Credir card debt --staggering
- Thread starter NY_HOOD
- Start date
LOL uh hell no. The avg combined interest rate on that 30K debt is fixed for life around 3.5%. I have absolutely NO REASON to pay off this cash cow, specially since I've generated enough return to pay that amount off twice over and am working on third time over
God I love credit card debt!
Quote from huh:
LOL uh hell no. The avg combined interest rate on that 30K debt is fixed for life around 3.5%. I have absolutely NO REASON to pay off this cash cow, specially since I've generated enough return to pay that amount off twice over and am working on third time over
God I love credit card debt! [/QUOTE
You think it is 3.5% but no. You charge $1000.00 for example. You make minimum payment say $25.00. Now you have $975.00 owed, and add any new charges to your credit card. Now next bill comes in with $975.00 of old balance plus new charges of $500.00. New minimum payment is say$35.00. You pay $35.00 of the $1475.00. Now $1440.00 is still owed and interest rate is added to that balance. So you are not paying 3.5% of what you (actually) buy, but really 3.5% of what you buy and what you DID NOT pay for in cash. So whatever you have earned with trading or job is going to be negative against the interest rate of the credit card. The credit card company will take your money slow, but they still take your money.
No you don't understand the game I'm playing here. I've used the "fixed for life" convenience checks from different about 5 different credit cards to take cash out with those checks. The interest rate is FIXED at 3.5% until its paid off. The 5 credit cards sit in my drawer and haven't even been activated, they are never used to make any purchases therefore there is no new debt on those cards unless the credit card company offers me another fixed for life convenience check. So I am in fact paying 3.5%, the only goal is to take that cash I took out at 3.5% and put it somewhere that earns more than about 5% which is pretty easy to do. I've run this game with my credit card companies for almost a decade and I've been able to avg well over 5% per year return on that money thats been borrowed at 3.5%.
I have a couple of personal credit cards besides these that I use to make my day to day purchases and the balance on these cards is paid in full every month.
So anyway my point isn't to do any boasting about my schemeing ways but to make the point that on paper it appears that I am 30K in credit card debt and a lot of people would say I'm crazy or a deadbeat when the fact is that I'm using the credit card money at cheap rates to make more money for myself. So you have to be careful when looking at that 3 trillion dollar credit card debt because you don't really know how much of that debt is there on pupose and how much is there out of necessity, and most of the financials have already been taken to the woodshed so I'm not sure how much the risk/reward makes sense to go short COF based on credit card debt. Might be late to the party, specially since there is much better opportunity out there (APPLE around 85-90 is a freaking joke , this is a $50 a share company!)
Their business model could be COMPLETLY flawled and they wouldn't know it because they are still looking backwards in the old world of the credit/asset bubble
You just cant lend money unsecured to anybody who can fill a paper form then reset their rate at will, negative amortize them and think the party will go on forever. The bill will come due, defaults will soar. I bet the credit card lending industry wont survive in their current form
Just like housing, credit card company profit is not realized until the future. Interest paid for credit card, and appreciation of house for housing is profit that has to be waited for. So how big the default on credit card no one knows yet. I think you are right that credit card company will have to change.
I am not sure what huh poster is saying about he makes money from the money on credit cards, and that money beats the interest rate he pays for the card. But it sounds good if he can do that.
the thing is, credit card debt looks and talks like they are the sucker lenders of last resort, you are seeing all kinds of people maxing out their cards because they have nowhere else to get cash
Credit card debt was the blow-off top of the credit bubble, when most were shutting credit off they were still with their neck out there thinking things were fine, heck its still going on as lenders havent shut down credit lines completly yet. Somehow they are in the mindset 'its going to be ok, we will just have a higher peak charge-off but it will be contained'
Yes, so maybe like housing, the charge off will become so big it go negative against the profit, then companys have to stop giving credit so easy, but if they stop giving credit so easy, they stop potential future profit too. Not good.
Like housing, they need buyers to make the market go higher, but no one want to lend the money to make it go higher.