Generation debt

[mr friendly guy]

http://video.msn.com/?mkt=en-au&brand=ninemsn&tab=s29

Click on the "news" tab, and click "sixty minutes" tab and then click on the video titled generation debt, which talks about generation Y and their spending habits with reference to Australia. Apparently generation Y (defined from 18-28 yrs old) is $60 billion dollars in debt.

Granted sixty minutes hasn't been great for a long time, but I thought this video was spot on most of the time. It features a 20 year old woman with 22 cents in the bank and wants to buy a $60,000 car on credit after spending $1500 / week based on a income of $35,000 a year. And I thought buying sci fi collectables was an indulgence.

Oh, and she says it it turns to shit its the banks fault. Oh yes it is.

Now I initially wondered whether sixty minutes just picked the worse of the lot, however even if you assume each gen y person is $70,000 in debt like one of the people featured, that would still be hundreds of thousands in debt given the $60 billion figure.

My only complaint is them making a bit of an issue about how Generation Y is in debt through HECS (ie what we borrow from the government to get us through University). HECS debt is interest free and index to inflation, and the government only comes a calling when we earn more than a certain amount. HECS debt isn't that crippling. The tax office just take a bit more in tax, and you get bonuses if you make voluntary payments. Most of my friends who graduated didn't consider it "real" debt because it was interest free. My own HECS debt was paid off under 3 years.

[TC Pilot]

She's fucking retarded. No one in college around me is assinine enough to buy a car almost equal to two years' worth of income. Although maybe that's not really indicative of the norm.

No 20-year old should be buying a $60,000 car.

[Darth Wong]

One thing I've learned is that there are entire social worlds in your own country which you probably never come into contact with. You can't say that this problem is rare just because it's rare in your own social circle.

Fareed Zakaria said that the average American has 13 credit cards; I don't know what his source was, but he's a credible journalist and I doubt he's just making it up. If it's true, that tells you a lot about just how irresponsible most people are.

[Lusankya]

I like the Mastercard ad at the beginning.

A part of me wonders when these girls started getting money. Even the richest of the private school girls I went to school with don't spend money like that. And when they were shown the cost of their interest, it was as though they couldn't comprehend how much money $80,000 was.

Also, I can't believe that first girl was getting into so much debt for such ugly clothes.

[TC Pilot]

I had a neighbor a bit like the woman in the OP. I mowed her lawns, because she was a single mother raising her son and obviously was too busy to do it herself (son was too young, too). I felt bad charging her what I did when one of her checks bounced and then later turned out she had to go through chemo for some kind of cancer...

...until six months later she goes to India (not Indiana) for Christmas...

She's recovering from cancer, probably being hit by jacked-up insurance. Her house is practically falling apart (there are pine trees growing in her gutters) and her fence has blown over onto our side twice during big storms, and it's only a few more years until her son's old enough to go to college... and she's pissing away money on airplane tickets to the other side of the planet?

Yeah, I'm probably not with a very representative sample of the population. But still, Ms. "No cash buys a 60k car" is probably near the high-end of fiscal idiocy.

[aerius]

Fareed Zakaria said that the average American has 13 credit cards; I don't know what his source was, but he's a credible journalist and I doubt he's just making it up. If it's true, that tells you a lot about just how irresponsible most people are.

I wouldn't be surprised if it's true. When I was in Georgia for my cousin's wedding, we saw a woman whip out 5 or 6 credit cards at the checkout before she got to one that wasn't maxed out or denied. And she acted like this was a common occurence, and apparently the checkout girl sees a lot of this too since she just stood there looking bored.

[Masami von Weizegger]

Fareed Zakaria said that the average American has 13 credit cards; I don't know what his source was, but he's a credible journalist and I doubt he's just making it up. If it's true, that tells you a lot about just how irresponsible most people are.

That might be a bit misleading. According to almost every article on the subject online, which source the information to myfico.com, a dubious source at best, but the only one to offer much on the subject, the average is 13 credit obligations, which is typically served in a ratio of 9 credit cards to 4 instalment loans.

Also, I can't believe that first girl was getting into so much debt for such ugly clothes.

You can buy clothes, but you can't buy taste, I guess.

[Duckie]

Also, I can't believe that first girl was getting into so much debt for such ugly clothes.

You can buy clothes, but you can't buy taste, I guess.

Sure you can. I'm absolutely sure you can pay for someone to follow you around and complement or correct your fashion taste as necessary. You know that some rich person somewhere has it.

I wonder if you can retain a personal serveuse on credit though. Probably not.

[Solauren]

I wonder what the average limit on those credit cards is, and how often they get maxed out.

It would seem the TV show 'Till Debt do us part', which my wife and I like watching and going 'what a couple of morons' to, is actually showing the lower rung of the debt-culture.

[Korvan]

I like the Mastercard ad at the beginning.

A part of me wonders when these girls started getting money. Even the richest of the private school girls I went to school with don't spend money like that. And when they were shown the cost of their interest, it was as though they couldn't comprehend how much money $80,000 was.

Also, I can't believe that first girl was getting into so much debt for such ugly clothes.

The funny / sad part is that $80,000 is only the interest on her current debt. Imagine how much more debt she will rack up by the time she's 40. When it gets to the point where she won't be able to get more credit, all she'll have is a bunch of out-dated clothes and an out-dated car and any disposable part of her income will go towards servicing her current debt.

[montypython]

Considering how much the political establishment has in one form or another promoted continuous consumption in the American mindset that it would not surprise me to see such debts increase even among upper-middle class people wanting to keep up with the Joneses.

[Ariphaos]

Fareed Zakaria said that the average American has 13 credit cards; I don't know what his source was, but he's a credible journalist and I doubt he's just making it up. If it's true, that tells you a lot about just how irresponsible most people are.

This is a bit misleading. When you're in college in the US, you get bombarded with "oh here have a credit card!" almost non-stop. I can easily see students trying to get one credit card ending up with several just because the process is extremely pushy and happens entirely over the phone.

I had two credit cards on my report, one with a $200 limit and another with a $300 limit, and I had no idea how I got them. They were never, ever used, so it's not like there was identity theft involved, but I never signed for either.

And regarding total debt obligations, that can also be misleading, as every single student loan year is considered a separate type of obligation, as is each type of student loan... so that number is easy to rack up with little meaning as well.

[thejester]

My only complaint is them making a bit of an issue about how Generation Y is in debt through HECS (ie what we borrow from the government to get us through University). HECS debt is interest free and index to inflation, and the government only comes a calling when we earn more than a certain amount. HECS debt isn't that crippling. The tax office just take a bit more in tax, and you get bonuses if you make voluntary payments. Most of my friends who graduated didn't consider it "real" debt because it was interest free. My own HECS debt was paid off under 3 years.

It's nor crippling, but surely it would take up the vast majority of Gen Y's debt. I'm about 13k in the hole from HECS after a three year degree; most of mates who are doing doubles degrees or even plain engineering would be considerably worse off, I would have thought.

[Sea Skimmer]

One thing I've learned is that there are entire social worlds in your own country which you probably never come into contact with. You can't say that this problem is rare just because it's rare in your own social circle.

Fareed Zakaria said that the average American has 13 credit cards; I don't know what his source was, but he's a credible journalist and I doubt he's just making it up. If it's true, that tells you a lot about just how irresponsible most people are.

Blame the massive proliferation of store specific credit cards on that, some people just can’t say no to the things even if they never shop at the place except once or twice a year. I’d easily have 13 cards by now (I have none, but I’m thinking of getting one to build credit with) if I took every zero requirements store card offer I’ve gotten. The limits on the cards tend to be low, and interest rates often aren't even that bad from what I can tell, indeed often the rewards are quite good because the whole idea is to make the store money on sales and loyalty, not credit, but its still just a bad idea for people to have.

[Lusankya]

It's nor crippling, but surely it would take up the vast majority of Gen Y's debt. I'm about 13k in the hole from HECS after a three year degree; most of mates who are doing doubles degrees or even plain engineering would be considerably worse off, I would have thought.

I think the idea is that even though it's debt, you don't have to worry about going bankrupt on it. I could spend the rest of my life in China, and not have to worry about my HECS debt at all.



The CBA actually gave my sister a $1,000 overdraft account. The thing is, my sister hadn't asked them for it, and I believe they'd actually offered it and then she'd refused. She only noticed when her available balance was $1,000 more than she remembered. Fortunately my sister, while being a spendthrift, is also smart enough to know how she'd act if she had a line of credit - and consequently avoid it.

The sheer irresponsibility of the CBA there is breathtaking, though.

[Adrian Laguna]

You can buy clothes, but you can't buy taste, I guess.

Sure you can. I'm absolutely sure you can pay for someone to follow you around and complement or correct your fashion taste as necessary. You know that some rich person somewhere has it.

That is a silly idea, you're not buying taste, you are buying the illusion of it. To buy taste, you hire someone with good taste and fashion sense to help you buy clothes, wear occassion appropiate attire, accessorize, decorate your house, etcetera.

[mr friendly guy]

My only complaint is them making a bit of an issue about how Generation Y is in debt through HECS (ie what we borrow from the government to get us through University). HECS debt is interest free and index to inflation, and the government only comes a calling when we earn more than a certain amount. HECS debt isn't that crippling. The tax office just take a bit more in tax, and you get bonuses if you make voluntary payments. Most of my friends who graduated didn't consider it "real" debt because it was interest free. My own HECS debt was paid off under 3 years.

It's nor crippling, but surely it would take up the vast majority of Gen Y's debt. I'm about 13k in the hole from HECS after a three year degree; most of mates who are doing doubles degrees or even plain engineering would be considerably worse off, I would have thought.

My point is that HECS debt has several differences between credit card debt and bank loans which makes it easier to repay, plus as mentioned by others you don't go bankrupt from it. I felt sixty minutes should have made some effort to diffentiate the two types of debt, because saying I have 36,000 debt and saying I have 36,000 HECS debt is a big difference IMO.

And your degree only cost you 13k? My six year degree cost me >$36,000.

The CBA actually gave my sister a $1,000 overdraft account. The thing is, my sister hadn't asked them for it, and I believe they'd actually offered it and then she'd refused. She only noticed when her available balance was $1,000 more than she remembered. Fortunately my sister, while being a spendthrift, is also smart enough to know how she'd act if she had a line of credit - and consequently avoid it.

The sheer irresponsibility of the CBA there is breathtaking, though.

I never got why they would do this until I learnt how money is created and how that makes the banks balance sheet looks good. At least until they find out the people who they lent to can't pay back.

[Glocksman]

Added up, all of the limits on my cards come out to about $35,000 in unsecured credit.
That's almost $10,000 more than I make in a year.

From my own research and a conversation with a friend who is an attorney, I've been told that if I ran everything up to the max and filed bankruptcy, I'd qualify for Chapter 7 (liquidation) instead of being forced into Chapter 13 (repayment plan) despite the Republican bankruptcy 'reforms' passed a few years ago.

Going by that, granting me that much credit is fucking insane.

[mr friendly guy]

Even now with the credit crisis various companies are still sending me offers to credit card. My bank keeps on sending me offer after offer even though I cancelled my credit card with them several years ago.

I only have 2 credit cards, an AMEX which costs me no annual fee and gives me points, and a Master Card which costs my no annual fee and which I use at places that don't accept AMEX, usually small stores and some countries eg Singapore. The total credit on both cards... $10,700.
Now I could apply to increase the credit, but why bother? I am not needing to spend that much, for day to day things, and if I ever needed lots of money, say for a car, I will just use cash.

Plus increasing the credit rating just hurts my borrowing power for big loans (hint, a bank will decrease how much they lend you based on your credit card limit irregardless of whether you always pay it off on time, its just a gross calculation they use).

So if the average on each card is $5,000, and as Darth Wong said if statistics do show people have on average 13 credit cards, that adds up to $65,000, so it certainly is possible for people to reach that level of debt.

[Solauren]

Added up, all of the limits on my cards come out to about $35,000 in unsecured credit.
That's almost $10,000 more than I make in a year.

From my own research and a conversation with a friend who is an attorney, I've been told that if I ran everything up to the max and filed bankruptcy, I'd qualify for Chapter 7 (liquidation) instead of being forced into Chapter 13 (repayment plan) despite the Republican bankruptcy 'reforms' passed a few years ago.

Going by that, granting me that much credit is fucking insane.

Question; what would be involved in getting out of Chapter 7, so you qualify for more credit cards?

[Glocksman]

IIRC, a bankruptcy stays on your credit reports for either 7 or 10 years (IANAL, so caveat emptor) and once you've filed, you can't do so again until 7 or 10 years (again, IANAL) have passed.

IOW, once you've been granted a bankruptcy, you'll get a ton of 'pre approved' credit offers with such sterling terms as 25% interest, $70 annual fees, and a 'one time $69 application fee' in the mail, because you can't escape the debt through bankruptcy this time.

The wise person would immediately run those 'offers' through a shredder, but the average US consumer going through bankruptcy isn't very wise WRT debt to income ratio.

[aerius]

Added up, all of the limits on my cards come out to about $35,000 in unsecured credit.
That's almost $10,000 more than I make in a year.

I can only get $4000 on my one & only credit card. However my bank keeps sending me pre-approved offers for a line of credit, the last one they sent me was good for a whopping $200k. That's several hundred percent of my annual salary. If I took the LOC and maxed it out it would take me over 10 years to pay it off, assuming interest rates don't go up.

[Darth Wong]

Ha. I have two credit cards (a Visa and a Mastercard), and their credit limits are both around $15k. That's just two credit cards, adding up to $30k of unsecured credit. I could theoretically use those two cards to buy a new car.

[Uraniun235]

My bank called me one day and said "You'll be getting a credit card in the mail any day, just call the number printed on it to confirm!" I decided to take it since I didn't have a card at the time.

I rarely use it (and promptly pay it off when I do), and they keep raising the limit and urging me to go out and spend. It started at $3000 and they've since raised it to $15000. It might not be that excessive (comparatively) at first glance except that up until this July I had never held a permanent full-time job before.

My thought is student loans but I don't really know.


On the "generation in debt" topic in general - I can't watch the video at work, but does that average debt load include mortgages? That would certainly shove the average a lot higher especially when a lot of young people buy houses when they're not really ready to.

[Arthur_Tuxedo]

It's actually good for your credit score to have available credit that you don't use. Using 30% or less of your total available is a big plus. Also, a person should have some history of paying down some type of loan. Using a credit card and paying it off completely every month is nice to avoid fees, but if you've never had a car or student loan or anything like that it's good to leave $50 or $100 on that card each month. For myself I think all of my available unsecured cards and lines are almost $30K, which is roughly what I'm hearing from others who have posted. Citibank just kicked me up to $21,100 on the card I've had since I was 18.