[askyourmother]

Best part is credit card debt is typically unsecured - spend, consume, enjoy, stick up middle finger when repayment is due. Those who do repay will of course sub those who don't over the long course in the variable rates and fees.

[TheOtherHobbes]

Sticking up a middle finger will trash your credit rating and make it impossible to get a mortgage.

In the UK you'll also be put through collections, which can include attempts to force you to sell a property - if you own one - and/or most of your possessions to repay the debt.

Credit cards may not be secured, but lenders have risk management divisions who make some attempt to estimate default rates.

The biggest problem is the ridiculous rates for the riskiest borrowers. A few cards have an APR of 99.9%, which guarantees a default for anyone on a low income who has to make an unexpected payment for any reason at all.

[toomuchtodo]

> Sticking up a middle finger will trash your credit rating and make it impossible to get a mortgage.

I walked away from an underwater mortgage on a townhouse. It only caused my dropped my credit score ~100 points, and was eligible for another mortgage after 3 years (My credit card provider didn't blink, and had no problem allowing me to keep a charge card with high five figures of credit available).

The repercussions of credit default are highly overrated.

[tehwebguy]

Main difference being the debt you walked away from was for property that the lender presumably got back.

[toomuchtodo]

My experience says otherwise (without going into detail). Consumer protections against creditors/debt collectors in the US are stronger than in the UK.

[nkohari]

I think what they're saying is that the bank exercised their lien and claimed the mortgaged property, whereas card debt is unsecured and there's no collateral to claim.

[toomuchtodo]

Yes. I understand that.

[shanecleveland]

That's incredible. I wonder how typical your experience is. I've considered this strategy on a home we are forced to rent at a loss, as we'd be unable to sell. But I couldn't bring myself to do it.

[toomuchtodo]

At the time, I was backed into a corner so to say. It wasn't something I went into willingly.

My HOA would not allow me to rent the townhouse out (too many rentals already), nor could I come up with the $150K to bring the mortgage down to the new fair market value. So, mailed the keys back to the bank and walked away.

[dragonwriter]

> My HOA would not allow my to rent the townhouse out (too many rentals already), nor could I come up with the $150K to bring the mortgage down to the new fair market value. So, mailed the keys back to the bank and walked away.

Note that this doesn't actually work to reduce your debt everywhere (even everywhere in the US); its basically voluntarily inviting the bank to foreclose, which they usually will do (because if you are abandoning the property and they don't, the longer they go before foreclosure the more likely that, just due to being abandoned, the property will lose more value.) But when they do foreclose, some jurisdictions allow foreclosure deficiencies -- that is, they allow the conversion of the amount of the mortgage debt that the lender doesn't recover in a foreclosure sale to be collected as an unsecured debt.

[toomuchtodo]

Yes! You're correct. But its not the same as, "If you default on you credit cards or other debt, your life is ruined."

[ryandrake]

Why not? If you're way underwater, default can often be the smartest resolution long term.

[ArkyBeagle]

Next time think short sale. Although I hope there's no next time :)

[empath75]

I went through a bankruptcy about 10 years ago, mostly stupid credit card debt I ran up in my early twenties. I paid for everything with cash for years after that and having a poor credit rating barely impacted my life. I have credit up near 800 now and the bankruptcy is still on my record for another couple of years. Other than a few months after my wedding and honeymoon, I haven't carried a balance for years.

[rco8786]

> stick up middle finger when repayment is due

Err, what a terrible idea. That might work once, sure. Then you're pretty fucked for a long time. The only way to avoid the collections would be to full on declare bankruptcy.

Honestly there's basically no situation in which that's a good idea unless you're actually bankrupt.

[vox_mollis]

Then you're pretty fucked for a long time

Depending on amount owed, this may not be true. Any unsecured default under ~$10k, the only consequences are usually a credit report hit and incessant calls from debt collector call center workers.

Over ~$10k, and yes, you're talking attorneys, judgments, garnishments, etc.

[FireBeyond]

Hah. I got divorced. I got served a while back over a joint debt that got overlooked. The principal was $1,050.

The firm had also tacked on $2,000 in "preparation and legal costs, filing fees". Which is pretty rich for what likely amounted to a mail merge in Word. But it's no coincidence that most collection firms are owned by lawyers.

[koolba]

> Best part is credit card debt is typically unsecured - spend, consume, enjoy, stick up middle finger when repayment is due. Those who do repay will of course sub those who don't over the long course in the variable rates and fees.

Those that pay it off entirely every month are the one's being subsidized. It's effectively an interest free loan for 30 days. Plus you get 1-2% back as "rewards". That's what contributes to the ~3% transaction costs for credit cards.