The US Fed came out with a stat a few years ago that 40% of Americans wouldn’t have cash to cover a $400 emergency: they’d have to sell something, borrow, or other.
That’s pretty much paycheck to paycheck if your savings are that low.
The question asked how somebody would pay for an unexpected $400 expense. If you answered “credit card” then you were considered to not have the cash to cover an emergency. I’d use a credit card…and pay it off when it’s due.
How are you all discussing this question from memory without linking to the source?
Poorly, that's how.
When faced with a hypothetical expense of $400, 63 percent of all adults in 2022 said they would have covered it exclusively using cash, savings, or a credit card paid off at the next statement (referred to, altogether, as "cash or its equivalent")
I suspect multiple things are getting mixed together... I swear I remember reading what GP said much further back than two years ago.
Edit: That said, the part you quoted supports GP, the part in quotes seems to be what they actually asked. Credit is probably not what most would think of as "cash equivalent", that would be debit, checks, and transfers like Zelle.
16% straight answered like that, if you scroll down to the next table for non-cash-equivalent payments:
> Put it on my credit card and pay it off over time
Edit: The people running this survey also had the same thoughts about ‘maybe some people are choosing to not this directly even though they could?’ And added this question:
Based on your current financial situation, what is the largest emergency expense that you could handle right now using only your savings?
1. Under $100
2. $100 to $499
3. $500 to $999
4. $1,000 to $1,999
5. $2,000 or more
This is discussed just below the stats @Jabble sites!
To explore this potential difference between how people would pay for a small, unexpected expense and whether they could pay for it with cash or the equivalent, the survey included a question asking people what the largest emergency expense was that they could handle using only savings. Eighteen percent of adults said the largest emergency expense they could handle right now using only savings was under $100, and 14 percent said they could handle an expense of $100 to $499
So this statistic means most people are not living paycheck to paycheck right? (Although I didn’t think that “paycheck to paycheck” meant you would be ruined by an unexpected $400 expense)
Anyway, it still doesn’t seem like most people live paycheck to paycheck, according to your link:
> Some financial challenges, such as a job loss, require more financial resources than would an unexpected $400 expense. One common measure of financial resiliency is whether people have savings sufficient to cover three months of expenses if they lost their primary source of income. In 2023, 54 percent of adults said they had set aside money for three months of expenses in an emergency savings or “rainy day” fund—unchanged from 2022 but down from a high of 59 percent of adults in 2021.
Yep. In the US, I would of course pay for an unexpected car repair (or indeed most any expense) with a credit card. It doesn't mean it won't be paid off at the end of the month in essentially all cases. So one of those meaningless statistics.
YOU would, but a lot of people with credit cards don't even understand that it's a loan, or what compound interest is. They put the expense on the card and then pay the minimum payment, either until it's paid off with insane interest, or they keep racking up debt until they reach their limit and get a worse card, until they're trapped in a cycle of poverty
seriously, everyone in this thread should watch Financial Audit and see how people outside the silicon valley bubble really live. That show has extreme examples to be sure but there are so many people like this
I find it hard to sympathize with people that have enough money to pay off their card bills but don’t actually do so because they can’t be bothered to read.
It is easy to make mistakes when you margins are razor thin. They might be stupid mistakes it still happens and you notice them more because your margins become even smaller. I have been there, being really poor was hard on me.
Not an excuse for using credit cards, just an explanation why you should sympathize.
They aren't, debit cards are the default. Credit cards are just readily available and people like having credit.
Credit access in the US is ludicrous, you can be a terrible borrower (late or even tons of charge offs) and still get credit offers for credit cards. A lot of people then get into trouble because somewhere in their psychology the credit limit counts as money they "have" even though they understand they have to pay it back. That's why you have people talking about literally freezing their cards in a block of ice to control their spending.
Because paper money is inconvenient as hell. Have you seen the size of those 25ct coins! And then you go to buy the cheapest bottle of water, and you need 20 of them to buy half a liter.
Oh I see. But I mean why not just a debit/bank card that allows you to pay with money you have but not with money you don't? You just meant card in general. Yes I agree cash is now very inconvenient.
Basically, you're less protected against purchases gone wrong with a debit card or against fraud. A fair number of (mostly higher income) folks also get other benefits from credit cards--though that may not be relevant here.
However, a debit card usually covers the floor of needing a card of some sort to pay for a lot of things.
I suspect a lot of people in the US use credit card generally to mean card of some sort because credit cards are so common. You do mostly need a card of some sort (and a smartphone) for many purposes but it mostly doesn't need to be a literal credit card so long as you have enough money in the bank.
We have no savings right now (I am not working) and could afford a $400 emergency, but we live paycheck to paycheck. Income is good, the extra just gets spent on various things due to having multiple disabled people in the house. Eventually we hope to rebuild the savings.
As I recall, there was also some disagreement in discussions over what "having cash" meant. A lot of people have ready access to assets that aren't necessarily literally cash.
OP got divorced so they probably sold the house. Many people living on the edge could still end up pretty loaded if they sold everything and lived like OP.
That’s pretty much paycheck to paycheck if your savings are that low.