Growing up, one of the biggest personal financial problems I've heard about was credit card debt.
When I was in high school, I think credit cards companies offered much higher limits than they do today.
Somehow, married couples would accumulate anywhere from tens of thousands of dollars in debt to a few hundreds of thousands of dollars in debt.
Later, in college, I took a few classes about business law and found out that credit card debt can be discharged through bankruptcy. The biggest down side is that bankruptcy destroys a person's credit history for up to 10 years.
This kind of made me wonder. How many people get up to the age of 70 or 80 will exhaust all of their liquid cash and then rack up hundreds of dollars worth of credit card debt and try to kick the bucket before having to pay back the debts or declaring bankruptcy.
I do not recommend anyone to actually try this. Please do not rack up hundreds of thousands of dollars of credit card debit with the anticipation of discharging it through bankruptcy.
A friend of mine majored in finance and I decided to ask him about this issue. He told me that credit card companies anticipate that a certain number of credit card holders would rack up credit card debt in old age and die before paying it back. The credit card companies will then just write this amount off.
Having this system in place seems to encourage financial irresponsibility. Credit cards aren't difficult today. At the age of 18 or 20 a person can apply for a credit card and start out with a credit limit of a few thousands dollars. After a few years, the person can develop a good credit card score and keep applying for more and more credit cards and keep accumulating more and more credit limit.
It is reasonable to estimate a man or woman in the mid 20's could have applied for around 20 to 30 credit cards and accumulate a credit limit of $100,000. By the age of 30, he or she could accumulate $100,000 of credit card debt and then discharge it by bankruptcy.
Once again, I do not recommend anyone to actually try this. Please do not rack up hundreds of thousands of dollars of credit card debit with the anticipation of discharging it through bankruptcy.
The man or woman could just live with his or her parents for 10 years until the credit history is repaired. He or she would be 40. At that point, he or she could repeat the process all over again.
This kind of behavior discourages people from saving money. It also discourages investing in different companies. This is partly the reason that our country is $17 trillion in debt. Eventually, this is one of the factors that will destroy our country.
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