54

I think the heart of the matter is that you're misinterpreting both what comprises a credit score in the US, and how they are used. This is evident in your second to last paragraph: A "credit score" in my country limits the extra debt you can take if you are already in debt. In The U.S. though, it seems that the "credit score" allows you to get even more ...


38

Can somehow add a layman explanation on how Americans can be so much in debt but have good "credit score" that allows them to borrow even more? A credit score measures the risk of not making monthly payments. That's all. Nothing more. If a creditor thinks you're a larger risk, they'll likely just demand a higher interest rate, or some form of collateral ...


25

One aspect that may not be obvious from outside the US is the prevalence of medical debt. A quick Google shows that about 2/3rds of bankruptcies are due to medical issues. The easiest way to end up $100k in debt is to find out you have cancer. While putting people into crippling debt because of medical issues is messed up, denying life-saving care to people ...


19

How can you get more loans when the ones you already have are way over what you can ever pay back? Credit scores don't exist to help the consumer; the exist to help the lender. A person who will never pay back their loans can be a fantastic investment. The poor debtor still has to eat, so they will get a job. The court system will then let you garnish ...


13

In the U.S. though, I see people making 20K an year but have credit card debt of 90K. How is this possible? You don't see that. I don't know what sort of fear-mongering sympathy extracting nonsense you've seen on the internet, it is not common at all for someone earning $20k to have $90k of credit card debt. In fact, at $20k of income a normal limit would ...


12

I noticed that the interest rates on savings accounts are significantly higher than those of checking accounts. Why is this the case? Balances in savings accounts tend to be maintained for much longer periods of time (both by choice, and by restrictions on transactions), so the bank doesn't need to keep as large a reserve and can loan out more of the money, ...


9

One part of the reason is that bad credit scores do not stop people from getting loans, it just means that they'll pay higher interest rates. At the lower end, they may resort to predatory lenders. From the point of view of such a lender, having the loan repaid is almost the last thing they want. They'd much prefer you to just keep paying the (very high) ...


8

Shouldn't the “credit score” prevent Americans from going deeper and deeper into personal debt? The credit score is often used as a indicator of financial risk as @RonJohn stated. Here is where it gets perverted in US Financial... Banks know low income folks and others with low credit scores are riskier, so they still make the loans but at a higher rate. ...


6

In your title you ask what happens typically. In the body of the question you ask if you have to specify how the extra payment will be treated. The answer is you have to ask your lender about your loan. My loan is through my credit union. I can make an extra payment anytime I want. The form on the website allows me to specify if the payment is to be ...


6

What would make investing into my 401k the better option other than NW? Company match. Eliminating all 401(k) contribs means no company match, and that's a pay cut, which naturally is Unwise. More important is the foolishly binary thinking embedded in your statement: If I choose to invest $19k into my 401k Who mandates that you must fully contribute ...


6

Depends on the store and conditions for the discount. As an example the grocery store occasionally has sales like this and require return of all products for a refund. For example, if 12 packs of Coke are on sale for "4 for $10 - must buy 4", the receipt will say "all items required for return". Sometimes the sale doesn't have the "must buy 4" requirement ...


5

There is no universal answer. Every company is free to set their own terms. Check the fine print or contact the company. Usually, companies are smart enough to avoid those situations. For example, if you sign up for a "Buy One Get One Free" deal, you can't return the paid one and keep the free one. You should also consider whether or not return shipping ...


5

The term for this is a Chain Marriage. Google results for examples are filled with hits for the phrase "ball and chain", but I did find one example that lasted 117 years. As far as I know, these are not considered the same estate by the IRS, so there would be no presumption of fraud.


5

I will restrict my answer to Canada and the US, the only jurisdictions with which I am familiar. Contrary to the other answer, the statutory and regulatory insider trading regimes in both the US and Canada require an actual transaction ("purchase or sale of securities") to occur. If no transaction occurs, there is no insider trading. There is a possible ...


4

Mortgage rules differ by country, and within a country they further differ by the lender. Assuming this is in the US, and based on my limited experience (2 mortgages), you can only add extra payment on top of a regular payment. For example, if your regular payment is $1000, and you want to pay $500 extra, you make $1500 payment. Regular portion of the ...


4

Yes, as the SEC explains, Federal Reserve Board's Reg T requires that you pay for the purchase of a security before you sell it: In a cash account, an investor must pay for the purchase of a security before selling it. If an investor buys and sells a security before paying for it, the investor is “freeriding” which is not permitted under the Federal ...


3

The "illusion" is the assumption that these vicious cycles can't happen, that liquidity is guaranteed by the large number and sophistication of market participants. They are warning people who focus on the current high level of liquidity that it could disappear suddenly if conditions change.


2

It depends on your mortgage company, and how they've set up their web site**. If you happen to be with Bank of America, when you make a payment, you'll be given an option to include an extra amount. If you check this, you then get a choice whether the additional amount will be applied to principle, escrow*, or "other", which I suppose could include such ...


2

You'll have to read your mortgage contract and/or ask the mortgage company. Let's say you have a 30 year mortgage with fixed interest rate, and you are supposed to pay $1,000 every month. This month you pay $2,000. One way the mortgage company can handle this (which is not very nice for you financially) is to stash the $1,000 away, and if you don't pay ...


2

Yes, its all about the paperwork. But realize that Form 5310 is filled out by the plan sponsor who is your now gone employer. Your 401k provider is only following instructions of whomever is control of the remains. Do remember that in the US the 401k as a retirement plan was accidental construct of the tax code. Legally the now defunct company is only on ...


2

Sure, there are all kinds of reasons why you may not be legally obligated to pay a bill. The most obvious would be if the bill is fraudulent. If I sent you a bill for a product that I had never sent you and that you never ordered, that's pure fraud, and you are certainly not obligated to pay it. If we had an agreement but you are not satisfied that I lived ...


2

From Tax Topic 409: (emphasis added) The tax rate on most net capital gain is no higher than 15% for most taxpayers. Some or all net capital gain may be taxed at 0% if you're in the 10% or 12% ordinary income tax brackets. However, a 20% tax rate on net capital gain applies to the extent that a taxpayer's taxable income exceeds the thresholds set for the ...


2

This should perhaps be obvious, but handing someone money without any sort of contract or agreement in place to govern the exchange is foolish. It sounds like that's what he's asking you to do - give him a security deposit and month's rent for a rental agreement that doesn't exist (yet). If you don't have a lease contract in your hand, there's nothing to ...


2

A shop/business that hasn't figured out how to address this issue, will soon run into a cash flow problem. In the past in the days of non-computerized sales receipts it would be possible to convince a young store employee to refund the higher priced one. But with the modern POS systems, the computer should quickly grasp the correct amount to refund. You ...


2

I have moved recently to the US from Europe. The simplest answer I can think of is the ability of the Credit companies to trap you further by giving loans at "higher interest" rate. For example, it is common to see Ads like "Have bad credit score? Don't worry! we have loan for you". Apparently such a loan is given at a significantly higher interest rate ...


2

A Home Equity Conversion Mortgage is close to (if not exactly) what you're looking for. Essentially, you "borrow" against the equity of the house, and use those proceeds to pay off the existing mortgage. The loan accrues interest that is paid off once the house is sold. Here are the problems with this type of mortgage: The interest that accrues is most ...


1

When you are covered by an HDHP for only part of a year, your HSA contribution limit is prorated. If you are covered in December, you can use what is called the "Last Month Rule" to maximize your contribution, but the catch is that you must remain HSA-eligible (covered by an HDHP) for all of the following year. In your case, you used the last month rule in ...


1

Here's a few off the top of my head: Clearance sale (old models, excess stock etc.) Salvage sale (for damaged, excess or used goods) Stocktake sale (typically done shortly before the end of a fiscal year, to simplify the stocktake) Runout sale (typical for cars, with updated models/manufacturing year arriving) Liquidation sale (company is short of cash ...


1

Free riding in general means buying without having the money to do so (generally, using unsettled funds from its own sale to cover the cost). At the retail level, your broker will generally have rules that prevents free riding in your account. Your broker is incentivized because the fundamental problem is that you effectively borrowed money without actually ...


1

If you pay $70,000 and take on say $40,000 in debt, then too effectively paid $110,000. So you would own 36.6% of the house.


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