Paying off your credit card debt

Frank the tank

Not that I have much of it personally but, how would everyone paying their credit cards off help the ecconomy out of the current mess?

While I accept it's best not to have any debt how would it work/help.

You may aswell ask everyone to pay off their mortgages.

Percy Vera

To make room on their card for more purchases???

Keith1983

Bacause then the lending institutions would have some capital to lend again, and so the circle continues!

shouldbeinbed

easier said when you're a multi millionaire with an even richer wife, in a top paid job with astronomical expenses you can live on without having to touch your salary, than one of the poor sods that you're all in it together with having pay cut or frozen or benefits removed whilst seeing the cost of everything rocket around them.


has he got bored of blaming Labour and fancies another soft target to point the finger at

shouldbeinbed

Keith1983 wrote:

Bacause then the lending institutions would have some capital to lend again, and so the circle continues!

you think they haven't?

Phil_D

Most people would have to borrow to pay off the debt so it wouldn't make the slightest difference to the economy.

alan_sherman

Credit card debt has some of the highest APRs around. Pay it off, even by taking out a personal loan at a lower APR, and you pay less money in interest to the banks. That money is now available to spend on other things, or save.

Frank the tank

Seems "team Dave" is doing some serious backpeddling on a fixed wheel as I post.

Bloke is a insensitive to55er (but we're all in it together).

CiB

This is a special trick that party leaders manage to pull during high-profile moments.

Its purpose is specifically to toss all the moaning whinging bleeders in the country some minor inconsequential slip of a speech-writer's pen onto which said whinging sods can jump up & down loudly proclaiming themselves to have been right all along on whatever subject it might be this time round.

This instruction to pay off your credit card bills is a device to divert your ire from the bigger picture, and to occupy Martha on WATO right now for the whole programme, every single Gaurdian columnist who's ever managed to scramble a semi-literate sentence together, every BBC journo lining up to spout their tedious lefty views on various news bulletins for the rest of the day, and every single hard-done by hard working family member who didn't vote for Dave & his pals, to have a pop at the pompous posh tw@t.

There. Will that do?

verylonglegs

Credit card debt is very expensive and leaves you a lot poorer in the long run. You can question the timing but as a piece of advice it's one of the more sensible things a PM has said.

Stewie Griffin

I have no credit card debt to pay off, not being Holier than anyone, I learned that lesson the hard way a few years ago

Wirral_paul

Simple really - paying off any debt means lower monthly spending on the interest repayments - money that could be spent elsewhere (more bike parts then!! ). Its this extra spending on whatever that will aid the economy - be it an extra meal out every month or more goods.

Gizmodo

I buy everything on a credit card from a well known supermarket, but I pay it off every month. That way I save up enough supermarket loyalty points to buy all my Christmas shopping.

The economy has grown by only 0.1% since April, and I'm sure that's all down to me buying a bike 9 weeks ago - the amount I've spent on all the kit and upgrades!

cee

Frank the tank wrote:

Not that I have much of it personally but, how would everyone paying their credit cards off help the ecconomy out of the current mess?

While I accept it's best not to have any debt how would it work/help.

You may aswell ask everyone to pay off their mortgages.

The answer is....it wouldn't help the economy at all. In fact..some have suggested that it would do the opposite...and have a negative impact on the economy.

Anyway....remember that he didn't even say this stuff.....it was in a draft speech which was circulated, the press picked it up, the business world went bonkers and the speech got changed!

tmg

I guess they were thinking that if people paid off their debt they would have more money to spend, rather than spending it on servicing their debt

Not particularly thought through as to why people are in debt in the first place and they don't have spare cash floating around

iainf72

cee wrote:

Anyway....remember that he didn't even say this stuff.....it was in a draft speech which was circulated, the press picked it up, the business world went bonkers and the speech got changed!

Surely you mean "when they realised the reaction they said it was a draft speech"

Peddle Up!

Because it's your purpose in life to enrich the banks and their masters. Not realised that yet? :roll:

cee

iainf72

well....yes kind of.....when they realised it was a totally stupid thing to say....

I am guessing that is exactly the point though of circulating a draft speech before making the address?

AidanR

In the long term, becoming a less debt-reliant, less consumerist and more export driven economy would be a Good Thing, and obviously paying off credit card debt would be a smart thing to do on the road to this.

In the short term, it would be very damaging. Assuming the money comes consumer spending instead of taking on more debt, it would hammer GDP: http://www.economist.com/blogs/buttonwo ... ebt-crisis

TheStone

It's a stupid thing to even think about saying.

Likewise, any talk of growth while paying down debt is nonsense.

Can't have growth without increasing the debt.
Can't increase the debt.
Can't have growth.

Get used to. The last decade was the illusion of growth on the back of a massive debt mountain. Things have to now change.

And don't do what governments like to do, confusing spending with producing and inflation with growth.

schlepcycling

Gizmodo wrote:

I buy everything on a credit card from a well known supermarket, but I pay it off every month. That way I save up enough supermarket loyalty points to buy all my Christmas shopping.

+1

shouldbeinbed

verylonglegs wrote:

Credit card debt is very expensive and leaves you a lot poorer in the long run. You can question the timing but as a piece of advice it's one of the more sensible things a PM has said.

its also up there with ooh look the sky is blue and grass is green as a statement of the bleeding obvious though isn't it.

anyone with a fragmet of functioning brain knows 15+% apr is high and the banks rig it to keep you paying interest only if you're not on top of it, but this problem of spiralling costs and suppressed wages makes this sort of patronising non advice far harder to achieve and palate, particularly from someone of such financial privilege in the first place.

Mabe I should go down to the railway arches and tell the local down an outs to lay off the special brew and wear a tie once in a while of they want to get on in life.

AidanR

TheStone wrote:

It's a stupid thing to even think about saying.

Likewise, any talk of growth while paying down debt is nonsense.

Can't have growth without increasing the debt.
Can't increase the debt.
Can't have growth.

Get used to. The last decade was the illusion of growth on the back of a massive debt mountain. Things have to now change.

And don't do what governments like to do, confusing spending with producing and inflation with growth.

Whilst I am sympathetic with the sentiment behind your post, I'm afraid I can't agree. Yes, it'll be difficult for our economy to grow from where it is with our delightful debt mountain. And yes, a lot of our growth has been based on debt-fuelled consumer spending. But to say that it's not possible to have growth without increasing debt is nonsense. Exhibit A - China, which has racked up a huge surplus whilst growing like crazy.

rubertoe

I clearly blame wiggle - if it wasnt for them having all that shiney blingy stuff then there would be no need for the credit cards to be bashed.

I guess that I am one of the lucky ones in that I dont have any CC debt - but as we are all in this together maybe I should get me some!

Possibly and excuse for a new bike.

TheStone

AidanR wrote:

TheStone wrote:

It's a stupid thing to even think about saying.

Likewise, any talk of growth while paying down debt is nonsense.

Can't have growth without increasing the debt.
Can't increase the debt.
Can't have growth.

Get used to. The last decade was the illusion of growth on the back of a massive debt mountain. Things have to now change.

And don't do what governments like to do, confusing spending with producing and inflation with growth.

Whilst I am sympathetic with the sentiment behind your post, I'm afraid I can't agree. Yes, it'll be difficult for our economy to grow from where it is with our delightful debt mountain. And yes, a lot of our growth has been based on debt-fuelled consumer spending. But to say that it's not possible to have growth without increasing debt is nonsense. Exhibit A - China, which has racked up a huge surplus whilst growing like crazy.

Yes, you're right. I should've made that clear.

We could have growth without continuation of the debt bubble, but it's very difficult to see where it could come from .... ideas anyone?

What's really bizarre, is that despite all the talk of government cuts, the expenditure and debt is rising at record amounts.

AidanR

Yeah, it's an odd one that. The economy is stagnating, everyone's blaming the cuts, but the reality is they haven't even kicked in yet. I subscribe to the Keynesian idea that the government should step in to boost spending during a recession in a counter-cyclical way. The trouble is, in order to do that it has to be counter-cyclical during the boom time as well to save up the money to do that.

Quite what will happen when the cuts truly bite, I don't know. But I doubt it'll be pretty.

TheStone

AidanR wrote:

I subscribe to the Keynesian idea that the government should step in to boost spending during a recession in a counter-cyclical way.

I'm not really Keynesian at all, but can see the counter cyclical logic. But, as you say, important not to increase debt during the boom (which makes the boom worse) and also important that when money is spent by the govt, that it is spent to improve out standard of living. Not simply wasted, as if it's only the process of spending that is important (which most Keynesian economists and most politicians seem to think).

AidanR

I think spending matters, in that the government must drive demand. But you're right - it'd be foolish to spend it on just anything. Also, if you print money to finance it you risk inflation, so you'd have to be very careful how you spent it to not create further inflationary pressure, e.g. by upping everyone's pay.

And as outlandish as simply printing money sounds, don't forget that's precisely what happened with quantitative easing. The Bank of England printed money to pump into the banks to recapitalise them. The idea was that they then loaned this out to small businesses, boosting growth. But banks are afraid of lending, and with demand so low, businesses don't want to borrow.

The difference between quantitative easing and Keynesian spending is twofold:

1) QE is theoretically reversible - the Bank of England just sells the financial assets it bought from the banks in order to recapitalise them.
2) QE does not in itself really create demand in the way Keynesian government spending would.

But quantitative easing is part of the policy that refuses to speak its name - inflating our way out of debt, pushing down the value of the currency in the process. This is a potentially risky move as inflation is notoriously difficult to control, and coupled with low growth could see is mired in delightful 70s-style stagflation.

TheStone

The strange thing is: what's the point of printing money to try to inflate your way out of debt without trying to aim for wage inflation?

There is no question that the BoE/Govts aim with QE was currency devaluation and inflation. But what's the point without wage inflation? The debt stays the same relative to your income, but everything else gets more expensive, so your ability to repay debt is less.

AidanR

Hmm, you have a point there. I suppose it depends whose debt we're talking about. If it's government debt then the fact that the public don't get wage rises in line with inflation simply heaps the pain on them, and in particular the poor and those with savings. Of course, domestic demand would slump, which will hit tax receipts. On the other hand, the currency should depreciate which will boost exports.

But inflating away government debt isn't all that simple as bond markets will react by pushing up interest rates on the debt to compensate.

Blimey, we're in a hole.

Mad Roadie

TheStone wrote:

It's a stupid thing to even think about saying.

Likewise, any talk of growth while paying down debt is nonsense.

Can't have growth without increasing the debt.
Can't increase the debt.
Can't have growth.

Get used to. The last decade was the illusion of growth on the back of a massive debt mountain. Things have to now change.

not fogetting , lots of debt = greater defaulting, and higher interest rates to cover defaulter's loses. the consequence being more cautious lending, and at higher rates which businesses and industry cant afford. So David is right , we have too much debt and it is crippling growth because of (that odd phrase) the price of money!