Divemedic

Credit Card Followup

In a follow up to the credit card post, let’s look at the math of credit card rates. Interest rates on credit cards only matter if you carry a balance on them. Nearly half of credit card holders (47%) carry a month to month balance. Who carries this balance?

  • more than half of Gen Xers (ages 46-61; 53%)
  • millennials (ages 30-45; 53%),
  • 2 in 5 boomers (ages 62-80; 43%)
  • Gen Zers (ages 18-29; 40%)

The average balance for credit cards where the owner does carry a balance is $6700.

Why do the users carry a balance? The largest single reason is they aren’t properly managing cash flow and spending beyond their means, which forces them to use credit cards for everyday expenses.

According to the Federal Reserve, 82% of American adults have at least one credit card. However, it’s common to have several cards in your wallet. On average, people have 3.9 cards.

My wife and I are super prime users, and we spend about $40,000 per year on credit cards. We use them for everything: utility bills, groceries, you name it. Once, I even made a $20,000 down payment on a car with a credit card. The difference is that we pay the balance off every month. Why do I do that? Rewards.

My Amazon card pays 5% cash back. Our joint card that we use for daily expenses? 5% cash back on fuel and restaurants, and another card gives us 7% credit for use on vacations. It’s all about maximizing our cash back returns. It’s like giving yourself a raise. As for us, that $40,000 a year in card use gets us about $1500 a year in rewards and freebies.

You just have to make sure you don’t carry a balance. That means spending within your means and not carrying a balance. The nationwide average APR on general-use credit cards is 21.91%, which means interest adds up quickly.

Among those who carry a balance, more than 7% of them are more than 90 days past due. So do the math from the other post- people with lower credit scores (below 700) spend the least, but are the most likely to carry a balance and most likely to become seriously delinquent and default.

So Trump’s rule of requiring credit card rates to be capped at 10% will cause credit card limits and availability to be greatly restricted. People will move back to cash, and will have to use debit cards for online transactions. This will in turn do three things:

  • It will force people like me to stop taking advantage of rewards, because they will no longer be available. I, and other prime and super prime users, will have to switch back to cash.
  • Prime users with scores between 700 and 749 will have restricted access to cards, and even then, those cards will have very low spending limits, likely $1000 or less.
  • Credit cards will simply not be available to those with a credit score below 700. This will force these subprime borrowers into more expensive payday loans, which carry interest rates of more than 300%.

The hit to online vendors and shopping will be enormous. Amazon, as the world’s largest online retailer with $400 billion in annual online sales, will be especially hard hit as people lose access to easy digital funding sources.

Likely, this will eventually settle into digital currency becoming more popular. At that point, I will have to reevaluate my opinion of things like bitcoin.

Just remember- price controls NEVER work as intended. Where there is market demand, the market will find a way to supply that demand.

By Divemedic, ago

Supply and Demand

People don’t understand how market forces work, and that is true on both the left AND the right. The price of anything: food, houses, cars, even your labor is set by market forces.

Michael Jordan got paid what he was paid for two reasons: no one else could play basketball at the level he played the game. The pool of talented basketball players was very small- there are less than 600 people in the entire country that can play basketball at an NBA level, and Jordan was the only person playing at the level he was playing at. So there is your supply- very limited.

The demand for him was huge- people wanted to watch the man do what he did, and they wanted to be like him so much that they bought millions of shoes simply because Nike put his name on them. That is your demand.

The same is true for houses, cars, food, or anything else for that matter. Right now, my wife wants to buy a car. She has her mind set on a specific car, and is very particular about what she wants. She wants a Lexus TX350 AWD with the Luxury trim package, a dark outside color, and any interior that isn’t white. Guess what? Demand for that vehicle is so high, the dealers are selling them sight unseen before they even arrive from the factory. You can’t special order them, because the factory is so busy trying to meet demand, that they don’t have the capacity to do custom orders. Because demand is so high, dealers charge sticker price, take it or leave it. If you don’t like it, go buy something else, but make no mistake, as long as the Lexus vehicles are selling so quickly, you won’t see deals or reductions in price.

Apply the same to houses- people want to buy houses, and the demand curve is being altered by large investors buying thousands of homes to use as rentals. Demand is high, so prices climb. Why are investors buying so many rentals? Because demand there is pushing rental rates to climb, because so many illegals have entered the country, and they all need places to live.

So more illegals= more renters. More renters=higher demand and increased rental prices. That equals more profits, which draws in more investors to meet that demand. Those investors are buying themselves rental property, which is causing a decrease in supply for homes, and here we are.

By Divemedic, ago

Assist

As a paramedic, I have opened dozens of cars for medical emergencies, pets, or even children locked in cars. A person who is in a car and isn’t responding is a medical emergency until proven otherwise. Our policy was to try and wake the person while knocking on the window. If no response, the person was showing signs of distress, or it was a child, we would then gain entry to the vehicle. If the temperature outside was less than 80 degrees Fahrenheit, we would take the time to open in without damaging the vehicle, if possible. We had tools for that, but they take a bit of time. If the temperature was more than 80 degrees, our policy was to immediately gain access using the fastest possible means.

The people commenting on this post have a problem with what the cops did. I don’t.

By Divemedic, ago

Housing Costs

Check this out, and I can prove that it is wrong:

  • A payment of $2665 corresponds to a house that costs $465,000, so that is realistic.
  • The 22% marginal rate isn’t applied to all of your income, it’s applied only to the portion of your taxable income that is over $81,050 for a married couple.
  • In order to qualify for this house, the payment can’t be more than 50% of pretax household income. To afford this house, a couple would need to make $5330 per month, which means they would have to make $64,000 per year combined.
  • Median household income in the US is $83,730. So an “average” couple would have no trouble affording an “average” house.

However, crying about how people making minimum wage can’t afford an average house ignores mathematical definitions. Average is more than minimum, and there is no way to change that.

This is leftists online trying to piss people off because most people don’t understand math well enough to know that this entire social media post is bullshit.

By Divemedic, ago

Funny

So there’s this crusty old Sergeant Major and he’s really tense and uptight.

One night he’s at a military ball and this beautiful young woman comes up to him and says “Sergeant Major, you look so tense. When was the last time you got laid?”

He replied, “I haven’t had sex since 1955.”

The woman was shocked. “1955?” She said, “That’s so long ago! Why don’t you come back here and I’ll help you loosen up?”

So she takes him into this dark back room. He knows all the angles, all the moves, he rocks her world. Afterward she’s laying on her back panting and she says “Wow, you haven’t forgotten anything since 1955, huh?”

He replies, “I sure hope not, it’s only 2130 now!”

By Divemedic, ago

Liberals Get Angry

Funny thing, leftists on the Internet keep calling me a boomer. I’m GenX, but since when do facts get in the way? Still, now leftists have moved on from their expertise in medicine, foreign relations, defense, and now are back to being use of force and legal experts. If you disagree, they call you names and then block you.

By Divemedic, ago

What It Will Look Like

An American civil war won’t be a clean battle between two sides. It’s going to be a messy affair involving dozens of factions.

By Divemedic, ago

No More Credit

Trump is claiming that he will support a rule change for credit cards that will cap interest rates at 10%. This is a horrendous idea that will cause real problems. The reason interest rates are where they are is a topic I have visited here before. People with bad credit are very likely to default.

With a ten percent interest rate, if more than 3% or 4% of people default, the bank will lose money covering the defaults.

Studies have shown that the lower your FICO score, the higher are your chances of default.

Credit Score% of the populationprobability of default
800 or more13%1%
750-79927%1%
700-74918%4.4%
650-69915%8.9%
600-64912%15.8%
550-5998%22.5%
500-5495%28.4%
less than 5002%41%

Credit Scores and Default Rates

With a ten percent default rate, anyone who has a credit score less than 700 is a money loser and won’t be able to get anything other than a secured credit card, and those with a credit score between 700-749 are right there on the border and will likely see cards with very low limits.

That isn’t to say credit scores are without fault. I detest how the FICO score works, but it is what the banks use, and for that reason, Trump’s actions will make sure Americans stop living beyond their means.

Maybe that’s his intent. If it isn’t, well, price controls never work as intended.

By Divemedic, ago

This is so Last Week

I know this is from last week and the left has since moved on, but below is a great video on the EF-18 Growler.

When I was in the Navy, we still had the EA-6B Prowler, affectionally called the “Queer.” The Growler has the same job, it’s just been modernized. There were 2 squadrons of these in the Venezuela theater: one was carrier based, the other was located in Puerto Rico.

There was a legend going around when I was in the service about a Prowler that had turned its jamming equipment on over Washington state and shut down everything: radars, radio, television, all of it for almost 15 minutes. Don’t know if it is true, but it certainly is within this plane’s capabilities. The jamming pod these aircraft carries is the AN/ALQ-99, which can jam all RF signals between 64 MHz and 20GHz.

In the run up to the Venezuela attacks, those Growlers would have shut down all radio and radar. No missiles, no tracking or seeing aircraft, and no issuing of orders to anti-aircraft batteries. All command, control, and communications (C3) would have been shut down. All radars inoperable. Anything that tried to shoot or track anyhow would have been eliminated by the F-35s that were operating over the country.

An entire nation’s air defense, shut down in a couple of minutes.

By Divemedic, ago

ONE TIME PAD

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By Divemedic, ago