8 ms·

I realize I'm likely an outlier (as a millenial) in my age cohort but... the whole reason I have no credit card debt is because I'd prefer to not pay interest w

by MrFoof 10y ago

I realize I'm likely an outlier (as a millenial) in my age cohort but... the whole reason I have no credit card debt is because I'd prefer to not pay interest when I don't have to. I certainly use my credit cards. In fact, I use them for everything I can, to maximize my rewards (which equates to ~$75 in cash back every month). The only things I can't use them for is rent and health insurance. Everything else gets churned through, and the balance is paid off at the end of every statement. It's quicker, has better fraud protection, and is easier to ensure I'm staying on budget. I just haven't paid a cent in interest in at least a decade. I believe the term the credit card companies have for me is a "deadbeat".

teej 10y ago
The credit card companies still get paid on transaction fees, which is where your rewards come from. They collect $150 from the merchant and pass $75 on to you. They are arguably making just as much money on you as someone with low transaction volume (say $250/mo) but with a $3k-$5k balance @ 20% APR which is $50 to $80 in interest a month.
bluGill 10y ago
> I believe the term the credit card companies have for me is a "deadbeat". No, the credit cards are making plenty of money off of you: probably on the order of $150 a month. From there it costs $.35 to bulk mail your bill, and $.25 to process your payment (including the cost of running the web site you pay it at). There is also your share of the advertising they do, and other overhead that I don't know how to place. Still their profit off of you is over $100/month! I'm not entirely convinced that the person who maxes out their cards and pays interest is actually more profitable - a lot of them will end up defaulting in a few years and paying less than they actually put on the cards in interest. I can't be bothered to look up the numbers (if they are even available) to see if that is true or not. Of course I made up the numbers above. They are ballpark (and somewhat variable), but they give you a picture of the truth: your are insanely profitable to them.
- MrFoof 10y ago
  Having worked in payment systems and processing, I'm well aware of the interchange fees and other fees. However, the specific name for the cohort of users who paid a very small percentage of their spend (including 0%) was indeed "deadbeat" (at least in the two data warehouses I helped build out), as I'm less profitable than others with less spend. In fact, one issuer (Capital One) actually closed a card I regularly used (~$1000/year annual spend) about 2 years ago, the letter not stating reasons why. I actually called customer service, and they cited that the costs to maintain my account was considered too high. I used them for a specific category of transactions in which the rewards were higher than any other card I had. Though my usage was apparently insufficient to make it worthwhile keeping me as a customer.
  - kerryfalk 10y ago
    $1000/year is a very low amount to consider regular use, I would think. As others have stated making money off of the merchants is part of their business model. At $1k/year I wouldn't be surprised if that puts you into negative territory.
jdpigeon 10y ago
How do you get so much cashback? I've always poo-pooed credit card benefits because back of the envelope calculations always make them seem negligible (ie 1% cash back)
- ams6110 10y ago
  One way is to look for introductory deals. A lot of cards give bonus reward points for opening an account, then more if you charge a certain amount in the first 30 or 90 days, etc. Some also give double or triple points for spending in certain categories e.g. restaurants or travel. Straight cash back bonuses are maybe not as easy to find.
- pbarnes_1 10y ago
  If you know what you're doing, it's easy to get 5-10c per point. There are entire websites and communities dedicated to the points game.
mwexler 10y ago
Deadbeats don't pay their bills; sound like you do. Instead, you are a "transactor", vs. a "revolver", one who takes on the debt for more than the grace period.
wvenable 10y ago
I'm not a millennial but I do this as well. However, when I was millennial aged, I used debit cards almost exclusively and credit cards only rarely. Now I use credit cards exclusively, paying it off every month, and never use my debit card. The security, rewards, credit score, etc are far better with credit cards.
camelNotation 10y ago
I'm a Millenial and I'm the same way. My wife and I pay for everything on our credit cards, then pay them off each month before interest accrues. We get the reward points with none of the drawbacks. We've been doing it for about a decade now. The idea of using a credit card to spend money that I don't already have sitting in the bank is appalling to me. If I need more money than I have, I borrow it from somewhere else. I would rather sit down at the bank and ask for a small loan from them than use a credit card with an obscene interest rate.
- weberc2 10y ago
  Same here.
- brianshaler 10y ago
  > We get the reward points with none of the drawbacks. A small nitpick would be that there is a drawback: the cash value of the reward points is less than the additional cost of doing business for the merchants you pay via credit cards. Granted, if everyone else is using credit cards while you use cash, you get hit with that drawback without the benefit of recouping a portion of that value by way of points.
  - douche 10y ago
    Unfortunately, in most cases, you are not given the option of the discount for not using a credit card - the cost is baked in and amortized over all transactions. Aside from a few gas stations that offer a cash discount and under-the-table transactions, I've seen so benefit to not using a credit card.
    - kazinator 10y ago
      This is rather baked in agreements that the merchants signed with the credit card companies, where it is stipulated that they must not make goods cheaper for cash paying customers.
      - 10y ago
kardos 10y ago
> I believe the term the credit card companies have for me is a "deadbeat". Nope, they're still collecting interchange fees [1] from everyone you do business with. They're probably taking the same amount as your rewards, if not more. [1] https://en.m.wikipedia.org/wiki/Interchange_fee https://en.m.wikipedia.org/wiki/Interchange_fee
- pasbesoin 10y ago
  It's worth pointing out that as cc payments have become ubiquitous, theses fees are built into the pricing we are all paying. Essentially, the participation and dominance of credit card transactions in our (U.S., at least) economy maintains a some-percent elevation in consumer prices. That "toll" going in large part straight into payment processors' and banks' pockets. If you do pay by another means, perhaps the seller gets a bit more on that particular transaction. But I've talked with many small business owners who greatly lament these transaction fees. Not insignificantly, because they've been unable to compete with the negotiating power of big business, the latter as a result getting lower fees and a resulting competitive advantage. As for "deadbeat", I've heard that term before, used for precisely the circumstance described. Are they "losing money"? I doubt it. But along with oligopoly comes an oversized dose of greed. And some portion of management looking to sell their own performance by upping the return/profit rate on extant accounts. Or something like that, no doubt.
- iofj 10y ago
  In total, yes, but probably VISA gets about half what you get in fees, and your bank gets the other half.
analogmemory 10y ago
I'm also a millenial, and I do a similar thing. Maybe that's why they don't think we're "using"?
ryanSrich 10y ago
Actually I don't think you're an outlier at all. This is exactly what me and my wife do. Everything from the mortgage to daily coffee goes on a card. I have a weekly calendar event to zero of the balance on each. We get all the cash back benefits and never pay any interest or membership fees.
chiph 10y ago
For your health insurance, if you're otherwise healthy, look into an HSA. You'll have a high deductible ($3k-ish) but it's linked to a savings account that can grow over time. Mine is currently paying 1.5%, which beats the pants off any other savings account I have.
apocalyptic0n3 10y ago
I am exactly the same way. I buy everything using my credit card and pay off every cent from the last month on the 18th of each month. No extra interest, but I gain rewards and it has let me build good credit as a young person with no other means to do so. I've never carried a single penny over from one month to the next.
- kazinator 10y ago
  Using a fixed day sounds like a good way to have discipline. Usually the due date is some number of days (like 21) past the billing period date. The billing period end date is always some fixed day of the month, but the actual due date fluctuates due to the different lengths of months. If you pay a bit early and make it a fixed date, that could be a useful tool to stay in line. You can then program it into your smartphone calendar as a recurring item, too. Of course, in online banking you can also set up things to have the bill paid automatically; but there are downsides to these "set up and forget" schemes.
Mister_Snuggles 10y ago
I do roughly the same thing. My regular bank changed the fee structure on me, somehow I missed the notice about it, and I got dinged with some account fees. So I switched ALL of my day-to-day spending to a credit card with a competing bank. So instead of 40-ish Interac transactions per month for my day-to-day stuff, they get one bill payment transaction. My interest payments are zero, since the bill gets paid off, plus I get the cashback bonus right around Christmas time.
razvanh 10y ago
Same here. There are a lot of advantages if you use a credit card to pay for most things, as long as you pay the balance in full every month.
pbarnes_1 10y ago
The article is arguing that they don't get credit cards to begin with, not that they don't want to get into debt. Credit cards are valuable tools since they: 1. Offer all sorts of insurance/protection. 2. Lump multiple small transactions into one monthly debit from your checking account. 3. Offer a 30 to 55 day interest free float. The issue is that some people have no self control. Once you start missing full balance payments all benefits are pretty much negated.
- antisthenes 10y ago
  Honestly, that's all this argument ever boils down to. "I don't use CCs because I have no self-control" It's also easily solvable by getting a credit card with a low transaction limit (say, $1000), but people who have no self-control generally aren't interested in solutions.
Nadya 10y ago
Also an outlier - the whole reason I don't have credit card debt is because I'd rather "pay now" lest I "forget later". I know I'm really bad with remembering to pay monthly bills if they don't pay themselves so buying things on credit involves an extra step of "paying it off immediately" which AFAIK defeats the entire purpose and negligibly, if at all, builds credit. It's a debit card with additional hassle added to every single purchase. No thanks.
jdc0589 10y ago
Ditto. My credit cards are set up to auto-pay in full every month (because apparently I'm too dumb to understand Chase's billing dates, I actually got a late fee one time when I was trying to pay everything off 100% manually every month). It's ridiculous, but I get more utility out of the credit cards, even with the fees, than debit cards.
deleted 10y ago
[deleted]

by MrFoof 10y ago

teej 10y ago

The credit card companies still get paid on transaction fees, which is where your rewards come from. They collect $150 from the merchant and pass $75 on to you. They are arguably making just as much money on you as someone with low transaction volume (say $250/mo) but with a $3k-$5k balance @ 20% APR which is $50 to $80 in interest a month.

bluGill 10y ago

> I believe the term the credit card companies have for me is a "deadbeat". No, the credit cards are making plenty of money off of you: probably on the order of $150 a month. From there it costs $.35 to bulk mail your bill, and $.25 to process your payment (including the cost of running the web site you pay it at). There is also your share of the advertising they do, and other overhead that I don't know how to place. Still their profit off of you is over $100/month! I'm not entirely convinced that the person who maxes out their cards and pays interest is actually more profitable - a lot of them will end up defaulting in a few years and paying less than they actually put on the cards in interest. I can't be bothered to look up the numbers (if they are even available) to see if that is true or not. Of course I made up the numbers above. They are ballpark (and somewhat variable), but they give you a picture of the truth: your are insanely profitable to them.

MrFoof 10y ago
Having worked in payment systems and processing, I'm well aware of the interchange fees and other fees. However, the specific name for the cohort of users who paid a very small percentage of their spend (including 0%) was indeed "deadbeat" (at least in the two data warehouses I helped build out), as I'm less profitable than others with less spend. In fact, one issuer (Capital One) actually closed a card I regularly used (~$1000/year annual spend) about 2 years ago, the letter not stating reasons why. I actually called customer service, and they cited that the costs to maintain my account was considered too high. I used them for a specific category of transactions in which the rewards were higher than any other card I had. Though my usage was apparently insufficient to make it worthwhile keeping me as a customer.
- kerryfalk 10y ago
  $1000/year is a very low amount to consider regular use, I would think. As others have stated making money off of the merchants is part of their business model. At $1k/year I wouldn't be surprised if that puts you into negative territory.

jdpigeon 10y ago

How do you get so much cashback? I've always poo-pooed credit card benefits because back of the envelope calculations always make them seem negligible (ie 1% cash back)

ams6110 10y ago
One way is to look for introductory deals. A lot of cards give bonus reward points for opening an account, then more if you charge a certain amount in the first 30 or 90 days, etc. Some also give double or triple points for spending in certain categories e.g. restaurants or travel. Straight cash back bonuses are maybe not as easy to find.
pbarnes_1 10y ago
If you know what you're doing, it's easy to get 5-10c per point. There are entire websites and communities dedicated to the points game.

mwexler 10y ago

Deadbeats don't pay their bills; sound like you do. Instead, you are a "transactor", vs. a "revolver", one who takes on the debt for more than the grace period.

wvenable 10y ago

I'm not a millennial but I do this as well. However, when I was millennial aged, I used debit cards almost exclusively and credit cards only rarely. Now I use credit cards exclusively, paying it off every month, and never use my debit card. The security, rewards, credit score, etc are far better with credit cards.

camelNotation 10y ago

I'm a Millenial and I'm the same way. My wife and I pay for everything on our credit cards, then pay them off each month before interest accrues. We get the reward points with none of the drawbacks. We've been doing it for about a decade now. The idea of using a credit card to spend money that I don't already have sitting in the bank is appalling to me. If I need more money than I have, I borrow it from somewhere else. I would rather sit down at the bank and ask for a small loan from them than use a credit card with an obscene interest rate.

weberc2 10y ago
Same here.
brianshaler 10y ago
> We get the reward points with none of the drawbacks. A small nitpick would be that there is a drawback: the cash value of the reward points is less than the additional cost of doing business for the merchants you pay via credit cards. Granted, if everyone else is using credit cards while you use cash, you get hit with that drawback without the benefit of recouping a portion of that value by way of points.
- douche 10y ago
  Unfortunately, in most cases, you are not given the option of the discount for not using a credit card - the cost is baked in and amortized over all transactions. Aside from a few gas stations that offer a cash discount and under-the-table transactions, I've seen so benefit to not using a credit card.
  - kazinator 10y ago
    This is rather baked in agreements that the merchants signed with the credit card companies, where it is stipulated that they must not make goods cheaper for cash paying customers.
    - 10y ago

kardos 10y ago

> I believe the term the credit card companies have for me is a "deadbeat". Nope, they're still collecting interchange fees [1] from everyone you do business with. They're probably taking the same amount as your rewards, if not more. [1] https://en.m.wikipedia.org/wiki/Interchange_fee https://en.m.wikipedia.org/wiki/Interchange_fee

pasbesoin 10y ago
It's worth pointing out that as cc payments have become ubiquitous, theses fees are built into the pricing we are all paying. Essentially, the participation and dominance of credit card transactions in our (U.S., at least) economy maintains a some-percent elevation in consumer prices. That "toll" going in large part straight into payment processors' and banks' pockets. If you do pay by another means, perhaps the seller gets a bit more on that particular transaction. But I've talked with many small business owners who greatly lament these transaction fees. Not insignificantly, because they've been unable to compete with the negotiating power of big business, the latter as a result getting lower fees and a resulting competitive advantage. As for "deadbeat", I've heard that term before, used for precisely the circumstance described. Are they "losing money"? I doubt it. But along with oligopoly comes an oversized dose of greed. And some portion of management looking to sell their own performance by upping the return/profit rate on extant accounts. Or something like that, no doubt.
iofj 10y ago
In total, yes, but probably VISA gets about half what you get in fees, and your bank gets the other half.

analogmemory 10y ago

I'm also a millenial, and I do a similar thing. Maybe that's why they don't think we're "using"?

ryanSrich 10y ago

Actually I don't think you're an outlier at all. This is exactly what me and my wife do. Everything from the mortgage to daily coffee goes on a card. I have a weekly calendar event to zero of the balance on each. We get all the cash back benefits and never pay any interest or membership fees.

chiph 10y ago

For your health insurance, if you're otherwise healthy, look into an HSA. You'll have a high deductible ($3k-ish) but it's linked to a savings account that can grow over time. Mine is currently paying 1.5%, which beats the pants off any other savings account I have.

apocalyptic0n3 10y ago

I am exactly the same way. I buy everything using my credit card and pay off every cent from the last month on the 18th of each month. No extra interest, but I gain rewards and it has let me build good credit as a young person with no other means to do so. I've never carried a single penny over from one month to the next.

kazinator 10y ago
Using a fixed day sounds like a good way to have discipline. Usually the due date is some number of days (like 21) past the billing period date. The billing period end date is always some fixed day of the month, but the actual due date fluctuates due to the different lengths of months. If you pay a bit early and make it a fixed date, that could be a useful tool to stay in line. You can then program it into your smartphone calendar as a recurring item, too. Of course, in online banking you can also set up things to have the bill paid automatically; but there are downsides to these "set up and forget" schemes.

Mister_Snuggles 10y ago

I do roughly the same thing. My regular bank changed the fee structure on me, somehow I missed the notice about it, and I got dinged with some account fees. So I switched ALL of my day-to-day spending to a credit card with a competing bank. So instead of 40-ish Interac transactions per month for my day-to-day stuff, they get one bill payment transaction. My interest payments are zero, since the bill gets paid off, plus I get the cashback bonus right around Christmas time.

razvanh 10y ago

Same here. There are a lot of advantages if you use a credit card to pay for most things, as long as you pay the balance in full every month.

pbarnes_1 10y ago

The article is arguing that they don't get credit cards to begin with, not that they don't want to get into debt. Credit cards are valuable tools since they: 1. Offer all sorts of insurance/protection. 2. Lump multiple small transactions into one monthly debit from your checking account. 3. Offer a 30 to 55 day interest free float. The issue is that some people have no self control. Once you start missing full balance payments all benefits are pretty much negated.

antisthenes 10y ago
Honestly, that's all this argument ever boils down to. "I don't use CCs because I have no self-control" It's also easily solvable by getting a credit card with a low transaction limit (say, $1000), but people who have no self-control generally aren't interested in solutions.

Nadya 10y ago

Also an outlier - the whole reason I don't have credit card debt is because I'd rather "pay now" lest I "forget later". I know I'm really bad with remembering to pay monthly bills if they don't pay themselves so buying things on credit involves an extra step of "paying it off immediately" which AFAIK defeats the entire purpose and negligibly, if at all, builds credit. It's a debit card with additional hassle added to every single purchase. No thanks.

jdc0589 10y ago

Ditto. My credit cards are set up to auto-pay in full every month (because apparently I'm too dumb to understand Chase's billing dates, I actually got a late fee one time when I was trying to pay everything off 100% manually every month). It's ridiculous, but I get more utility out of the credit cards, even with the fees, than debit cards.

deleted 10y ago

[deleted]