Not sure if it is our "values" that changed. As much as the predatory practices of Credit Card companies.

Back in "the old days" getting a credit card was a process. You went to your bank, you applied, they checked you credit--and you may or (gasp!) may not have gotten a card.

Flash forward 40 years where credit card companies realized they could make MUCH MORE MONEY from APR then credit card fees--so they simply give a card to anyone, regardless of credit risk.

I'll admit to some credit card debt that has been used to keep me afloat as I finish my last year of college.

But I also have the option of living at home rent free after graduation, so I can pay it off (my mom's condition of me living at home rent free).

I feel bad for this lady. All it takes is one incident to send you headlong into debt.

We're willing to do this to ourselves because our desire for stuff - electronics and that sort of thing on a smaller scale, owning our own homes and cars on a larger scale - knows no bounds, and credit offers us a way to get it fast, and worry about the consequences later. Banks are just happy to exploit this fact of human nature. Predatory fees and lending practices certainly aren't helping matters.

Between this lady tossing money out the window on cokes, smokes, and purses I tossed away an sympathy I could possible have for her. She included her son's income on one of those loans in order to get it. I guess it never dawned on her that they don't really want to just give you money without some way of getting it back.

One word happened to us: Greed.

We've become a greedy nation full of entitlement issues. I deserve a plasma TV (right now), even if I can't afford it.

American Debt Discussion Cliche checklist:

1. ...using their homes as an ATM.

2. ...latest, greatest and biggest flatscreen tv.(somehow universally the pinnacle of excess)

3. ...keeping up with the Jonses.

4. ...SUV...Hummer...gas guzzle...

5. ...3000 sq ft....pool...jacuzi...

IMHO, it's like this: the lenders issuing loans and credit cards got put under more and more pressure to make higher profits. Once you've tapped out the market of responsible people, it's time to hit the irresponsible ones, and overlend to the (formerly) responsible ones.

Of course, overlending and lending money to irresponsible people is stupid, unless you can figure out some way not to lose money when they default, hence the insane fees and crazy interest rates. The problem that the lenders are now running into is that they didn't do their math right in terms of pricing that risk into the money they were lending out - which is why they're getting totally smashed in earnings.

This isn't to put all the blame on the lenders - at best, they enabled the situation to happen. There's also a culture of conspicuous consumption involved, not to mention the marketing involved. Ultimately, both parties made their bed - now they should be laying in it - by themselves!

Been there... and I'm almost out of this vicious cycle. My family finally concluded that possessions are not important. I'm sure you can guess where my stimulus check went towards.

I know a couple who got a five-figure cash advance on two credit cards for some home improvement work. Two months later the money is sitting in a checking account and they haven't chosen any contractors. It makes me want to scratch my own eyeballs out.

It all boils down the increased pressure to "grow" a company by its stock holders, instead of focusing on building long-term, solid foundations on long term investments.

The main people at fault are the investors in our society that changed the practice of investing long term, for the "glory" shot at high risk, short term investments. That fundamental change meant that publicly owned companies had to push harder for profits and take much greater risks to get them to keep investors sinking their money in them.

Instead of buying 100 shares of "Coke" and keeping them for life to retire on, a person will buy 1,500 shares of "Google" and dump them when they have made a 15% return in one month. (for example).

Its not so much "wrong" to maximize your profits from your investments, but people need to realize the attitude shift towards investing by the average person, wanting to be a wall street hot-shot.

In the end, you wind up with companies like the ones we have, maximising profit at the expense of everyone, including consumers that it should rely on for stability.

It's not just greed, it's also the rising cost of living. People haven't been able to adjust their spending habits to accommodate these changes. Coupled with declining wages, benefits and people now have to pay more for more things. Health insurance, food, gas, utilities all have gone up more than incomes.

CitiBank was pretty quick to throw me a $1000 credit line card when I'm only 19 and have absolutely no credit history. Granted I stay on top of my bills and pay it off, but thats still quite high for someone with no credit I think. I'm sure they're hoping I default my account so they can cancel my 6 months 0% apr and get me going on that lovely ~28% apr!

@arthurat: Possessions aren't important? Do you not like sleeping on a bed? Do you enjoy living on the streets, naked?

There's nothing wrong with enjoying the wonderful stuff on the market. The key is moderation and responsible spending.

Ummm is it really that much of a mystery?

The article explains that as few as 40 years ago, we were a thrifty nation full of "savers," and that banks were focused on whether or not you could repay your loan and not the "fees" they could get from loans before they were sold to investors.

Banks etc... were sold to investors, investors don't want you pay off your loan/debt they want you to pay their fees. Why else do you think credit cards have fairly high interest and fairly low payments? For the people lending you the money, having you pay them $100 of which $99 are interest is great. From an investment point of view, the annoying thing about loans is how they eventually start making you less and less money as the interest is paid first and then the principle.

From that perspective, why the hell wouldn't they want you to refinance every few years forever? Aside from getting more money in closing costs etc... they get more money in interest payments and if they can get you to refinance your house every 2 or 3 years for a decade, a 30 year mortgage effectively becomes a 40 year loan with big interest payments for the first 15-20 years that you have it.

In a nutshell, the banks were sold to investors. Greed became the name of the game, banks taught consumers to live off of credit cards, loans and implicitly got them to accept the idea that they'd be paying off their debt forever and guess who ends up winning? Think about it, how many people realistically plan to be debt free anytime in the next couple of years? next 5 years? 10? Heck, most consumers probably don't even think that far ahead... certainly not in any concrete terms where they have a realistic plan for improving their financial situation in the long run.

@Burgandy: She lost me when she bought a house with $25,000 credit card debt!

My husband and I bought our house with no money down. I'm not sure it was the best decision but we made it. I had $0 credit card debt, he had $300 from his stupid days of "not paying makes it go away!", which we easily paid off prior to closing. We had enough in our savings to give us a "Slush fund" to make the bank comfortable.

If my husband had even $1000 in credit card debt, I would have said no way to buying a home until it was paid. $25,000!

@CreativeLinks:
Isn't that a little easy? It's the bank being predatory!!

No, it's being greedy. Just because someone offers you easy credit doesn't mean you have to take it. Nobody put a gun to anybody's head.

The part of that feature that amazed me the most were the figures chronicling Americans' debt to savings ratio for the past 100 years. Apparently, the average American saves less than $400 a year. That's stunning to me.

Commenters, how do you save? Direct deposit to your ING account? Money under the mattress? Change in the cookie jar?

I think it's a snowball effect. Most companies, as mentioned, were sold to investors and the only thing they look at is profit. Unfortunately constant focus on profit can lead to some poor decisions which, when done in places like the financial sector, can have some major impact on the economy. All of a sudden banks are, again as mentioned in the articles, worried about the fees they can collect and you have crazy things like ARM loans and jumbo loans. Health care also seems to suffer from this as any consumerist reader is aware.

Yes, consumers have been irresponsible. But most people want what they can't have and want a better life with nice things. Financial institutions offered that with some nice fine print that has ended up screwing a lot of people. I have a hard time believing bankers and accountants are shocked that ARM loans, credit cards with huge interest rates, and all of these things that push irresponsible spending habits have come back to bite them in the ass. You just can't be surprised that if you offer a guy making $20k/yr a loan for a $400K house he's probably going to have some trouble paying for it.

The thing is that yes, we as consumers have screwed up, but what really wrecks the economy is when big companies screw up. Now we're in a situation where the dollar is a fraction as strong as it used to be, food costs more for less due to recession of the economy and the rising cost of transporting and producing that food, health care is insanely expensive and will drop you without a second thought if you get seriously ill, but companies are not giving raises to compromise for these raises in living.

Yes, some folks get a 3-5% yearly "cost of living" raise, but the cost of living has risen way more than 3-5% for the past few years, especially if you factor in gas. As far as I see it the government can send out all of the stimulus packages it wants but this will all be useless until corporations shift some money from that multi-million dollar bonus/golden parachute/whatever to their employees. Unless the consumer has the spending power it doesn't matter how much money your CEO makes, companies and banks are going to continue to tank.

That's just one I.T. worker opinion that's had a few college courses in micro/macro economics and I'm sure I'm just completely off base and rambling.

hurkon is exactly right.

Surprising number of people do not think before spending money and they are really bad planning things ahead. I myself live in a pretty tight budget. Since I'm still paying back my school loans I really don't save any money at the end of the month.

Since I can't save any money there really isn't any protection for me when I get sick or lose my job and such. So as bad as it sounds I have my credit cards as my backup plan since I know that I can live for a year without working just on the credit card. Having all these readily available doesn't mean you can just buy more things, you should really save them up so that you can get by when you are forced too.

When you get a 2000 line of credit it doesn't mean that you should now buy yourself a new Macbook and an iPod. Yet sooooo many people does this, again and again, until they run out of options.

@friendlynerd: It really goes hand- in-hand.

Yes, people shouldn't be spending outside their means, they shouldn't be buying 300k homes on 60k a year, but when several "professionals" repeatedly tell you you can do this and show you nifty graphs and charts and "plans" that detail how you can do that, then tell them that you have to do this...That is where the banks need to take some responsibility.

A professional shouldn't be looking to "take advantage" of anyone, which is what banks are doing now.

@mindshadow: The amount being spent on those bonuses doesn't really add up to much on the grand scale. Labor is already the number one cost at almost all companies.

Stagnant wages aren't really the issue, except on the lowest end of the spectrum. People aren't using credit cards and loans to buy flour from the store, they're using them to buy luxury items and homes (and homes are a luxury if there are apartments available).

*has a BS in economics*

@friendlynerd: Eh, I don't think it's that easy.

If you look at the motivation of the people lending the money, it seems pretty clear that the people really being greedy (as defined by wanting to make as much money as possible) are the ones running the banks/credit card companies etc...

Consumer behavior is just a learned habit and it's a function of so many people believing that it's ok to buy everything on credit and spend the next 50 years trying to pay it off. Keeping up with the Jonses (which, don't kid yourself, has always been around) takes on a whole new dimension when everyone else is doing the same stupid financial things largely at the insitance of the banks etc...

Humans are social creatures and they tend to learn from their friends and families. Why do you think that places like the consumerist tend to attract so many people with comparable viewpoints? We all want to try to better our lives and not get screwed over by various companies out there and it's nice being around people who in one way or another share that goal. Unfortunately for far too many people the folks they're around get them thinking that it's ok to never pay off their debt in full because that's what everyone else is doing and the banks just facilitate this because they're the ones making all the money.

@l951b951:

Agree. My 19 inch Target special is holding up just fine, though I refuse to give up my Tivo.

My mom gets a small disability check each month (not old enough for SSI), yet she manages to help me with books each semester and have savings.

She doesn't watch TV, so no cable. No car, all public transit or walking. No cell phone (she refuses to get one) and no credit cards. All her clothes come from thrift stores (she does her own sewing and mending). Her only vices are cigarettes and Coca Cola.

Trust me when I say, I'm taking her advice on finances and budgeting very seriously.

I consider myself quite cautious when it comes to credit cards. I have a few at the moment, but they are cards i can only use at certain merchants (Kay Jewelers, Metro Mattress). I will not get a VISA or Mastercard because i know i will be irresponsible with it. I agree that the practices of Credit Card companies could be improved, but i dont feel an ounce of sorrow towards this woman. She should be her own first line of defense at not getting screwed. People need to start realizing that companies these days are out to MAKE MONEY and NOT help the consumer. In the "old days" companies actually wanted to help people. Not the case these days. If you wanna keep screwing yourself into debt, why would these companies give a crap?

I think the problem is that our values didn't change fast enough, because we didn't perceive what was going on. We were still operating under the old system, thinking "if the bank lends this money to me, it must be okay to spend it," while the banks went over to a new system without reasonable limits. We expected those limits to be there, but we never ran into them.

It's irresponsible as hell to lend money without the considerations that used to be in place, but at some point we really should have figured out that the game had changed -- you know, before disaster struck. It's not the bank's job to keep us honest, though I submit that it is the bank's job to lend only that which can be repaid.

The populace finally adopted the spending habits of our government. If the a little deficit is good for the Government, it should be good for me as well. I wish Master card would understand that!

This isn't just the fault of the borrower - this did not happen in a vacuum.
Credit card companies offered cards to people they know are credit risks, people took the offers and were later charged outrageous APRs and fees which increases their debt even if the person is paying more than the minimum amount. (Sure the offer details arrive with the card, but try reading through that if you don't have a financial or legal background.)
If the card holder's credit report changed negatively, the credit card company increased the card holder's APR putting them into more debt.
The issues with credit are not just the borrower's fault, credit card companies want to increase profits by charging fees for everything and raising the interest rate for borrowing to the very people they knew were risky from the start.
Yes, we used to be a country that valued saving money, but then there were all these ways to make more money and faster - which now means a lot of people are in danger of losing their homes and some have already lost the money they thought was safe in a savings account.
I am looking forward to credit card reform. Sure, people need to borrow more responsibly, but credit card companies should also lend and conduct themselves more responsibly also.

I say both. Banks and CC companies are focused on profits not on serving their communities and Americans are focused on keeping up (cost of housing, college education, health care has all gone up) and keeping up with the Joneses. This NYT series has a really interesting and scary graph that shows how the saving and debt rate has changed since the 1920s.

My husband and I are off credit cards (although we still have a card for travel purposes) we paid off $50,000+ in debt (student loans, credit card debts and home improvement loan) and have resolved to live like our parents and grandparents did. We have a budget, we only spend current dollars, we have a $20,000 emergency fund, we are saving for retirement.

When we want something above our budget we save up for it. Right now, while my peers are all driving luxury leased cars that cost them $600 - $1000 a month I'm driving my paid for car and saving for a nused car. I won'd buy the next car until I can pay cash for it. We live a good life but its not always easy to be different.

@loquaciousmusic: I've had my share of savings and credit problems. After I polished off my credit card debt, I joined a credit union and split my direct deposit between my bank and my credit union so that about 10% goes into my credit union account. My credit union's branches are too inconvenient for me to drive to on most days and I don't have access to my savings through my credit card. I've saved over $2000 the past year, I'm shifting things up so that I can save even more now. It's a healthy addiction to save money. I was saving up to buy things but now that I have more than enough I don't want to lose the money.

I refer the honorable gentleman to the title of this blog.

One word: Entitlement.

What sucks is I pay off my CC every month, I put 20% down with a fixed mortgage, I don't have kids or new cars or Iphones because I realized I didn't really want that expense, I've worked practically every day of my life since I was 15, and now I have to pay for all these f*cking idiots out there that are too stupid to do about 5 minutes of research when buying a house. So my 401k has to suffer. And my insurance goes up. And my grocery bills go up. All because America is filled with retards. I give up.

@Burgandy: Yes, I read this artcile and the picture on the inside really bothered me. She was sitting at a table littered with soft drink cans and ashtrays. Yet she complained about health problems that led her to this point. Here is an idea: eat better and stop smoking! As for the purses, why did she have to acquire so many? She was already working two jobs through much of the events that transpired. Shouldn't trhat have been a flag to save some money so she would not have to be in that position?

I know it is easy to judge. I do. And I will be the first to admit that I have some vices (hello, shoes!). However, I have a budget every month and I save religiously rather than buy all the shoes I want.

@Youthier: "If my husband had even $1000 in credit card debt, I would have said no way to buying a home until it was paid. $25,000!"

Wow... When my wife and I bought our house, she had ~$10000 in student loans and together we had ~$20000 in credit card debt. That was 12 years ago, and not only have we paid off our various other debts, but we're now ahead of the game on house payments, on a house that is now worth 2.5 times as much. If we would have waited to buy a house until we were debt free, we would have bought it ~3 years ago, and be stuck with a house that was worth less than when we purchased it.

I'm not saying that it was smart to have that credit card debt, but buying a house when we did was the smartest thing we've done financially. Too many commenters here automatically assume that people that use credit cards are idiots (with a subtext of "why are those people allowed credit anyway!"), but a few years back that was the typical American, and most people survived.

$1000 would be too much? Wow, that is one month's apartment rent. Personally, if I was buying now that is probably what I would do - charge 2 month's rent (if possible, which I'm pretty certain it is) so I would have SOMETHING for a down payment.

To each their own.

I'm not sure I agree with not buying a home when you have credit card debt. As long as you don't continue your poor decision making and agree to a Variable interest rate loan.

A mortgage for $135K at 7% is somewhere around $900 a month. You can easily pay that much for rent depending on where you live.

Now obviously she made some startlingly bad decisions, but I think that commenting on her bad decisions is off point.

I think the point here (which many have eloquently explained) is that even in these rough economic times the banks out there are seeing people in trouble with their debt as an opportunity to make a quick buck.

@jst07: I had a very similar experience at Chase. I recall the banker not actually explaining the APR or any other feature to me, and sort of strong-arming me into the card. I expect they were counting on me to rack up debt due to my ignorance or inexperience, so while I'm responsible and carry no debt, it makes me worry for the people my age who aren't as knowledgeable, or aren't as responsible, or are just not in as good a financial state as I am. Financial mistakes you make in your twenties can and will follow you for a loooooooong time.

@Erwos: Right, good point. I'm speaking more-so on the lower end of the spectrum, since I guess that's more where I fall. There are a lot of people spending money on stupid things, but at the same time I believe that's more of a learned habit (or a lack of learning). Also we are a very over-worked society (least vacation of any 1st word country etc etc), so can it be a big surprise that people feel they need to "reward themselves," even if it does dig them into debt?

What really sucks is that we have such a broad spectrum of businesses and what they can afford. McDonalds or Wal-mart could technically easily afford to pay their employees two or three times what they're making now, but a small business may be struggle to pay minimum wage if it can afford employees at all. But consumers want the lower prices and don't want to pay for the added cost of a local small business that cares about you and wants your business.

What I'm saying mostly is that it's all our fault. Until there is a shift in both consumer spending and corporate culture things are going to continue to be the way they are. People will still buy big SUVs to transport one person in, huge McMansions, and eat out every night, and the financial institutions will continue to offer that lifestyle to them knowing that it's not sustainable.

@SadSam: I applaud the effort you put into getting your finances in order, but it's not always best to be entirely without debt. Student loans, investments (e.g. property), sometimes even vehicles can be reasonable places to be in debt.

The key is to be smart about the sorts of debts you get and make sure that you're not paying interest and whatnot on frivolous things. For example, I own rental properties that I built and financed with loans, would I rather have paid cash for them? Sure thing, could I have? Nope. However, right now I'm making a decent bit more in rental income than what I'm paying in mortgages so the net result is positive (I have assets with decreasing liabilities AND I'm getting income from them). I bought a used truck a few years back and I financed it because I realized that my then current truck was costing me about what a car payment was every month in mechanic's fees and maintenance PLUS all the time I was losing from having it break down. Again, I would have rather bought it cash, but looking at the finances, financing it wasn't a horrible idea and I'm almost finished paying it off, ahead of schedule.

Finances aren't cookie cutter. Not all debt is evil, not all debt is good. Being totally debt free can hurt you in the long run (i.e. if you're debt free for so long that a lot of your credit history falls off your credit report it can be more difficult to borrow money if/when you need it in the future). People need to learn to evaluate their finances and make smart decisions based on their actual situation, not "rules of thumb" that don't take into account their actual lives.

At one time I had almost $20K in revolving charge debt, including plastic. Now I pay it off in full, every month. Our house almost half paid off.

I put 12% of my pre-tax income into a 457-b deferred compensation account; my wife is doing 20%. Between that and my pension, we should be OK even without depending on Social Security benefits.

To quote Vincent Pastore, host of "Repo Men: Stealing for a Living", "If you can't afford it, DON'T BUY IT!"

@moneywrangler: Oh, I so agree. I am a liberal at heart but when it comes to things like this I am as conservative as it gets. I had an ARM when we first boughto ut house, and I knew that my options within five years were: buy a new house or refinance. So we did the latter after two years and locked in the same rate as we had with the ARM. Plus we had equity built up, so no more PMI. Now I am being asked to bail out people who did not plan and think...it kills me. I don't think I should have to bail out companies, either.

We want to move into a new house but we know now is not the time. And I am not willing to leverage every little bit of savings I have to do so. I need my rainy day fund to sleep at night. And I am not about to raid my retirment savings. I plan to NOT live on Social Security when I retire, and in all honesty it probably won't be there for me, anyway.

@loquaciousmusic: 10% of monthly after-tax income into savings, 15% of monthly pre-tax into 401k

@akalish:

Bingo. I am on the edge of a generation that believes they deserve everything for nothing. We look at our parents and see the nice things they have and don't think about how much hard work and sacrifice it took for them to get those things. There are a lot of people who just buy buy buy...

@Loquaciousmusic: Personally, I split my money between paying off my credit card and putting it into savings. $500 a month into savings is nothing to sneeze at, especially when it's automatically handled by Ing. Thinking about buying a house next year, once I get more money into the bank and the car paid off.

I think this is all happening because Bill Clinton had sex with an intern.

Yup. That's gotta be it.

I think part of the problem is here:

Hers was a pay-as-you-go family, she said. Although money was not discussed much around the dinner table, credit card debt was not a part of her parents' financial plan, and sometimes personal purchases were put off.

I see 2 ways in which the government has interfered with the market, causing people to save less. The first is inflation. When money is worth less tomorrow than it is today, people are disincentivized to save. The second is social security. Social security can't keep you afloat through retirement, even though many expect it to. Imagine what we could do if we were allowed to keep 15% of our paycheck? If Americans were forced to be responsible with their money, and had more of it to be responsible with, they'd be better off. Sure, some people would go out and buy new TVs and houses instead of saving, but that's their choice.

It's not just because people want to buy plasma TVs. I went to some rough years of underemployment and my debt accrued to $20,000. Once I started making a living income, I started paying it. That's when the bank started coming up with tricky stuff, like arbitrarily changing my due dates so I'd have to pay late fees and raising the interest rate for no apparent reason. It was as if they didn't want me to pay it off. I finally did pay it, but it took a lot of sacrifice (I lived under the same conditions as when I was underemployed) and a lot of fighting the bank. I think -for most people- the reason they get into debt is desperation, and for corporations, pure and simple greed.

A lot of problems explode into existence when factors that used to constrain our behavior are suddenly removed. People were more thrifty in the past simply because credit was not obtained as easily. When you take away that constraint, people borrow more and become less thrifty. It's the same with companies. Banks used to be more selective about lending because the health of their business depended on getting that money back. No longer. Now many of them make most of their money off fees because they quickly sell off their loans. Getting the money back no longer constrains their decisions; that's someone else's problem. The "someone else" is turning out to be the shareholders of companies that are going under or the taxpayers who will be bailing out the mortgage companies.

Not everyone in debt is as irresponsible as the subject of the article, who I admit pisses me right off.

How is one supposed to start a massive retirement fund in one's 20s or early 30s when one pays as much monthly in student loans as in rent & utilities? It's a vicious, nasty cycle: without a college education, you only get low-paying jobs and stall out on the career track, but when you do go to the "better" jobs, you dump the majority of your salary into repaying your education.

(And my grad school debt I admit was a free choice, not a requirement, but in-state rates at my state university, where I did my undergrad work, were over $20k a year when I went, by the time you add room & board and books. I worked 20-30 hours a week during the school year and 40-60 during the summer pay for much of it but there's still only so much you can reasonably do!)

Everyone who can afford to save in their 20s, because your parents paid for everything until you were 21... go thank your folks and make sure to do right by them in retirement. Mine would have loved to, but couldn't, and it's going to be another few generations before we can do any better.