11 ms·

How Millennials Became Spooked by Credit Cards

45 points by e15ctr0n 10y ago

op00to 10y ago
Just a few months ago, NY Times said folks are spending more and more on Credit Cards: http://www.nytimes.com/2016/03/27/your-money/credit-cards-encourages-extra-spending-as-the-cash-habit-fades-away.html http://www.nytimes.com/2016/03/27/your-money/credit-cards-en... They highlight a 25-year old (arguably fitting the Millenial archetype) that "uses her Southwest Airlines Rapid Rewards card to collect points she says she uses for plane tickets to visit her family in California." Which is it? Are we using credit cards more, or are we spooked by them and using them less?
ljoshua 10y ago
Huh, that's weird. I fall into the age bracket mentioned in the article, but use a credit card for nearly every single purchase for 1) the fraud protection benefits and 2) points. With the anecdotal group of people I know most people are fine using CCs. On the other hand, I pay off the statement in full every month, and therefore never have revolving debt that extends beyond 30 days. The article wasn't clear whether or not such credit would have counted in their analysis or not.
- icebraining 10y ago
  That was my first thought - are they avoiding credit cards or credit card debt? - but later in the article it says: "more recent data has also suggested that millennials are using credit cards less than people of a similar age did in the past"
  - Bartweiss 10y ago
    Even that - are using credit cards less - is unclear to me. Are there fewer millennials with open cards, or are millennials spending fewer dollars via credit cards (and thereby avoiding debt)?
- douche 10y ago
  This. It's really not that hard to do correctly. The fraud protections are much better, at least in my experience in the US, than using debit cards, you get the reward points, and you can "float" expenses over the course of the month, as long as you pay it off every statement - which is nice if you only get one paycheck a month.
- Bartweiss 10y ago
  I've known both types of people in that age bracket. Some feel underconfident with credit cards, and avoid them either for self-control or fear of fees and hidden surprises. Many more have them and use them liberally, but won't carry a balance. It's like a debit card with fraud protection and cash back, which seems pretty popular at all ages.
  - tenaciousjames 10y ago
    This. The golden rule is to pay off your "Statement Balance" in full each month, thus accruing no interest month-to-month, but getting the added benefits of a credit card. When I was young I racked up credit card debt and it was an expensive lesson. Now I use credit cards for everything but never carry an interest-bearing balance. The upside: never at risk with disputes, additional insurance/warranty coverage, free flights/hotels/etc using points, and up to 30-day deferred payment on all purchases. Personally, I felt the article a bit silly. Especially when I reached the part quoting the PE-firm employee. I can't say that I know a single person who manages their money well that doesn't use credit cards. IMO, strong financial acumen equates to using any available tools to maximize your output and utility. As long as you spend within your means and do not accrue any interest, credit cards literally give you free [insert rewards program here] for doing what you're already doing day to day. That is the power & utility of a credit card.
- blakeyrat 10y ago
  At my bank, the fraud protection for any card with a VISA logo is identical whether it be debit or credit. Due to that, I never bothered with a credit card. I don't want the ability to spend money I don't have. I did end up finally getting a credit card (in my mid-30s) not because I want one, but because I wanted a back-up card for when my debit card is out of commission for whatever reason. It's a constant struggle to remember to do transactions on it so it doesn't get closed for inactivity.
  - op00to 10y ago
    Depending on your bank, you may be out the money that's in dispute until the dispute is completed. If your bank decides to spot you the money in dispute while things are figured out, you need to keep in mind that if the dispute isn't decided in your favor that loan will go away, and they will debit your account. If you were cutting things close, you'll end up in overdraft and the financial screwing begins in earnest.
  - Obi_Juan_Kenobi 10y ago
    Here's the issue: you're paying for CC transactions anyway (cost gets passed on to consumer), so you might as well try to get some of it back (with reward points, etc.). I've never understood the credit vs. debit aspect. I know my budget and can easily just not spend more than I can afford. Paying the balance is automatic, so the only difference between using one card or another is that one gives me an e.g. Amazon gift card every couple months.
- op00to 10y ago
  My wife and I fit into that age bracket, and we also exclusively use credit cards for purchases anywhere we can. Just this morning, on a rarely used card, someone used the card and in about 10 minutes and a few purchases ran up to the limit. If this was a debit card, we would have been out the money in our checking account, and the onus would have been on us to recover that money. Instead, the fraudulent purchases were removed and a new card was issued - this took about 5 minutes, including looking for the card in question to find the number to call.
- pc86 10y ago
  It was putting my last car's down payment on the credit card that got us enough points to get nearly free ($18 I think) first class tickets for airfare for vacation this year.
- jseliger 10y ago
  but use a credit card for nearly every single purchase I hope you never end up in divorce or any other sort of court, which will result in your credit card records (and pretty much everything else) being subpoenaed. I have a credit card but use cash whenever possible. That way, transactions are more likely to be between me and one other party, rather than between me and many, many other parties. Let me say in advance that I know the system is not perfect, that I know I'm hypocritical for having an iPhone, etc. etc., but I will still note that some level of privacy / anonymity is better than none.
cmurf 10y ago
It still boggles my mind how prevalent credit cards are in the U.S. and how almost non-existent they are elsewhere, in particular Europe and Japan where debit cards are used. They don't call them debit cards, but rather cashless payment or what have you. And the merchant fees for these cards are far, far lower than credit cards which makes it even more baffling to me. ADD: "Without a substantial credit history, it is much harder to take out a home mortgage, for example." Why is this? It's not true in other countries where credit cards aren't used anywhere as much.
- Vexs 10y ago
  I honestly don't understand why they're so popular here either. A debt card is basically the same as paying with cash, because you have the money. With credit, you're still doing the same thing, but you pay later- either way you're still paying the same amount, but with credit, you can fuck yourself pretty easily. Also, it's because credit cards are so prolific here that it's harder to take out a mortgage, if everyone has a good credit score but you, then you're not going to be at the top of their list.
  - icebraining 10y ago
    Don't most credit cards offer rewards? If so, it's not true that it's the same thing, especially if there's no discount for paying with cash/debit.
    - ghaff 10y ago
      >Don't most credit cards offer rewards? Typically cash back credit cards also have (especially) egregious interest rates for carrying a balance month to month. And some have a fee. Cards without cash back typically have lower (but still very high) interest rates.
      - icebraining 10y ago
        Yeah, but you can not carry a balance. I'm not saying it's easy for everyone, but that would explain their popularity.
Mc_Big_G 10y ago
Boohoo. Millennials don't want to be enslaved by debt and the corporations that profit from it. I've told my kids since they could understand that credit cards are evil and are to be avoided like the plague unless you pay them off religiously every month. I'm glad to see they're listening.
- space_ghost 10y ago
  I watched my parents struggle with credit card debt for decades - there's no way I'm going through that. Also, even though I've never had a credit card in my life, I had no trouble getting a home mortgage with a fantastic interest rate. This article smells like it was written directly by the Credit Card Industry, which isn't what I would expect from a reporter that's obsessed with Bitcoin.
sotojuan 10y ago
This is interesting and I am glad less people are using credit cards. It's really not a good idea for the majority of people in my experience. I got mine when I was 20 and I've never paid it late or gone over my limit. Most of the time I coordinate my payments with the day I get my direct deposit (I've tried automatic payments, but too paranoid that they might not work!). Discover gives me pretty good Amazon cash back too, so every few months I get enough points to get something small for free or very cheap. It wasn't until much later that I realized not everyone is like me and most of my peers had a lot of debt accrued over the years. They're definitely dangerous.
- johnward 10y ago
  Maybe I lack self control but it was really easy to go from paying off $30k in credit card bills every month, to not having that income anymore, to being $30k+ in CC debt.
  - Bartweiss 10y ago
    This is probably a big concern for millennials in particular. The ability to "float" expenses is a nice way to smooth funds across a month, but for people without savings a sudden loss of employment can turn into instant debt.
  - slavik81 10y ago
    Surely if you were spending $360,000/year on your credit card, you'd have enough home equity and other assets to refinance that debt. It really shouldn't be on the credit card for long, because CC interest rates are atrocious.
    - johnward 10y ago
      negative. I was living in my parents basement at that time (yes seriously).
      - slavik81 10y ago
h4waii 10y ago
What's really scary is the fact that many of these individuals don't consider the benefits and rewards of using a credit card -- free flights, cash-back, insurance and extended protection, and best of all it's not your money. You get to hold on to your cash for a month's worth of interest and you get fraud protection. Credit cards are tool and, just like most tools, should be used with proper awareness and thought-process. None of the examples in the given article are fallouts of "using credit cards", but having runaway debt in the first place. This article really just emphasizes the fact that we are living in an age of complete lack of personal responsibility and self-control, where you can blame an institution for your inability to spend.
- ianai 10y ago
  Im willing to bet people don't value fraud protection because they haven't been a victim yet. I keep the number of places that see my debit and checking numbers as few as possible. Plus, the credit card companies themselves don't view fraud the same way or with alarm.
- johnward 10y ago
  > This article really just emphasizes the fact that we are living in an age of complete lack of personal responsibility and self-control, where you can blame an institution for your inability to spend. Not having credit cards is one way to control yourself.
  - Bartweiss 10y ago
    The whole "it's a lack of self control" claim is really weird to me. I don't stock my house with junk food, because I'd rather use willpower once at the store than constantly in my living room. Am I supposed to feel weak-willed for making the simpler choice? I guess you can argue that people are giving up a lot and ought to find the willpower to get those benefits, but for that you need to argue that they're actually giving up a lot. Otherwise, it's just as you say: these are people who are controlling their spending and not blaming institutions.
    - 10y ago
yumaikas 10y ago
This is something I fall squarely into. I've avoided debt like the plague, preferring to live a few years behind the tech curve in electronics and using older cars and such. I do use a debit card a decent amount however, for better and worse. I'd much rather operate within my means, than spend my entire life chasing something I can't actually afford. edit: I will be looking into getting a credit card decently soon so I can build credit for things like a house, but at 22, I can say I'm glad I don't have to worry about that hanging over my head in the future.
bbctol 10y ago
The use of credit history and score to determine worthiness in all sorts of purchases is a horrible construction that must be destroyed. I got a credit card for no reason other than to build score; I've never spent money I didn't have in my life (which seems responsible to me!) but I still have to go through this silly rigmarole of purchasing and then paying off to prove to future agencies that I'm responsible.
- jasonmp85 10y ago
  > this silly rigmarole of purchasing and then paying off to prove to future agencies that I'm responsible That actually sounds like a fantastic method for a lending agency to determine who is responsible and who is not.
  - logfromblammo 10y ago
    Not when you define "responsible" as "saving up and then buying when you can afford it". But the lending agencies say "responsible" when they mean "profitable for us", so I can see how someone might get confused.
  - mark_edward 10y ago
    How is such a person more responsible than someone who never uses debt to make similar purchases?
    - antisthenes 10y ago
      They may be equally responsible in actuality, but the company still needs to see a verifiable source that the credits are being paid back. It's a form of signaling.
- skrause 10y ago
  The whitelist-type system of building a credit score in the USA just seems weird and invasive to me. Here in Germany you have something more like a blacklist: You pretty much have a good credit score by default and only get a bad score by not paying bills or not paying back debt on time. I have a perfect credit score in Germany despite never taken any debt in my life.
ourmandave 10y ago
The article mentions several times that student loans are putting a lot of people off more debt. Then it says they'll have no credit history when it comes time to buy a house or car. What about all the student loan payments they're making? That's certainly a credit history, esp. if you miss a few.
- theandrewbailey 10y ago
  Over half of my credit report are student loans. All of them are paid and closed, years before their original term (probably still in the future as of now).
- manarth 10y ago
  In the UK, student loan payments (at least, those issued by and owed to the Student Loans Company - an official government-owned body for student loans) are not reported or recorded to any credit rating agencies. UK student loans are effectively invisible.
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loukrazy 10y ago
Given the option for zero interest payments on things like appliances and computers, why would you use a credit card for those?
- cmurf 10y ago
  No kidding. Even new cars have 0% financing, but an even better deal is buying a newish used car. But this whole article sounds like it was written by the finance industry as if millennials are irrationally scared (i.e. spooked). I'm increasingly not liking this article!
typetypetype 10y ago
> Credit cards are frequently necessary for the bigger purchases - like washing machines and computers... Saving up enough to buy items like without going into extremely high interest credit card debt is responsible consumerism.
- tantalor 10y ago
  Also, layaway (https://en.wikipedia.org/wiki/Layaway https://en.wikipedia.org/wiki/Layaway) if you have bad credit and no bank account.
- Bartweiss 10y ago
  And amusingly, the best credit cards for those purchases are almost always obtained during the purchase. An appliance purchase at Sears comes with 60 months of 0% interest if you open a card - it's debt, but not necessarily irresponsible. Using a normal card to debt-finance the same thing is far less responsible, and I'm not really sure what the article was trying to claim there.
biztos 10y ago
While I realize it may lead to less (reckless) spending, this is probably a good thing. Certainly my generation overused credit cards, and many of us learned painful lessons from it. I sure did, though even now I have a somewhat cavalier attitude towards the plastic. Sure, there are lots of benefits to credit cards if you have the discipline to use them to your advantage. But most people don't have that discipline, and the banks try very hard to loosen what discipline you do have. As an American living in Europe I find the different attitudes to credit cards over here very interesting. For instance in Germany I had a Visa and now I have a MasterCard, at a big fancy bank, and both are automatically paid in full from your account on the first of every month. It might be possible to run up debt on a credit card in Germany (or it might not) but it's not the default action like it is in the US. No "click here to pay the minimum." Also, lots of places won't even take credit cards in Germany. Like Ikea for example. Instead these places will take your "EC card" which is like an ATM card in the US, i.e. a direct debit from your account. While the Germans are notoriously paranoid about debt -- hyperinflation will do that to you -- some other countries are more freewheeling. In Hungary most people don't have credit cards, but lots of places (including Ikea!) accept them. (Slightly complicating this whole story is the fact that in Europe most debit cards are also Visa or MasterCard, which I assume is transparent at the point of sale.) However, back in debt-averse Germany, unsecured personal credit is much easier to obtain, at much better rates, than in the US. So if you're gainfully employed and you really need to buy that used speedboat to set the Spree on fire, they've got you covered. [edit: grammar]
- skrause 10y ago
  The credit card acceptance in Germany is changing quickly right now, even the discounter chains like Aldi and Lidl who were cash-only just 15 years ago have been accepting contact-less VISA and MasterCard payments for around a year now.
  - emp_zealoth 10y ago
    EU came down like a tonne of bricks on max fees that the banks/processors are allowed to charge - those are no longer eating the profit off razor thin margins those chains had
nostromo 10y ago
My sense is that Millennials have a less rosy view of their future economic situation than did generations past. I don't know if it was coming of age during a banking crisis or huge student loans or expensive housing or what. But obviously if you're unsure about your future earning potential you'll be more hesitant to rack up future obligations.
- Bartweiss 10y ago
  Notably, the suggestion that "it's fine if you pay off your card every month" or "loans are sensible if you get good rates" only holds for people with some kind of faith in stability. With a stable job and some savings, paid-off credit cards and zero-apr loans are great tools. If you're worried about losing the job and barely making rent (like many millennials are) then even 'safe' debt becomes troubling.
  - spdionis 10y ago
    Or if you don't want to chain yourself to the job and like the financial flexibility to take time off whenever you want.
- theandrewbailey 10y ago
  It might also be that many are un-/underemployed compared to where they want to be, and have been for years. They don't see their economic fortunes ever improving much.
mankash666 10y ago
The credit for these individuals has shifted from cards to student loans. Paying your student loan on or ahead of time does give you great credit history, in time for your first mortgage
SeanBoocock 10y ago
I can identify with this. As a 30 year old, I have never and don't ever see myself owning or using a credit card. The experience of my parents struggling with debt for most of my childhood remains emotionally powerful, even against the opportunity cost of not using credit cards. I am willing to to take extra precautions against fraud and lose the cashback I otherwise would earn, if it means never inviting potential credit card debt.
- op00to 10y ago
  I'm curious what the credit score would be of a fiscally-responsible 30 year old with no credit cards. Care to share a ballpark, if you know?
  - SeanBoocock 10y ago
    The closest I have is the approximation supplied by my credit union (Alliant). Currently it sits at ~660, having fallen from ~740 when I finished paying of my student loans. At the moment I am counting on saving more than the standard 20% for a future home purchase, in order to minimize the impact of my lower credit score on a worse mortgage interest rate.
    - op00to 10y ago
      thanks! That's interesting that you took such a hit from having your loans paid off. I know that has an effect, but that totally dropped you out of prime territory. When shopping for your mortgage, you may want to see smaller mortgage brokers who would be able to give you a slightly better deal versus going to a larger bank. Good luck!
- antisthenes 10y ago
  This post is a great example of complete misunderstanding of CC basics and as a result - an irrational fear of "all things financial" If you're so afraid you might lack self control that you will spend more than your monthly income, get a card with a limit that's 1/2 of your income. Simple as that. This country is structured around using debt as your leverage, as both business and consumer. Not to utilize that and tout it as somehow virtuous or prudent is, in fact, just ignorant at best.
doctorpangloss 10y ago
There's a lot of confusion around how these cards work and what these statistics measure. In this article they are talking about the sum of all balances on credit card accounts. Technically all of this money is borrowed, even if, as some commenters say, you "pay in full every month." You're just only getting charged interest after typically 30 days. Using terms like "revolving debt" to describe interest charges is imprecise, as is describing payments on interest-bearing debt as "paying late." Interest is interest, and debt is debt. How do credit scores distinguish debt from interest from defaults, the inability to pay interest (sometimes principal)? It doesn't matter. Before Lending Club hid them, the variables that were strongest correlated with borrower race and borrow age were most correlated with default on loans. But debtors who accrue interest via credit cards and pay it are the most desirable, because obviously they are the debtors who make money for the creditor. The fastest way to get the best credit card offers is not to pay off your balance in full before interest is accrued; instead, accrue some interest and pay it off. Then you become Mr. Credit Card Offer, Eater of Spam Mail. I think a lot of aversion to credit cards (and borrowing generally) is just financial illiteracy. Universally people conflate debt and interest. They get dinged by the horrible experience of forgetting to pay once, even if the total interest paid was less than 0.1% of their expenses in a year. Put another way, if you gave me access to low interest debt, of course I'd take it... And open a bank! The real scam is mortgages. Financial illiteracy makes people minimize monthly payments instead of "finance charges," one of the most precise (broad and well defined) but poorly understood terms on a mortgage. There are millions of wealthy suburbanites paying 30 year mortgages with finance charges equal to nearly half the value of the home—a 50% markup for the privilege of lower monthly payments.
pc86 10y ago
> Jason Towner, a 32-year-old who works at a private equity firm, cut up his last credit card, from Capital One, in 2010. He did not have any unruly debts, but he had just watched his father and sister close the family furniture store after a bank cut off their credit line in the middle of the financial crisis. I can't understand this mindset. A bank refuses to extend a business line of credit, so you... cut up a credit card? It's hard to imagine two things that look related but have less to do with each other in actuality. I would expect an PE professional to know that. The idea that credit cards are bad is rooted in a fundamental misunderstanding of what they are and how to use them to your advantage.
- yumaikas 10y ago
  It's not that credit cards are inherently bad, but that they are dangerous/risky if you personally struggle with impulse control. The examples do seem to be decently unrelated, but we also don't know the full story, so there could be a relating factor. Or the reporter could just be using two stories of "credit" that tied together.
angryasian 10y ago
I know I'm the cynic but I find this more telling as how millennials are incapable of self control. I love using credit cards vs physical money. I also dislike the direct access to my bank account that a debit card provides. I think credit cards place a very good level of security and consumer protection if used responsibly.
calvinbhai 10y ago
Surprising that the article equates less credit card debt to less usage of credit cards. Its possible that people became more responsible and started paying off their balances while also using their credit cards? The article would make any sense if it also mentions the total credit limit and the ratio of revolving debt to credit limits. I for one, am glad that I'm comfortable with using credit cards, applying for new ones, and pay off statement balance all the way. That way, I'm getting good money back, while the spooked credit card avoiders are paying more for the same stuff :)

45 points by e15ctr0n 10y ago

Just a few months ago, NY Times said folks are spending more and more on Credit Cards: http://www.nytimes.com/2016/03/27/your-money/credit-cards-encourages-extra-spending-as-the-cash-habit-fades-away.html http://www.nytimes.com/2016/03/27/your-money/credit-cards-en... They highlight a 25-year old (arguably fitting the Millenial archetype) that "uses her Southwest Airlines Rapid Rewards card to collect points she says she uses for plane tickets to visit her family in California." Which is it? Are we using credit cards more, or are we spooked by them and using them less?

ljoshua 10y ago

Huh, that's weird. I fall into the age bracket mentioned in the article, but use a credit card for nearly every single purchase for 1) the fraud protection benefits and 2) points. With the anecdotal group of people I know most people are fine using CCs. On the other hand, I pay off the statement in full every month, and therefore never have revolving debt that extends beyond 30 days. The article wasn't clear whether or not such credit would have counted in their analysis or not.

icebraining 10y ago
That was my first thought - are they avoiding credit cards or credit card debt? - but later in the article it says: "more recent data has also suggested that millennials are using credit cards less than people of a similar age did in the past"
- Bartweiss 10y ago
  Even that - are using credit cards less - is unclear to me. Are there fewer millennials with open cards, or are millennials spending fewer dollars via credit cards (and thereby avoiding debt)?
douche 10y ago
This. It's really not that hard to do correctly. The fraud protections are much better, at least in my experience in the US, than using debit cards, you get the reward points, and you can "float" expenses over the course of the month, as long as you pay it off every statement - which is nice if you only get one paycheck a month.
Bartweiss 10y ago
I've known both types of people in that age bracket. Some feel underconfident with credit cards, and avoid them either for self-control or fear of fees and hidden surprises. Many more have them and use them liberally, but won't carry a balance. It's like a debit card with fraud protection and cash back, which seems pretty popular at all ages.
- tenaciousjames 10y ago
  This. The golden rule is to pay off your "Statement Balance" in full each month, thus accruing no interest month-to-month, but getting the added benefits of a credit card. When I was young I racked up credit card debt and it was an expensive lesson. Now I use credit cards for everything but never carry an interest-bearing balance. The upside: never at risk with disputes, additional insurance/warranty coverage, free flights/hotels/etc using points, and up to 30-day deferred payment on all purchases. Personally, I felt the article a bit silly. Especially when I reached the part quoting the PE-firm employee. I can't say that I know a single person who manages their money well that doesn't use credit cards. IMO, strong financial acumen equates to using any available tools to maximize your output and utility. As long as you spend within your means and do not accrue any interest, credit cards literally give you free [insert rewards program here] for doing what you're already doing day to day. That is the power & utility of a credit card.
blakeyrat 10y ago
At my bank, the fraud protection for any card with a VISA logo is identical whether it be debit or credit. Due to that, I never bothered with a credit card. I don't want the ability to spend money I don't have. I did end up finally getting a credit card (in my mid-30s) not because I want one, but because I wanted a back-up card for when my debit card is out of commission for whatever reason. It's a constant struggle to remember to do transactions on it so it doesn't get closed for inactivity.
- op00to 10y ago
  Depending on your bank, you may be out the money that's in dispute until the dispute is completed. If your bank decides to spot you the money in dispute while things are figured out, you need to keep in mind that if the dispute isn't decided in your favor that loan will go away, and they will debit your account. If you were cutting things close, you'll end up in overdraft and the financial screwing begins in earnest.
- Obi_Juan_Kenobi 10y ago
  Here's the issue: you're paying for CC transactions anyway (cost gets passed on to consumer), so you might as well try to get some of it back (with reward points, etc.). I've never understood the credit vs. debit aspect. I know my budget and can easily just not spend more than I can afford. Paying the balance is automatic, so the only difference between using one card or another is that one gives me an e.g. Amazon gift card every couple months.
op00to 10y ago
My wife and I fit into that age bracket, and we also exclusively use credit cards for purchases anywhere we can. Just this morning, on a rarely used card, someone used the card and in about 10 minutes and a few purchases ran up to the limit. If this was a debit card, we would have been out the money in our checking account, and the onus would have been on us to recover that money. Instead, the fraudulent purchases were removed and a new card was issued - this took about 5 minutes, including looking for the card in question to find the number to call.
pc86 10y ago
It was putting my last car's down payment on the credit card that got us enough points to get nearly free ($18 I think) first class tickets for airfare for vacation this year.
jseliger 10y ago
but use a credit card for nearly every single purchase I hope you never end up in divorce or any other sort of court, which will result in your credit card records (and pretty much everything else) being subpoenaed. I have a credit card but use cash whenever possible. That way, transactions are more likely to be between me and one other party, rather than between me and many, many other parties. Let me say in advance that I know the system is not perfect, that I know I'm hypocritical for having an iPhone, etc. etc., but I will still note that some level of privacy / anonymity is better than none.

cmurf 10y ago

It still boggles my mind how prevalent credit cards are in the U.S. and how almost non-existent they are elsewhere, in particular Europe and Japan where debit cards are used. They don't call them debit cards, but rather cashless payment or what have you. And the merchant fees for these cards are far, far lower than credit cards which makes it even more baffling to me. ADD: "Without a substantial credit history, it is much harder to take out a home mortgage, for example." Why is this? It's not true in other countries where credit cards aren't used anywhere as much.

Vexs 10y ago
I honestly don't understand why they're so popular here either. A debt card is basically the same as paying with cash, because you have the money. With credit, you're still doing the same thing, but you pay later- either way you're still paying the same amount, but with credit, you can fuck yourself pretty easily. Also, it's because credit cards are so prolific here that it's harder to take out a mortgage, if everyone has a good credit score but you, then you're not going to be at the top of their list.
- icebraining 10y ago
  Don't most credit cards offer rewards? If so, it's not true that it's the same thing, especially if there's no discount for paying with cash/debit.
  - ghaff 10y ago
    >Don't most credit cards offer rewards? Typically cash back credit cards also have (especially) egregious interest rates for carrying a balance month to month. And some have a fee. Cards without cash back typically have lower (but still very high) interest rates.
    - icebraining 10y ago
      Yeah, but you can not carry a balance. I'm not saying it's easy for everyone, but that would explain their popularity.

Mc_Big_G 10y ago

Boohoo. Millennials don't want to be enslaved by debt and the corporations that profit from it. I've told my kids since they could understand that credit cards are evil and are to be avoided like the plague unless you pay them off religiously every month. I'm glad to see they're listening.

space_ghost 10y ago
I watched my parents struggle with credit card debt for decades - there's no way I'm going through that. Also, even though I've never had a credit card in my life, I had no trouble getting a home mortgage with a fantastic interest rate. This article smells like it was written directly by the Credit Card Industry, which isn't what I would expect from a reporter that's obsessed with Bitcoin.

sotojuan 10y ago

This is interesting and I am glad less people are using credit cards. It's really not a good idea for the majority of people in my experience. I got mine when I was 20 and I've never paid it late or gone over my limit. Most of the time I coordinate my payments with the day I get my direct deposit (I've tried automatic payments, but too paranoid that they might not work!). Discover gives me pretty good Amazon cash back too, so every few months I get enough points to get something small for free or very cheap. It wasn't until much later that I realized not everyone is like me and most of my peers had a lot of debt accrued over the years. They're definitely dangerous.

johnward 10y ago
Maybe I lack self control but it was really easy to go from paying off $30k in credit card bills every month, to not having that income anymore, to being $30k+ in CC debt.
- Bartweiss 10y ago
  This is probably a big concern for millennials in particular. The ability to "float" expenses is a nice way to smooth funds across a month, but for people without savings a sudden loss of employment can turn into instant debt.
- slavik81 10y ago
  Surely if you were spending $360,000/year on your credit card, you'd have enough home equity and other assets to refinance that debt. It really shouldn't be on the credit card for long, because CC interest rates are atrocious.
  - johnward 10y ago
    negative. I was living in my parents basement at that time (yes seriously).
    - slavik81 10y ago

h4waii 10y ago

What's really scary is the fact that many of these individuals don't consider the benefits and rewards of using a credit card -- free flights, cash-back, insurance and extended protection, and best of all it's not your money. You get to hold on to your cash for a month's worth of interest and you get fraud protection. Credit cards are tool and, just like most tools, should be used with proper awareness and thought-process. None of the examples in the given article are fallouts of "using credit cards", but having runaway debt in the first place. This article really just emphasizes the fact that we are living in an age of complete lack of personal responsibility and self-control, where you can blame an institution for your inability to spend.

ianai 10y ago
Im willing to bet people don't value fraud protection because they haven't been a victim yet. I keep the number of places that see my debit and checking numbers as few as possible. Plus, the credit card companies themselves don't view fraud the same way or with alarm.
johnward 10y ago
> This article really just emphasizes the fact that we are living in an age of complete lack of personal responsibility and self-control, where you can blame an institution for your inability to spend. Not having credit cards is one way to control yourself.
- Bartweiss 10y ago
  The whole "it's a lack of self control" claim is really weird to me. I don't stock my house with junk food, because I'd rather use willpower once at the store than constantly in my living room. Am I supposed to feel weak-willed for making the simpler choice? I guess you can argue that people are giving up a lot and ought to find the willpower to get those benefits, but for that you need to argue that they're actually giving up a lot. Otherwise, it's just as you say: these are people who are controlling their spending and not blaming institutions.
  - 10y ago

yumaikas 10y ago

This is something I fall squarely into. I've avoided debt like the plague, preferring to live a few years behind the tech curve in electronics and using older cars and such. I do use a debit card a decent amount however, for better and worse. I'd much rather operate within my means, than spend my entire life chasing something I can't actually afford. edit: I will be looking into getting a credit card decently soon so I can build credit for things like a house, but at 22, I can say I'm glad I don't have to worry about that hanging over my head in the future.

bbctol 10y ago

The use of credit history and score to determine worthiness in all sorts of purchases is a horrible construction that must be destroyed. I got a credit card for no reason other than to build score; I've never spent money I didn't have in my life (which seems responsible to me!) but I still have to go through this silly rigmarole of purchasing and then paying off to prove to future agencies that I'm responsible.

jasonmp85 10y ago
> this silly rigmarole of purchasing and then paying off to prove to future agencies that I'm responsible That actually sounds like a fantastic method for a lending agency to determine who is responsible and who is not.
- logfromblammo 10y ago
  Not when you define "responsible" as "saving up and then buying when you can afford it". But the lending agencies say "responsible" when they mean "profitable for us", so I can see how someone might get confused.
- mark_edward 10y ago
  How is such a person more responsible than someone who never uses debt to make similar purchases?
  - antisthenes 10y ago
    They may be equally responsible in actuality, but the company still needs to see a verifiable source that the credits are being paid back. It's a form of signaling.
skrause 10y ago
The whitelist-type system of building a credit score in the USA just seems weird and invasive to me. Here in Germany you have something more like a blacklist: You pretty much have a good credit score by default and only get a bad score by not paying bills or not paying back debt on time. I have a perfect credit score in Germany despite never taken any debt in my life.

ourmandave 10y ago

The article mentions several times that student loans are putting a lot of people off more debt. Then it says they'll have no credit history when it comes time to buy a house or car. What about all the student loan payments they're making? That's certainly a credit history, esp. if you miss a few.

theandrewbailey 10y ago
Over half of my credit report are student loans. All of them are paid and closed, years before their original term (probably still in the future as of now).
manarth 10y ago
In the UK, student loan payments (at least, those issued by and owed to the Student Loans Company - an official government-owned body for student loans) are not reported or recorded to any credit rating agencies. UK student loans are effectively invisible.

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loukrazy 10y ago

Given the option for zero interest payments on things like appliances and computers, why would you use a credit card for those?

cmurf 10y ago
No kidding. Even new cars have 0% financing, but an even better deal is buying a newish used car. But this whole article sounds like it was written by the finance industry as if millennials are irrationally scared (i.e. spooked). I'm increasingly not liking this article!

typetypetype 10y ago

> Credit cards are frequently necessary for the bigger purchases - like washing machines and computers... Saving up enough to buy items like without going into extremely high interest credit card debt is responsible consumerism.

tantalor 10y ago
Also, layaway (https://en.wikipedia.org/wiki/Layaway https://en.wikipedia.org/wiki/Layaway) if you have bad credit and no bank account.
Bartweiss 10y ago
And amusingly, the best credit cards for those purchases are almost always obtained during the purchase. An appliance purchase at Sears comes with 60 months of 0% interest if you open a card - it's debt, but not necessarily irresponsible. Using a normal card to debt-finance the same thing is far less responsible, and I'm not really sure what the article was trying to claim there.

biztos 10y ago

While I realize it may lead to less (reckless) spending, this is probably a good thing. Certainly my generation overused credit cards, and many of us learned painful lessons from it. I sure did, though even now I have a somewhat cavalier attitude towards the plastic. Sure, there are lots of benefits to credit cards if you have the discipline to use them to your advantage. But most people don't have that discipline, and the banks try very hard to loosen what discipline you do have. As an American living in Europe I find the different attitudes to credit cards over here very interesting. For instance in Germany I had a Visa and now I have a MasterCard, at a big fancy bank, and both are automatically paid in full from your account on the first of every month. It might be possible to run up debt on a credit card in Germany (or it might not) but it's not the default action like it is in the US. No "click here to pay the minimum." Also, lots of places won't even take credit cards in Germany. Like Ikea for example. Instead these places will take your "EC card" which is like an ATM card in the US, i.e. a direct debit from your account. While the Germans are notoriously paranoid about debt -- hyperinflation will do that to you -- some other countries are more freewheeling. In Hungary most people don't have credit cards, but lots of places (including Ikea!) accept them. (Slightly complicating this whole story is the fact that in Europe most debit cards are also Visa or MasterCard, which I assume is transparent at the point of sale.) However, back in debt-averse Germany, unsecured personal credit is much easier to obtain, at much better rates, than in the US. So if you're gainfully employed and you really need to buy that used speedboat to set the Spree on fire, they've got you covered. [edit: grammar]

skrause 10y ago
The credit card acceptance in Germany is changing quickly right now, even the discounter chains like Aldi and Lidl who were cash-only just 15 years ago have been accepting contact-less VISA and MasterCard payments for around a year now.
- emp_zealoth 10y ago
  EU came down like a tonne of bricks on max fees that the banks/processors are allowed to charge - those are no longer eating the profit off razor thin margins those chains had

nostromo 10y ago

My sense is that Millennials have a less rosy view of their future economic situation than did generations past. I don't know if it was coming of age during a banking crisis or huge student loans or expensive housing or what. But obviously if you're unsure about your future earning potential you'll be more hesitant to rack up future obligations.

Bartweiss 10y ago
Notably, the suggestion that "it's fine if you pay off your card every month" or "loans are sensible if you get good rates" only holds for people with some kind of faith in stability. With a stable job and some savings, paid-off credit cards and zero-apr loans are great tools. If you're worried about losing the job and barely making rent (like many millennials are) then even 'safe' debt becomes troubling.
- spdionis 10y ago
  Or if you don't want to chain yourself to the job and like the financial flexibility to take time off whenever you want.
theandrewbailey 10y ago
It might also be that many are un-/underemployed compared to where they want to be, and have been for years. They don't see their economic fortunes ever improving much.

mankash666 10y ago

The credit for these individuals has shifted from cards to student loans. Paying your student loan on or ahead of time does give you great credit history, in time for your first mortgage

SeanBoocock 10y ago

I can identify with this. As a 30 year old, I have never and don't ever see myself owning or using a credit card. The experience of my parents struggling with debt for most of my childhood remains emotionally powerful, even against the opportunity cost of not using credit cards. I am willing to to take extra precautions against fraud and lose the cashback I otherwise would earn, if it means never inviting potential credit card debt.

op00to 10y ago
I'm curious what the credit score would be of a fiscally-responsible 30 year old with no credit cards. Care to share a ballpark, if you know?
- SeanBoocock 10y ago
  The closest I have is the approximation supplied by my credit union (Alliant). Currently it sits at ~660, having fallen from ~740 when I finished paying of my student loans. At the moment I am counting on saving more than the standard 20% for a future home purchase, in order to minimize the impact of my lower credit score on a worse mortgage interest rate.
  - op00to 10y ago
    thanks! That's interesting that you took such a hit from having your loans paid off. I know that has an effect, but that totally dropped you out of prime territory. When shopping for your mortgage, you may want to see smaller mortgage brokers who would be able to give you a slightly better deal versus going to a larger bank. Good luck!
antisthenes 10y ago
This post is a great example of complete misunderstanding of CC basics and as a result - an irrational fear of "all things financial" If you're so afraid you might lack self control that you will spend more than your monthly income, get a card with a limit that's 1/2 of your income. Simple as that. This country is structured around using debt as your leverage, as both business and consumer. Not to utilize that and tout it as somehow virtuous or prudent is, in fact, just ignorant at best.

doctorpangloss 10y ago

There's a lot of confusion around how these cards work and what these statistics measure. In this article they are talking about the sum of all balances on credit card accounts. Technically all of this money is borrowed, even if, as some commenters say, you "pay in full every month." You're just only getting charged interest after typically 30 days. Using terms like "revolving debt" to describe interest charges is imprecise, as is describing payments on interest-bearing debt as "paying late." Interest is interest, and debt is debt. How do credit scores distinguish debt from interest from defaults, the inability to pay interest (sometimes principal)? It doesn't matter. Before Lending Club hid them, the variables that were strongest correlated with borrower race and borrow age were most correlated with default on loans. But debtors who accrue interest via credit cards and pay it are the most desirable, because obviously they are the debtors who make money for the creditor. The fastest way to get the best credit card offers is not to pay off your balance in full before interest is accrued; instead, accrue some interest and pay it off. Then you become Mr. Credit Card Offer, Eater of Spam Mail. I think a lot of aversion to credit cards (and borrowing generally) is just financial illiteracy. Universally people conflate debt and interest. They get dinged by the horrible experience of forgetting to pay once, even if the total interest paid was less than 0.1% of their expenses in a year. Put another way, if you gave me access to low interest debt, of course I'd take it... And open a bank! The real scam is mortgages. Financial illiteracy makes people minimize monthly payments instead of "finance charges," one of the most precise (broad and well defined) but poorly understood terms on a mortgage. There are millions of wealthy suburbanites paying 30 year mortgages with finance charges equal to nearly half the value of the home—a 50% markup for the privilege of lower monthly payments.

pc86 10y ago

> Jason Towner, a 32-year-old who works at a private equity firm, cut up his last credit card, from Capital One, in 2010. He did not have any unruly debts, but he had just watched his father and sister close the family furniture store after a bank cut off their credit line in the middle of the financial crisis. I can't understand this mindset. A bank refuses to extend a business line of credit, so you... cut up a credit card? It's hard to imagine two things that look related but have less to do with each other in actuality. I would expect an PE professional to know that. The idea that credit cards are bad is rooted in a fundamental misunderstanding of what they are and how to use them to your advantage.

yumaikas 10y ago
It's not that credit cards are inherently bad, but that they are dangerous/risky if you personally struggle with impulse control. The examples do seem to be decently unrelated, but we also don't know the full story, so there could be a relating factor. Or the reporter could just be using two stories of "credit" that tied together.

angryasian 10y ago

I know I'm the cynic but I find this more telling as how millennials are incapable of self control. I love using credit cards vs physical money. I also dislike the direct access to my bank account that a debit card provides. I think credit cards place a very good level of security and consumer protection if used responsibly.

calvinbhai 10y ago

Surprising that the article equates less credit card debt to less usage of credit cards. Its possible that people became more responsible and started paying off their balances while also using their credit cards? The article would make any sense if it also mentions the total credit limit and the ratio of revolving debt to credit limits. I for one, am glad that I'm comfortable with using credit cards, applying for new ones, and pay off statement balance all the way. That way, I'm getting good money back, while the spooked credit card avoiders are paying more for the same stuff :)