Americans In Debt Interview with KABC Radio Los Angeles
Doug McIntyre: A new poll says that one in five Americans say that they’ll be in debt forever. According to the poll, 21% of those with debt predict they will never get rid of it. This is really kind of disturbing. To talk about this right now, it’s a pleasure to welcome the editor in chief of creditcards.com, Dan Ray. Dan, how are you?
Dan Ray: Good morning, I’m doing well.
McIntyre: Are you doing well enough to pay off your credit card debt?
Ray: Well, our poll certainly sounds like a lot of people are having trouble with that. It looks like, playing off of what you were just saying, that the middle class is being carved – caved in. We’re also – when it comes to debt, we’re becoming a nation of debt haves and debt have nots. On the one hand, more of us are handling debt and credit pretty well, overall household debt is below its peak from before the recession and a record number of us pay off our credit cards every month. But our survey data revealed that there is still a big segment of the population who are having trouble with debt, and for those people, things are looking bleaker, not better. We’ve asked this poll question three years in a row, and the numbers just keep building up. It was 8% in 2013, 14% in 2014 – or 18% last year, and then this year, one in five Americans with debt, 21%, believe that they’ll never pay them all off.
McIntyre: You know, probably, I guess it’s 15, 16 years ago, my wife and I made a decision, we got to pay off the credit cards, and we, you know, it wasn’t easy, but we did, and we’ve been kind of rigorous about that ever since, and I’ve got to tell you something, it’s one of the greatest feelings in the world, it’s absolutely liberating.
Female 1: To be debt free?
McIntyre: Absolutely. Well, we’re not debt free, but we’re not credit card – because credit card debt is about – you’d be better off going to Tony Soprano, I mean, the interest you could pay on your credit cards, it’s terrible debt. And one of the tricks that we use is whenever possible, we don’t – first of all, we try to pay the cards off every month, but we don’t charge anything, don’t charge anything that you don’t retain physical possession of. In other words, if you’re going to buy a new sofa, fine, you’ll have possession of the sofa, but pay cash for a meal.
Female 1: A vacation?
McIntyre: Or pay cash for a meal, because it’s transitory, and that’s one way to get a grip on it. But this sort of sense of negativity, this sort of sense of doom, Dan, that’s something that’s fascinating. And I also think it kind of explains the political climate, that people feel like they’re getting further behind and that they’re never going to get out of it, and that’s a very unusual concept for Americans who normally are very optimistic about the future.
Ray: And you put your finger on something there. You found something that works for you; you want something that’s tangible. For people who are listening to this, find the method that works for you. There are a lot of different ones. Some people go the old fashioned envelope method of budgeting, some people make it a rule never to charge anything you can’t pay back in three months, and that’s particularly good advice during this holiday season when we all tend to pile on the debt a little bit. But find something that works for you, and stick with it.
McIntyre: You know, Dan, when the market crashed in 2008 and we started to see this sort of dominoes toppling, it really kind of started a little earlier than ’08 actually, but it really came down in 2008, and then for a couple of years, during the depths of the great recession, I would hear almost as a mantra people would say I can’t wait for things to get back to normal. But here’s the problem. What we’ve defined as normal is tremendous amounts of consumer debt, consumer credit being handed out. You know, people with – the stories of credit cards showing up in the mail for people’s pets, you know, giving credit cards to kids on college campuses right before spring break, you know, who don’t have jobs, we were extending credit to people who didn’t have the actual – they didn’t qualify for the credit, and, you know, handing out houses through HUD like it was – Freddie and Fannie were handing out houses, no money down, and then president Bush was bragging about the highest percentage of home ownership in history, and talked about having all these qualified buyers, the only thing they don’t have is the down payment. Well, duh, that’s not a qualified buyer in the traditional way that we used to do this. So if we’re going to get back to normal, normal is getting people to work Monday through Friday and then go to the mall on Saturday and blow on their money on credit cards, buying stuff to wear to work on Monday.
Ray: Yeah, we have gotten away from the situation that you were describing where the only qualification for credit was to be able to fog a mirror.
Ray: We watch the industry pretty closely, and while credit has loosened up from the days of the recession when nobody was able to get a loan, it’s still being – it’s still tighter than it was. Folks who had trouble with credit in the past, they’re getting cards, but what the card issuers are doing is giving them out with very small credit lines. Somebody with great credit, they get a new card, it averages about a $9,000 credit line; somebody who has poor credit, barely above $1,000. So some people have learned some lessons and the banking industry isn’t quite the way that it was before, but yeah, some people are still piling on the debt and are having a hard time paying it off.
McIntyre: Now we’ve also – and here’s – this is just such an irony, it’s such a flip on the wisdom of our fathers, is that we used to have an expression, a common expression, it’s like money in the bank, that was a way of expressing a sure thing. But now we’re told we’re idiots if we have money in the bank because it doesn’t keep up with the rate of inflation so we have to be on Wall Street and we have to be investors and we have to be this and that, and we tax the income on savings accounts and things like that, we discourage savings, and we’re told that saving is really bad for the country because it’s a consumer economy.
Ray: Yes, it’s a more complicated world than it was when our parents and our grandparents taught us those old sayings, but some of the things are still true. If you borrow money, you got to be able to pay it back, and that’s one of the things that our survey pointed to that some people are taking that to heart and expect on average to be out of debt at age 54. We just asked a simple question, what age are you going to be out of debt, and the average was about 54. But some people, a significant number still are saying never, and that’s bad.
McIntyre: Wow, okay, hey listen, Dan, thanks for coming on with us, I appreciate it. Creditcards.com, Dan Ray, editor in chief.