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There are substantial differences in the credit card offers that banks extend to different potential customers. Less-sophisticated borrowers receive offers with more back-loaded and hidden features, as well as more upfront rewards, visual distractions, and fine print at the end of the offer letter, according to Hong Ru and Antoinette Schoar in their new study, Do Credit Card Companies Screen for Behavioral Biases? (NBER Working Paper No. 22360). Banks also ratchet up these hidden features when their cost of funding increases, and when the credit risk of consumers is lower, which reduces the risk for the banks that customers default once they are hit with the unexpected charges. Hidden fees go up when state unemployment insurance benefits become more generous.
https://www.nber.org/digest/sep16/w22360.html
One more way in which Big Data is used against Little Guys.
(Score: 3, Interesting) by rondon on Wednesday September 07 2016, @12:26PM
In all seriousness, how did you live on $750 a month for 4 years? That gives absolutely no wiggle room for unexpected expenses, in my experience.
Other than that, good job. Much respect for financial responsibility. Unfortunately, that is a tough lesson to learn for many people who have only bad role models for $$ management.
(Score: 2, Interesting) by Anonymous Coward on Wednesday September 07 2016, @01:46PM
True story. College. You never forget it when you (have to) do it. The gross budget was:
$400/month - rent (included internet/water/electric/maintenance). 3 roommates. Same place nowadays runs $520/month. It was notably on the college bus route.
$100/month - food (eat very little meat, rice with every meal, lentils/bean frequently)
$100/month - car (insurance/gas, reduced insurance rates for driving infrequently... $50/month in gas, BIKE)
$150/month - "wiggle room" (bike repairs, clothing, but usually going to the movies or dates)
(health insurance was covered by tuition)
I worked on/near campus for $12/hour (later 13, closer to $850/month for the last year now that I'm running the exact numbers) for ~17 hr/week. Notably did not have a phone (internet phone before it was cool!). Additional props to Dominos pizza, which had "Two For Tuesdays", where a "anything you want" pizza was $10, and you got two. This is 4 days of food (one meal a day, half-pizza at a sitting) for $10. Slightly above the $2/meal threshold, but "any way I want it" is "with all of the meat, extra meat, omg protein".
Nowadays of course, the budget is a bit more generous (figures adjusted for individual values, double everything to get household values):
$175/month - food (eating good now!)
$90/month - gas
$160/month - house repairs
$136/month - taxes/insurance/HOA (house is paid for)
$250/month - general 'fun money'
$80/month - general 'dating' (my half anyways)
$44/month - car repair
$80/month - car insurance
$12/month - power (solar panels FTW)
$43/month - water/trash/sewer
$27/month - cell phone
$14/month - internet
-----
$1111/month - current "self only" budget. Looks like we are budgeting $27264/year for the two of us (her 'fun money' is $50/month higher than mine). Need roughly 818K to retire. Currently have 278K in asset, making $180K/year (after taxes/fees). 3 years left (retire at 33/37) on current path assuming investments make 0. 30 months left is probably a more reasonable estimate. Wife gives birth next month, which /could/ affect the numbers, but hitting it before 40 is almost inevitable now (investments alone should cover half our spending).
My divorced parents always had to work for a living. They had/have bad financial skills. My mother unexpectedly inherited about $1M, and got to retire miraculously (life is unfair). My father will probably never be able to (unless we help :-/). Ziglar's story of the brothers from an alcoholic father is relevant: "how could I be anything but..." financially responsible when I've seen what irresponsibility leads to? On the current plan, my father will continue to work 50-60 hour weeks in poor health until he is dead and leave nothing to his children. He has visited something ~8 states. I have visited 40ish states and 12ish countries (you can actually hack it together with the above budget, believe-it-or-not). I will not have to work at 35. This is the power of financial responsibility.
(Score: 2) by rondon on Tuesday September 13 2016, @12:14PM
I respect what you have done on that budget, but as you have indicated - health insurance was covered by your school. This is a very, very large expense for many individuals that makes that $750 a month unworkable in my humble opinion.
Still, kudos to you for making a difficult situation work for you! I have been in a similar situation, but I was able to work about 25-30 hours a week and the budget fit wasn't as tight.
(Score: 0) by Anonymous Coward on Wednesday September 07 2016, @01:47PM
The parent didn't say they MADE $750 per month, just that they LIVED on that. Just because you make $XXX per year doesn't mean you need a X sq ft residence, new car etc. When you get over how others perceive your status, in other words, the stigma of "that is for poor people" and focus on optimizing what you get for your money, you will be pleasantly surprised on how much you can save. Cable TV is overrated and expensive, you will get used to the current seasons heat/cold, so keeping the thermostat at X degrees isn't necessary. This years gadgets don't offer much more than last years. Driving safely and maintaining property will keep your chances of an insurance claim low, so you don't need a .30 cent deductible. Unless you are disabled, riding a bike or walking is more fun, better for your health, and much cheaper than driving. Your local library has lots of books you haven't read yet. The internet has tons of free content to read, play, or watch that you have already paid for with your connection. Good clothes last a really long time. You can wear the same garment you didn't sweat in several times before washing. I can go on and on about how to cut costs. The point is, you need less than you think, and having the peace of mind of being able to handle a job loss, health problem, law suit, or major repair, and retiring young enough to be healthy enough to enjoy it is FAR more valuable than a fancy house, SUV, or gadget.
(Score: 0) by Anonymous Coward on Wednesday September 07 2016, @02:05PM
Heh, at the time I was making close to that. A month where I made $900 was a good month (20 hr @ 12/hr). Maximum was 20hr/week for 4 weeks, so $960 (_minus_ taxes) was about the max.