen if there was a downturn.  And they're starting out with negative equity on the house.  The question to ask is if a person can't save enough money to put any down payment towards a house, then isn't he pretty much living on the financial edge when he takes on a mortgage?  If not, he would have some savings, wouldn't he?  What happens when the economy tanks or a major personal financial crisis occurs?  Where is the cushion that would allow him to stay in their house -- or do we have another foreclosure crisis? 

Anyway, my point is that the same thought process (or lack thereof) that allows a person to carry cc balances probably takes place when a person takes on a mortgage when they do not have any down payment.  That is, they don't consider the additional costs involved with immediate gratification vs waiting and saving. 

---

Gotcha.  I must have missed the part about no down payment.  I see what you are saying.

[Anonymous]

---

@Turbobuick wrote:

ahh... folks buy stuff on credit because they need or want something and don't have the immediate cash. Life happens. Not a difficult conclusion. 

---

And that wasn't the purpose of this thread, but thanks for the contribution.

[sarge12]

---

@Anonymous wrote:

---

@Turbobuick wrote:

ahh... folks buy stuff on credit because they need or want something and don't have the immediate cash. Life happens. Not a difficult conclusion. 

---

And that wasn't the purpose of this thread, but thanks for the contribution.

---

BBS...the question originaly posed reminds me of a conversation I had with a co-worker a few years back. He was a college graduate, mind you. He was complaining about credit card debt and I asked him why he did not PIF. He said that his monthly expenses were just more than his pay. I went over his expenses with him, which were about the same as mine and he made the same amount of money as me. Then he showed me his paycheck...much less than mine. He had put 0 dependants on his witholding form. I told him he needed to change that, but he argued if it were not for the 5000 dollars he got as a refund, he would never be able to pay off his credit cards. I kid you not, he was loaning the Feds 5000 dollars a year at 0 interest, which caused him to carry a balance at 24.99% interest on credit cards. I gave up arguing how stupid that was.

[jason0618]

I have a balance of $1.00 on my credit card right now, and last month I paid $0.54 interest from carrying a balance because I'm trying to rebuild.
I remember the day many years ago when I was going through some credit card statements and came across one that woke me up. I had taken out a cash advance on a credit card for $20 because I wanted mcdonalds. (This is before they took plastic) that was the only cash advance I ever got on the card and over a year later, I was still paying interest on that cash advance because of how they posted payments. A year of interest for a Big Mac. Paid it off and didn't pay interest again until I got to my bankruptcy stage.