[lbo-talk] definitive evidence on the housing bubble

[JBrown72073 at cs.com]

Michael Pollak wrote:
>But if you ask people in a focus group why they don't pay off their loans,
>they'll tell you it makes them feel prudent to have money in the bank for
>emergencies.  For some reason, having 2 grand in the bank and 2 grand on
>their card makes them feel prudent, but having zero on each makes them
>feel vulnerable.  The Frontline report gave the impression that this kind of
>fuzzy thinking about credit is very widespread.
>
>Michael

The 'for emergencies' thing is strange, I've had friends argue this, too.  
But presumably, if you're not running a balance on your credit card, you could 
use that for emergencies.  If your access is restricted to more cumbersome ways 
of borrowing money, keeping emergency cash makes some sense.

It's not surprising that compound interest escapes people, as they pointed 
out in the Frontline program, the credit card companies make it as difficult as 
possible to figure it out.  Were there not regulations requiring it, they 
wouldn't even disclose the interest charges.

Jenny Brown