50% of Americans Couldn't Come Up with $2000
 

An article here says that 50% of Americans could not raise $2000 in the event of an emergency.

That is a scary statistic. I'm sure the economy is partly to blame, but it's also the fact that many (most?) American families did not save while the economy was good.

Define "emergency" and then I'll know if I can come up with it.

I can't.
There were about 10 years in my life when I could have.
But I was bloody miserable for most of them.

Now I would have to throw myself on the mercy of my brother and my Grandad. Which is certainly not the same thing.

I wonder what the % was 5 years, 10 years and 20 years ago.

I wonder if the numbers would be that different.

Here's a graph of savings rates since 1960.

http://research.stlouisfed.org/fred2/series/PSAVERT

The supposition in the article was:

The hypothetical cost "reflects the order of magnitude of the cost of an unanticipated major car repair, a large co-payment on a medical expense, legal expenses, or a home repair."

What is $2000 in plasma?

Blood money? :-)

Interesting, savings declined on a pretty consistent basis since the early 80's, then in about 2005 it started to increase dramatically.

Here is the chart for those who don't like to click on links.

It's also interesting that savings rate seems to jump up when there's a recession and drop off when things are better.

Maybe recessions are caused by people saving money, instead of spending.

I must assume that means 50% are totally maxed out on every credit card. Credit cards are an emergency fund of last resort. One solution for cash flow problems. Difficult is to believe that 50% of Americans are totally maxed out on all credit cards. That article do not discuss this.

Given my current situation, perhaps it is unusual that I can say that I am part of the "good" 50% of this statistic.

That may or may not be true in the coming months. But as of today, I'm all right.

Yeah. Except for the 'legal expenses' the others aren't really emergencies.

If you've gotta pay a co-pay before they will give you treatment, I'm thinking it's not so much of an 'emergency'.

Cars? I can always borrow.

home repair? What are those? ;)

I cleaned out my car and found $2,000.25 in change down the back seat.

Unfortunately, I spent it all on the quarter car wash.

Why would you get just 1/4 of your car washed? :D

That could very well be "could not afford to save, even when the economy was good."


I'm always amused by the number of people who are not aware that everyone is not as well off as they are. A huge slice of America saves nothing each week, because they have nothing to put in the bank. They drive POS cars that need work all the time, because they can't afford a better car. And they bought that POS because they couldn't afford a car in better mechanical shape. They can't fix everything on the car because they have to feed themselves, their kids, their family, pay the electric bill, pay rent because they can't afford to buy.

And why must it be assumed that these people's credit cards are "all maxed out"? The people you are talking about do not have credit cards, because they can't afford the minimum monthly payments. That's right, some of these people don't have $20 left at the end of the month to pay on a credit card balance.

How are legal expenses an emergency?

Now, as you were.

:blunt:

or in kidney?

It's all I could afford.

I'm trying to figure out if this is a judgement or just a statement of fact.

My late FIL used to call it "the high cost of poverty"

Well said Digr. I lived that life for about a decade. I couldn't take it anymore and changed my ways and my life. Even while living paychecks to paychecks (3 jobs) I still was borrowing to make ends meet and to feed my family. I bartered anything and everything I could. Its not living.

That's an excellent description.

Right now I could raise it. But that's only because Dad left some money. Before he died, the only way I could have raised it would have been by borrowing off him.

There have been times in my life where I've had decent cash coming in, but never a sustained period. I have generally spent far more time living on the margins of the economy where, frankly, saving was not an option. Living cheap, is a much less cost effective way to live, you get less for your money.

I'd like to see the savings rate plotted with the interest rate in the average savings account. I'm a saver but saving money is a losing proposition.

First, one has a credit card, does not use it, and therefore has no monthly payments. Or one only uses a credit card for amounts that can pay off that month. Either way, the credit card is that emergency $2000.

The argument is valid, but subjective. Do you describe most of the 50%? Or well less than 1%? A problem with all these assumptions is one glaring problem. No hard numbers.

I don't believe most of the 'on the edge' cannot have any credit cards. A credit card that you have and do not use can cost nothing. I would suspect a significant number of that 'on edge' 50% has foolishly used credit cards. It would explain why they enrich the richest with their 20+% interest charges on outstanding balances. And therefore cannot afford any savings.

But again, that is only suspicion based in a lack of any hard numbers. We really do not know why that 50% is close to which edge. And, unfortunately, the article does not even define 'edge'. Does not even define how many Americans have credit cards.
The article implies an American public that is living on large cash flows and few real assets. It is how AIG, GM, Lehman Bros and so many other financially irresponsible companies also lived. It only implies this is worse than ever before. But provides no numbers to make that conclusion. It only suggests a serious problem that has been deteriorating.

Meanwhile, saving numbers in the chart strongly suggest American financial stability has seriously deteriorated.

Do you believe more than 50% of this nation cannot have any credit card? I suspect that is not true. Anybody can afford a credit card by not using it. Then an emergency $2000 fund exists.

Many companies are canceling credit cards if they are not used and/or the credit rating of the consumer does not meet their standards.

Google is your friend and this has been happening for at least 4 years. Its the "If you don't use it, you lose it" plan

Unrelated statistic - "37% of families are still paying off a credit card they cancelled. "

That statistic doesn't surprise me, even if it's not completely proven. I don't know too many people who could come up with 2k without blinking an eye. I know we'd have trouble doing it right now although we'd manage.

I have to say that over the last couple of years, the cost of living here has gone up so much it's just impossible to find the right words to describe it. We're on an above average household income, and yet we're finding we can't save at all anymore, so we're in the midst of making some major changes to how we live. One of those is sacrificing the quality of the food we eat. When you're paying $10/kg for bell peppers, and $6/kg for carrots it's becoming impossible to eat healthy as in, to afford to buy enough fruit and veges to allow everyone their recommended daily intake, which is a guide and the teenagers in our house would eat more than that at the moment. That's not even including buying things like milk and bread and some kind of protien. Fortunately for us, we suppliment that by fishing, but it's still out of control.

I know this isn't america, but it's still a western country.

Why Creditors Close Inactive Accounts
some links here ...

I wouldnt say many are cancelling cards.

I would say it is primarily Capitol One, which also wont accept new customers with high credit ratings and a history of paying off charges monthly and not having any interest or penalty payments.

If I'm in jail, it's an emergency.

P.s. Capitol One is teh debbil.

I don't think either of your arguments is absolute. tw is right that those things can happen, and you're right that it's getting less likely to happen. To categorize his assertions as FALSE is Intellectually dishonest, IMHO.

For probably the first time in my life, I could scrape together $2k right now. I would not have to use credit or sell anything or pay a bill late to do so.

I've spent the last decade (since a nasty divorce and subsequently losing my job) getting square again, financially. I work two jobs, make decent money, RENT a nice house and have no credit card debt. My only debt obligation is 1 car payment. It will be paid off in 2 years and I do not plan to ever finance a vehicle again.

My goal over the next 5 years is to re-establish my credit with carefully controlled credit card spending and save $25k for a down payment on a condo which I intend to finance for 15yrs. At the same time, I will be heavily saving and investing. Once the condo is paid off, I plan to retire.

But for 40 years, I was paycheck to paycheck and always teetering on the edge of financial ruin. Ok sometimes I was deep in the pit of ruin, but I survived somehow. Now I have to find a way to enjoy my retirement years.

Part of doing so involves getting healthy, because who the hell can afford major medical costs or wants to spend their retirement as an invalid? So I quit smoking, am losing weight, began eating organic and non-processed, and recently started running and lifting weights. I don't think I've ever been healthier.

Stormie

It is a fact that card companies are canceling dormant or unused cards. They are not making any money on the card if it isn't used. They will extend that credit to someone else who will use it - that is how they make money. They can only extend so much credit and to have it "wasted" on someone who is not using it is not a fiscally sound business plan.

I too was unaware of this until about 2 years ago when a card I kept just for emergencies was canceled without notice. :mad:

Spreading misleading information and blatant falsehoods is intellectually dishonest. Your ire is also misdirected.

The big three - Chase, Citi, BOA (who along with Amex represent more than half of all card isusers) - dont cancel dormant cards. Their policy is to provide a notice of pending cancellation unless the customers requests the card to remain active.

It is primarily Capitol One and a few small bank insurers that have a cancellation cause with no recourse.

So I would suggest that your statement is spreading misleading information to some degree.

My card was a Chase card and was canceled.

Again, I am speaking from personal experience. There is nothing misleading about facts, whether you like them or not.

Perhaps you just ignored the notice or had credit issues. I dont know the circumstances, I do know the policy. It is a risk management policy and a standard practice among the big three. Even more so since the passage of the CARD Act in 09 (no, the act does not address dormant cards, but it does reaffirm the overall risk management practices).

None of the statements are FALSE on their own merit.

J works in the HQ of the card department at one of the banks mentioned, *specifically* in matters like these, and will settle this immediately when she gets home.

oh snap!

you just wait til momma gets home.

Battle of the banker babes?

My info is from my sis, who works at a pretty high level in the consumer/community affairs dept of one of the big three.

This'll be good.

:corn:

It's like someone telling me how financial aid works and what the regs are because something happened one time to them or to their friend's dog and that is how it works because that is how it works.

GO J! :)

disclaimer: I ain't on any side...I have no clue about any of it. ;)

I predict that the answer will be somewhere in the middle: they can do it, but don't always do it.

sez Carnac the Magnificent. ;)

Well, in my experience, I have cards I don't use, and I don't pay squat for them. So right there, the "FALSE" claim is wrong. I haven't been contacted by anyone that they are going to cancel my cards.

I don't carry a balance on the card I do use. I imagine the card companies don't like me much, but they do make a little bit off of each transaction through merchant fees. Certainly enough to cover postage on the bill.

We had a few dormant cards close in the last 2 years, but prior to that never. I assumed it had to do with the financial chaos. Other than that, for us...

The initial charge of FALSE was not based on what happened to him or them or his friends, but the old "Google is your friend" defense.

Pet peeve - Google is not your friend. It is a tool and only as friendly as your interest in using it wisely and thoroughly, not superficially and selectively.

disclaimer: I ain't on any side...I have no clue about any of it. ;)

In other words: I ain't on any side. I have no clue about any of it.

(you don't need to explain sketchy cellar debating techniques to me.)

I'm holding the "my friend's dog ate the evidence" in reserve. ;)

:)

I shared what my personal experience was. I also stated facts and corrected some bad information. It is very easy to support that it can and has happened. Info is available all over the internet about the fact that they cancel them and some info about why. Take for what it is.

I never said all the time, every case, always... just that they can and do cancel dormant cards.

I have a credit card that I never use, and they haven't canceled it yet. Just because some companies do it doesn't mean that tw's statements are false.

Especially if you look at the wording:

That's me.Note the can. Also me.
Note the afford. I've got a card that I don't use, and costs me nothing, so obviously anyone could afford that (unless they're shopaholics who can't afford to have a credit card available or they'll max it out). You could read more between the lines of tw's post, and argue that it would be hard for some people to get the card in the first place, but that's not a direct contradiction of anything tw said.

As long as there are still cards that aren't canceled through inactivity, tw's statements are true.

Yes you did. That's what your "False" means when tw says it can happen. You were saying it can't.

It turns out everyone is on the same page now, and the arguing was for nothing. You are agreeing now with tw that it can happen.

Even if, in the future, there are no cards left that can be held dormant, you can use them for many purchases you would otherwise pay cash for, and not carry a balance, and still have it cost nothing more than stamps.

Maybe some day you won't be able to get a card unless you promise to carry a balance or pay a monthly fee, but it's not here yet.

When that happens, I'll go back to writing checks or paying cash.

If anyone wants to borrow part of my balance (you know, just so you keep your card...really, I'm thinking of YOU) I will help you out.

PM ME!

Still, though: Capital One is teh debbil.

I stand corrected...

My humblest apologies.

On behalf of everyone, I accept your apology.:)

Meanwhile, Stormieweather described a process that everyone should aspire. A process of moving from debtor to creditor means maintaining a cash flow without 9% and 20+% interest rates.
Why would 50% not be able to pay $2000 today? Does that mean 50% are even maxxed out on credit cards? That article does not say - is too subjective.

I believe most can get $2000 at any time. Even a loan shark is an alternative. The article is probably ignoring loan sharks, the 'get money today for your future tax refund' outlets, and other emergency money outlets. But again, we cannot say for sure. The article does not define 'the edge'. Does it even ignore a loan shark option?

More important. Do 50% have no grasp of financial responsibility demonstrated by Stormieweather? The article implies that. I find it difficult to believe 50% are that financially ignorant.

Stormieweather defines what every financially responsible adult aspires. To move from debtor to creditor. Anyone working towards that goal could easily obtain $2000. But resulting fees, penalties, and interest charges would be a setback to the lifelong task of 'moving from debtor to creditor'.

50% of Americans could not even get money from a loan shark? I find that difficult to believe. But again, hard numbers remain unknown. Still it is curious (or distressing) that so many still have so little. Or have been so manipulated by advertising as to make Capital One so profitable.

I think loan sharks were probably not counted, alongside money-making schemes like selling a kidney, whoring kidnapping or becoming a drug mule for the money.

Of course I may be wrong, just guessing.