Because credit card rates are so much higher now than they were in the past, even a mild recession could crush those who carry credit card debt. The current national average interest rate on credit cards is 17.61%, just shy of the record set in July. By comparison, the average credit card charged about 13% when the Great Recession began.
According to CNBC, this overlooked issue of high-interest rates on consumer goods and credit card purchases are going to be incredibly difficult to pay for people during the next recession. Whether it’s mild or severe, and an economic downturn could really hurt those carrying a balance.
Nearly 25% of Americans Are Using Debt To Pay For Necessities Like Food
The so-called “private label” credit cards (often known as store credit cards) are experiencing the highest severe delinquency rate since 2011, according to Equifax. Delinquencies are ticking up even amid the media’s glowing reports of a “10-year economic expansion.” The Consumer Financial Protection Bureau reports that in 2018, about 9% of general-purpose credit cardholders and 4.5% of private label cardholders had at least one severe delinquency in the preceding 12 months.
Millions of Americans are living dangerously close to the financial edge.
Living Paycheck To Paycheck: The New Crisis And Normal For The American Middle Class
Just 35% of Americans have enough savings to cover three months’ expenses, and 28% have no emergency savings at all. Additionally, 39 million U.S. adults have been carrying credit card debt for at least two years, and another 8 million can’t recall how long they’ve been in debt. A quarter of debtors expect to die in debt. All of this despite an extraordinarily low unemployment rate of 3.7%. I fear what could happen to credit card debtors if that rises to 5%, 6% or 7%, let alone the 10% we saw in 2009. –CNBC
The Federal Reserves states that the average American holds $5,700 worth of credit card debt. That means cutting the interest rates a quarter of a point would only save them $1 on their minimum payment. It also means those minimum payments would stretch nearly 20 years and cost about $7,500 in interest (more than double the principal).
Credit cards are often a trap for the middle class in the United States, as people fall victim to consumerism and the ease of paying with plastic. This trap could crush them during the next recession, so take the steps necessary to prepare for an economic problem early.
There’s one sure way to whip your finances into shape, and that’s with The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness
By now, you’ve heard all the nutty get-rich-quick schemes, the fiscal diet fads that leave you with a lot of kooky ideas but not a penny in your pocket. Hey, if you’re tired of the lies and sick of the false promises, take a look at this—it’s the simplest, most straightforward game plan for completely making over your money habits.
Hmmmm, the last thing I will be concerned about is paying a high interest rate credit card bill. Food, water, shelter, protection will be where all resources go.
After some years of preaching frugality, and being ignored, a part of me wants to become a predatory lender.
I all ready am.
I buy Tbills, you pay me interest.
I pay myself interest every April 15th.
When the hurricane slammed into Houston, I bought Home Depot stock, after they said the flooding caused 600 million in damage. I was going to sell it after a year, but then another hurricane hit, then another. It’s up 50% from where I bought, and it pays a big dividend, far more than cash in the bank.
Regarding dividends, if I buy a hundred shares of a stock at $100/share and it goes to $150. My investment was $10,000. The dividend is then reported as 2%, but my investment was based on my $10k buy, not the $15k current value. My real return on investment, (ROI) is 3%.
This is the buy and hold argument for stocks that pay good dividends. It’s all about ROI.
Warning, don’t run out and buy Home Depot stock now, after the run up I described. The market is in nose bleed territory. If HD stock drops 15%, I will sell and take profits. I present this as an example of the value of a good dividend paying stock. Even if the stock goes flat for the next two years, it’s still paying me a great dividend, that is income at a max 20% tax rate.
As a prepper I watch the market for bargains, just like I buy food and household goods in bulk and use coupons to save. I also am not ashamed to exploit a natural disaster that people didn’t prep for to line my pockets.
Stay alert, stay ready.
This assumes you plan on paying of the card…
I love this solution,
Click on the Amazon link near end of story be,
get out your credit card and waste $20 on this two bit hack,
just so Mac,
can get fat,
off a $1.00 affiliate fee.
The book ends up in the trash can, never read.
Because those in debt are too stupid and/or lazy to earn.
Because the obese are too lazy and irresponsible to diet.
Because felons are too stupid and/or lazy to earn.
Because entitlement people are too stupid and/or lazy to earn.
Because illegal aliens don’t care about laws.
BECAUSE ANY SORT OF WORK IS VERBOTEN TO THE STUPID AND LAZY.
BECAUSE MOST ADULTS ARE FUNCTIONING LIKE FIVE YEAR OLDS THROWING TEMPER TANTRUMS —gimmie that mommy, gimmie that!
“BECAUSE MOST ADULTS ARE FUNCTIONING LIKE FIVE YEAR OLDS THROWING TEMPER TANTRUMS ”
Perfect description of Democrats and their party.
Rellik, I’m debt free and sitting pretty with several years of supplies. I knew I was doing something right all these years avoiding credit.
Bert, you are a dick.
I’ve bought many prepper books, and I must confess I did not read my 600 page SHTF, no doctors available medical manual cover to cover, but is one of my highest regarded printed resources.
I have no issue with Mac having prepper related advertisers. I can’t imagine what your real issue is. Perhaps you are infected with liberalism, which is a known mental illness.
Bert, you just gave the perfect description of libturds/democrats.
Unemployment at 3.7% ? You believe that and I’ll sell you a fridge at the north pole.
Hey, this is America, just file bankruptcy and go have a $6 dollar latte. (sarc)
Correct Jim and that is what will happen. The banks will try to get cc debt protected like student loans, or they will lehman
The problem with telling people to go debt free (which is the right place to be) is the fact we live in an economy completely dependent on consumption and debt. The reality is many employers and companies pay late or delayed by many months for completed work: this is a mockery of exhortations to the financial and moral benefits of working hard. How many here run businesses that pay suppliers and employees late?
It is also a daisy chain: the big contractor waits half a year or more to pay and everyone else down the chain gets paid late. To survive and pay rent etc.people take on debt.
Donald Trump in the 1980s clocked where the US economy was going and he developed the idea of staying in a technical state of poverty and bankruptcy in order to keep the banks propping up his businesses. If you owe the bank $10,000 they own you; if you owe the bank $100 million then you own them. That’s why he always filed a tax return stating no income for the year. The government can’t tax what isn’t there.
It is taxes that bury people in debt and drive people into poverty and bankruptcy. Why? Because you can avoid most things but you can’t avoid what you owe the government. And let’s face facts: the majority of the money taken in taxes goes to fund the military, wars, secret programs etc. Smart people know this and build in distance from the government so they are not working all hours for the government.
Offshore your profits. If you are a little guy organise your finances like rich guys do. Set up family trusts, offshore accounts, put the business in the wife’s name, employ yourself, etc. There are a zillion ways to reduce or take to zero your tax load. And then you want be going into debt to survive.
When it happens no one will care about paying back the bankers who caused it.
When it happens no one will care about paying back the bankers.
“Your wants are many, your needs are few”. As time goes on the generations after the Great Depression have been increasingly blurring the distinction between the two. This is why living frugally is considered, “old school” and now you would have a difficult time explaining the difference to a millennial. They’re about to get a crash course clarifying their understanding.