Surprising Purchases that Put People In Debt
Ok, technically these aren’t really surprising to me, but maybe some of you have never thought of them before. Or maybe you know someone who is now in credit card debt to their ears because of it. This post piggybacks off of Jonathan’s “Why do Get Into Debt?“, so if you haven’t read it, be sure to check it out!
Job Loss
One of the number one reasons I’ve heard why people are in credit card debt is because of job loss. Some of them had run through their emergency funds and then fell back on credit cards; however the majority of folks in this position didn’t have an emergency fund to begin with.
Medical Expenses
I wasn’t too surprised to hear that, particularly with the fact that medical insurance has skyrocketed and many people can’t afford the insurance. Instead they’re putting their bills on credit cards.
A Daughter’s Wedding
I was actually a little surprised with this one, only because I had never even considered how I would pay for a wedding when the day comes. I, like many other people, have absolutely no savings for the big day and I don’t think my dad does either. So what is a proud father to do? Apparently put it on his credit card. There’s no real solution to this, either. I mean it’s nice to save for your daughter’s wedding, but the truth is, there are so many other things to save for that most people put this on the back burner.
Starting a Business
Being denied a loan by the bank is a tough blow when you’re trying to start a business. It may not have had anything to do with your credit either. It may have simply been because you didn’t have any money of your own to include. Sound strange? Don’t worry, you’re not alone. Banks are pretty conservative when it comes to lending start-up businesses money, and with good reason; 50% of start-ups close their doors within two years of opening. When you go to a bank for money, they want to see your commitment to making the business work and will require you to invest anywhere from 20-50% of your own money, depending on the risk level of the business. The riskier the business, the more they ask you to put down. And that 50% is just a guideline, some will ask for more.
So business owner’s who either can’t get approved for a loan or need to put some equity into the business tend to use credit cards. It’s tough when you’re just starting out, but if you can avoid using your credit card, I highly recommend it! Look into small business opportunities with the Small Business Administration (SBA) in your area. Most SBA loans will guarantee the bank 80% of your loan, meaning if you default the bank doesn’t take a total loss. They even have special programs for women and minorities seeking loans. However, they do require excellent credit in this case because they are guaranteeing the loan. Still, it’s worth looking into.
Furniture
This falls into the category of ‘instant gratification’ for most folks. If you’ve already got a furniture set, then save the money until you have enough for the newer set you want. It’s usually not a dire need to have that new set, yet because we want what we want when we want it, people go into debt over furniture. Granted, this usually isn’t something that runs most people anymore than a few thousand dollars, but still. That’s a lot of interest if you have other debts when you could have waited and saved, then paid no interest. To each their own, but furniture isn’t something I think should be put on credit.
Traffic/Parking/Warrant Tickets and Fines
I have a friend who went into serious debt because of this, and they weren’t even hers. Unfortunately it was either pay them or the significant other was going to jail. Most people don’t like to see their loved ones suffer – or hauled off to jail, for that matter – so they pony up the dough. But when they don’t have the funds, they turn to credit cards. Another one to add to this category is bail bonds. I know a customer that put $15,000 on a credit card to cover a bond when the guy split. It’s not a fun situation, so really consider the consequences when it’s someone else’s ticket you’re paying.
What other surprising purchases or payments can you think of that put people in credit card debt?
Related posts:
- Debit Card Purchases Triggering Overdraft Fees
- Rich People Gone Broke: Donald Trump
- Good Debt vs. Bad Debt
- Life or Debt: The Psychology of Consumer Debt
- 7 Lame Reasons People Spend More Than They Make
I’ve had the job loss situation. I graduated just over a year ago and started working at a small company that went under a few months later, and I was jobless. I found a new job just a few weeks later, but didn’t have enough money in the in-between, so I definitely racked up some credit card debt. I had some savings but didn’t want to use all of it up. Fortunately, I was able to do some babysitting and freelance work to help, and I made sure to pay off that debt as soon as humanly possible. Because of that experience, I’m working hard to build my emergency fund to prevent myself from ever being in that frustrating situation again.
I’m appalled that you say, regarding parents going into debt for a daughter’s wedding, that “there’s no real solution.” Of course there’s a solution — assuming that the daughter is an adult (I hope so!), then she, and her intended, can pay for their own wedding. BTW, my husband and I paid for our own wedding. I would never have considered burdening my parents with that expense. They are retired and have their own expenses to pay. Even if they had been still earning, I wouldn’t have wanted to depend on them, particularly if it meant they’d go into debt.
Well I’m very glad that you paid for your own wedding. However, most parents – fathers in general – would very much like to pay for their daughter’s wedding, as evidenced by the fact that they’ve gone into debt over it. I was referring to the fact that when a father wants to help his daughter, there’s no real solution – either he saves for it in addition to other responsibilities he has or he puts it on a credit card. Some daughters – like yourself – wouldn’t dream of asking for their parents to pay for the wedding, in which case, this post doesn’t apply. But, not every daughter has the notion to pay for their own wedding and most fathers wouldn’t tell their daughters they just didn’t have the money. They’d find a way. Appalled or not, it’s a tough situation to be in.
Not a purchase per se but more in line with job loss; medical conditions that affect functioning (e.g. clinical depression). Couples can trade off duties until the victim can function well enough again but singles have no one to take over their finances when they are not functioning well. Also true of debilitating ailments – it’s hard to manage your affairs when you can barely get out of bed – assuming you can.