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Being German I want to pPoint out that the article leaves out one cruicial detail: Building your own home puts you into debt for quite literally the rest of you

• buro9 10y ago
  Yup. Germany has one of the lowest adoption rates of credit products such as the humble credit card out of nearly all Western nations. Debt is not liked. Edit: From the same site, the linked article at the bottom has the answer: http://qz.com/262595/why-germans-pay-cash-for-almost-everything/ http://qz.com/262595/why-germans-pay-cash-for-almost-everyth... A better link: http://www.businessinsider.com/you-have-to-understand-germanys-long-standing-fear-of-debt-2012-7?IR=T http://www.businessinsider.com/you-have-to-understand-german...
  • premium-concern 10y ago
    Yep. "Don't buy things if you can't pay for then." sounds reasonable, but some other countries seem to disagree. Not surprised that those countries suffer from government shutdowns over how much the debt ceiling is raised.
    • thesimon 10y ago
      >suffer from government shutdowns over how much the debt ceiling is raised On the other hand: The government shutdown because of the debt ceiling seems just like "Stop hitting yourself" on the playground. And Germany's budget is far from balanced.
      • buro9 10y ago
        The myth of the balanced budget. The article speaks of consumer debt, I spoke of consumer debt. Government debt is a different thing, and a government without any debt doesn't sound like a wise thing if it is even possible in such a highly integrated and globalised world.
      • nailuj 10y ago
        > And Germany's budget is far from balanced. Hmm? http://www.bloomberg.com/news/articles/2016-08-17/germany-plans-to-cut-2017-debt-sales-amid-balanced-budget-push http://www.bloomberg.com/news/articles/2016-08-17/germany-pl...
      • mpweiher 10y ago
        >And Germany's budget is far from balanced. "Germany recorded a Government Budget surplus equal to 0.70 percent of the country's Gross Domestic Product in 2015. " While it's true that the budget is not balanced, a 0.7%/GDP surplus is pretty darn close. http://www.tradingeconomics.com/germany/government-budget http://www.tradingeconomics.com/germany/government-budget
      • kriro 10y ago
        Nominally Germany has a balanced budget. I agree it isn't really balanced and the big zero is just achieved via some shifting around of things. However the fact that the government jumps through all sorts of hoops to be able to say the budget is balanced is at least an interesting indicator that it does seem to matter to enough people.
        • premium-concern 10y ago
          Even government budgets have to adhere to some standardized schemes of reporting. See also rating firms. Otherwise even the US would have a balanced budget and no debts. (Ignoring the fact that the US is the main force behind trying to change the account rules to make them look less bad.)
    • 0xcde4c3db 10y ago
      In the US, at least, the shutdowns don't have much to do with our actual spending/borrowing habits. It's a structural quirk of government operation that provides a handy perennial disaster to use for political brinkmanship and finger-pointing. Basically "if you don't start being reasonable by caving to my demands, then you're going to cause a government shutdown".
      • premium-concern 10y ago
        > political brinkmanship and finger-pointing The difference is that parties that try to pull that in Germany not only loose elections, but are punished so hard by voters that they can't even get over the necessary 5% requirement in the next election. Have a look what happened to the FDP after they pushed through lower taxes for hotels.
        • DasIch 10y ago
          In Germany not passing a new budget wouldn't let to a government shutdown. So it's not an option anyway.
          • premium-concern 10y ago
            Even if it did, it wouldn't matter, because people would vote those politicians that tried this shit and their party out of office.
    • webkike 10y ago
      Using credit cards does not preclude being able to afford the thing you are paying for. I regularly use my credit card for every day purchases despite having ample money in my checking account. The regular payments allow me to develop a good credit history without much worry.
      • josefresco 10y ago
        Bingo. Unfortunately the common assumption is that you're not paying it off monthly and paying high interest.
        • fwn 10y ago
          Which, by the way, sounds like an awful concept of how creditworthiness is created. Signing into some unnecessary additional financial product with comically obsolete interest rates, just to manually repay it in the random timeframe in which the (still unnecessary) credit is free sounds like a bad idea. It's probably only there to nudge people into paying interest on money they already have.
          • josefresco 10y ago
            Credit history is just a history of making payments on-time. You can build a history by making student loan payments, car payments, health care payments etc. Obviously it's only one factor in someone's credit worthiness, however it's not a bad metric. If you pay your bills on-time, it makes sense that a lender would value you higher/safer than someone who does not.
          • hx87 10y ago
            > the random timeframe in which the (still unnecessary) credit is free Are you talking about the 0% APR period, or the monthly revolving cycle? The latter is absolutely predictable, and if you dislike manual payments you can always set up automatic ones.
      • kriro 10y ago
        Why can't you use a debit card for that? Isn't having enough money in your checking account to reasonably afford all stuff you need to live basically proof of a good credit history? Isn't the best credit history one where you never need credit in the first place?
    • maxsilver 10y ago
      Disagree might not be the right word, "force" is probably more accurate. In many countries, it would be effectively impossible for most regular people to get basic living needs (like housing and transportation) if they couldn't buy them using some amount of credit. Obviously it shouldn't be this way, it should be possible to save and buy these things outright. But since it effectively isn't (for many people, in many places) I wouldn't fault people for taking on debt to do things like put a roof over their head or get to work on time reliably.
    • snowwrestler 10y ago
      I can pay for my house--over time. Which is fine because I'm also living in my house over time.
    • gozur88 10y ago
      Government shutdowns in the US are largely theater. The last time they only halted 15% of expenditures.
  • thesimon 10y ago
    >such as the humble credit card out of nearly all Western nations Of course using your overdraft is totally fine, but using the evil credit cards even when paying in full is just like declaring bankruptcy. Doesn't help payment services in Germany that Visa/MasterCard is always considered an evil credit card and debit brands aren't too common.
    • Noseshine 10y ago
      From the PoV of someone who once co-owned a small business in Germany that accepted card payments: The reason they are "evil" is that they charge the dealer the by far largest fees. Cache: no fee. EC card: small fee. Credit card: large fee. And of course I can't ask the customer to pay for it, I must have one price for all. It was something like 1% vs. 3% (approximately(!), just to give an idea of magnitude). It's not even any more convenient. Except for a few places like car rentals, where the credit card serves an insurance function (the rental deposit), there is exactly zero reason to point to convenience. Just use an EC card or a bank card that's attached to the major payment processing networks, everybody has one. On the other hand, most credit cards cost a yearly fee of 20-70 Euros or so. The only reason I grudgingly pay for one is because I rent a car occasionally.
      • fwn 10y ago
        That's quite interesting. I rent cars quite frequently with the boring free VISA debit card from my normal checking account. I never knew that there are restrictions on which cards can be used for renting.
        • Noseshine 10y ago
          It's not so much a restriction, and it differs from company to company. For example, I rented twice this year - I don't own a car and usually use the train - and the first time they wanted my to enter the PIN for the credit card, which I didn't know. A big hassle, they took (real!) money off of my EC card (which I got back afterwards). The second time I didn't need a PIN (different car rental company), but they helped themselves to almost 800 Euros in alleged damages from my credit card (good thing I had used an online service and opted into the "we pay the deductible", which was 1,000 Euros, on the full insurance I had also selected to get).
  • thatfrenchguy 10y ago
    Never seen credit cards outside of the US/UK/Canada...
    • ghaff 10y ago
      I use them in continental Europe and Asia all the time. Maybe they're not as common but they certainly aren't anything like unheard of even if they're not as universal as in the US.
    • dirktheman 10y ago
      Here in the Netherlands credit cards are used almost exclusively for online purchases. If you're a (brick) store owner and you would like to accept credit cards at your payment terminal you pay a hefty premium for that transaction. It's usually around 5% of the total amount. Debit cards, that's another story. Most people pay with their debit cards instead of cash. It's convenient, even more so since the introduction of contactless bank cards.
    • coldtea 10y ago
      They are used all over the world, including in France. Not sure what are you talking about... Except if you live in some rural area...
      • Xixi 10y ago
        I don't know many people who use credit cards in France. Practically everybody use the so-called CB which is a debit card (either immediate or deferred, usually deferred), not a credit card. It doesn't allow you to accrue debt: the balance is always re-paid in full, and the linked bank account (usually a checking account) will go red in case of overspending. That said there are definitely credit cards, usually linked to big retailers (Auchan, etc.), but are they that popular?
        • coldtea 10y ago
          From what I see, most people use the CB, but: "Euromonitor International, a market research company, estimated that there were just 34 million French credit cards in circulation" (0.5 per person, in contrast the US has ~4 cards per person). Average credit card spending per French annually is $300 -- so quite insignificant compared to Americans (which would be almost half their annual salary if not more).
  • cylinder 10y ago
    And yet the public debt of Germany is just as high as these credit addicted nations, what does that say?
    • MagnumOpus 10y ago
      Gross debt is as high. Net debt is way lower than in the US let alone in the UK, Japan or Club Med countries. (The German Feds and the states own parts of a lot of strategic income producing companies - KfW state investment bank, Deutsche Bahn, Volkswagen etc).
    • wolfgke 10y ago
      > And yet the public debt of Germany is just as high as these credit addicted nations, what does that say? That in the past Germany was not so sensible about its budget.
• tanto 10y ago
  Agreed. Building a house also locks you money. In Berlin you can spent easily 300k to get a 3 BHK apartment.
• andreasklinger 10y ago
  +1 To explain cultural difference: - In the US you are considered financially stable if you are always paying your debt/credit on time. - In the germanic countries you are considered financially stable if you have none. My US Bank clerk needed a few meetings to convince me that it is good to build go into monthly credits (creditcard) to support my credit score.
  • wil421 10y ago
    I wouldn't go as far as saying always. The banks want a history of loan payments. I'm 30 and just got my first installment loan for a car. Getting a home loan is difficult. I don't have any bad credit at all but not much installment loan history.
  • darkhorn 10y ago
    >My US Bank clerk needed a few meetings to convince me that it is good to build go into monthly credits (creditcard) to support my credit score. Uhmm, can't a bank see your salaries? Because in Turkey they want to see your salaries. You enter to www.turkiye.gov.tr and print out your last 12 months salaries with a validation number and then hand it to your bank. Or you ask from your employer, he ask it from Social Security, travels back to you and you hand it to your bank. Then they check wheter you had missed to pay back your credit (even to another bank, because they share data). And they check wheter if you were rejected by an another bank (because they share data). Basically, your score is high if your salary is high.
    • acchow 10y ago
      The US system is kind of broken. They don't equate high salary with high creditworthiness - maybe it's because of the american culture of consumerism (which implies that you might make lots of money, but if you spend it all and are going into debt to fund your lavish lifestyle, then you're not creditworthy). So the American system rates creditworthiness by a history of paying off debt on time (usually credit cards, mortgage, car loan, etc.). It's stupid. It would obviously be better if we judged creditworthiness by your bank balance history. But this is apparently hard/impossible to show.
• wil421 10y ago
  What about cars? Are Germans more likely to buy or lease a new car? Or do more people buy used cars with cash?
  • tksap 10y ago
    You buy the car you can afford. I would only take a credit if I wanted to buy or build a house.
    • cylinder 10y ago
      In 2014, 27% of all car purchases in Germany were financed.
      • premium-concern 10y ago
        Which includes leased company cars. So yes, people don't finance their cars.
  • kgwgk 10y ago
    You can also buy new cars with cash!
  • usrusr 10y ago
    New cars tend to be leased, but more often than not (at least in the price ranges "family sedan" and up) this is formally a company car, even if it is not used for business purposes at all. This is primarily driven by a full set of smoke and mirrors on the taxation level, that probably grew because it's what keeps the domestic market going for German car giants. In the case of "formally a company car", leasing is not perceived as personal debt at all but just as a car that is much nicer than what you would buy on your own and that you happen to loose when you quit your job. Privately held new cars are the realm of those who can easily afford to pay up front (e.g. a large fraction of those are bought by are retirees in burn those savings as long as you can mode) and those who are at the same time in the top percentiles of both madness for cars and willingness to go into debt (these people certainly do exist, just in slightly but noticeably lower numbers than elsewhere).
• deleted 10y ago
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• bryanlarsen 10y ago
  I know some incredibly debt-averse Americans, and they all consider mortgage debt to be "good" debt. They still try to minimize it, and pay it off as quick as they can, but they all would recommend reasonable mortgages.
  • ZeroGravitas 10y ago
    Part of that might be tax incentives for mortgages, which another commenter claims Germany doesn't have
    • dasmoth 10y ago
      The UK doesn't have tax incentives for mortgages any more, but they're still popular. I think the big distinction is that -- unlike nearly anything else you might buy on credit -- houses don't really depreciate. Even without the overall rising house prices, relatively few people value a 20 year old house at a meaningful premium over a similarly-sized 40 year old house. So it's comparatively easy to justify as an asset counter-balancing the debt.
      • hx87 10y ago
        Houses can certainly depreciate if you don't keep them up to date (e.g. a house with no electricity in 1920) or at least take care of them. The land beneath them, on the other hand...
• mto 10y ago
  Same for Austria. Then considering that you might change jobs every few years... and the jobs are mostly in the cities, where you can't afford building a house. We live in a small to medium size flat for 380€/month, including some running costs. Buying it would cost roughly 250k. That just doesn't pay off. Most medium sized houses are about 700k€ in the region, with typical software developer wages at 2-4k€/month before taxes. So 1.5-2.5k€ after taxes. Now go figure how long you will be in debt... And of course, people are older nowadays when they start to earn. For example, my parents started working with 16. I visited a technical school up to age 19, had to do a year of civil/military service, then worked 2 years to save some money, then did a CS bachelor. A bachelor alone is "no real degree" here, so also doing an MSc. Working while studying to afford the studying prolonged the studies a bit.. and in the end I started with my first real OKish earnings at age 28 when I started with my PhD. So... yeah. At the bank they laughed at my income when asking for a loan for a flat.
  • petra 10y ago
    So what happens to people when they are old , and maybe they're pension isn't that good ?
    • pjmlp 10y ago
      Sadly they might land in the streets, if they don't have a family to support them. But this can also happen if you own a house, because there are running expenses for municipal taxes, validating the plumbing every X years, renewal of the boiler system before every winter starts, cleaning the snow or paying someone to do it....
      • dnissley 10y ago
        True, but then you can sell it and potentially have enough money to live out the rest of your days (or a significant portion of them). There was a comment I read here recently about how a mortgage is in some ways a vehicle for forced savings. Not enough to retire on alone of course, but a big check if you ever need it.
• atmosx 10y ago
  If I am not mistaken the word "debt" either has the same root or derives from the word "sin" in Protestant tradition.
  • stevoski 10y ago
    Not so much Protestant tradition as Germanic languages. The German word for debt "Schuld" also means guilt, fault, and blame.
    • pluma 10y ago
      Note that in German the word is generally used in plural when talking about debt and singular when talking about guilt/blame. "My fault" -> "Meine Schuld" "My debt" -> "Meine Schulden" I think both also behave as mass nouns, so there's rarely any ambiguity.
      • jakub_g 10y ago
        Interesting. In Polish OTOH "debt" is a separate word, but I just realized that "to owe someone" and "to be guilty" is the same verb.
• kriro 10y ago
  Pretty much agreed. My rather simple (and completely argumentative) explanation is that Germans generally are less enthusiastic about taking on debt to finance things. Psychologically I'd say it's rooted in the fact that the results of hyperinflation are very much in the minds of people and there's a tendency of "don't borrow if you can save for it". Since the only realistic option for buying houses is taking on debt, less people do it. I feel this mindset is slowly going away though. Another point in favor of this "theory": credit cards are relatively uncommon compared to other countries (that's also changing imo). I feel like home ownership is even less of a useful concept these days with ever shifting jobs so I think we accidentally stumbled upon the right strategy. Edit: There's also quite a few buildings that are owned by a "Wohnungsbaugenossenschaften" (basically a https://en.wikipedia.org/wiki/Cooperative https://en.wikipedia.org/wiki/Cooperative for housing)
  • krautsourced 10y ago
    It's not about inflation, since inflation is actually good for you if you're in debt (as your debt is not adjusted to the inflation, your debt is effectively shrinking by the inflation). People are still buying and building houses here, especial in rural areas. It's mostly the cities where things simply have become unaffordable for most people.
    • paganel 10y ago
      > It's not about inflation, since inflation is actually good for you if you're in debt Like with many things, the devil is in the details. I'd say a 1 to 5% inflation rate is preferable, a 5 to 10% inflation is livable rate, 10 to 20% is starting to get tense, more than 20% and then everything is suddenly more expensive and you risk don't having money to get you through the month. Yes, some of your nominal debt might go down, but, then again, you still probably have to buy gas every couple of days (which is most probably imported, so its price has gone up), with more expensive gas comes more expensive merchandise (things like food, clothes and the like) because carrying stuff around consumes gas, your heating and electricity bills will also probably double of triple in value in a matter of a couple of years, and so on and so forth (not to say that you can forget about more-than-basic stuff like having a vacation abroad).
• bogomipz 10y ago
  There are two way to look at what you are calling "debt" though. In the United States you are allowed to write off the interest on your mortgage from your taxes. This often has the effect of making what you pay for housing every month either cheaper or very close to the same amount you would pay to rent a house. Housing is a constant expense. If you rent practically speaking you are in debt to your landlord every month. In the US and many other countries on the list where home ownership is prevalent although you are in debt to the bank you are also paying yourself in a round about way in the form of equity(principal) that you have in the house. So you are actually saving rather than spending which is generally financially conservative. As the poster above you mentioned Germany doesn't incentivize home ownership via tax breaks and I think thats the key difference.
  • pluma 10y ago
    Home ownership is actually seen as a long-term investment in Germany (although I feel that recently more people come to realize the numbers don't really add up). Land ownership in particular is considered a good thing and most people have a strong aversion to selling off land they inherit. However home ownership is also considered a luxury. Not only is there not as much of a tax incentive as in the US and not only does it require you to take on life-long debt, but there are also a lot of expenses the landlord would have to pay for but a homeowner has to pay out of their own pocket. The obvious example are routine maintenance like roofing and plumbing, but also drainage or the cost of public works: if the house sits on a street corner and both streets get modernized, you may end up having to pay for both. The expenses when renting on the other hand are much more predictable: you just pay the rent and utilities and whatever one-off costs come up have to be spread out via an increase in the utilities bill or swallowed by the landlord. So if you want to build or buy a house, you're expected to save money for paying for these fun surprises as well -- because having to take out a loan is a sign of poor planning, if the bank even grants you one on top of the financing for the house itself. Add everything together and home ownership becomes nothing more than a luxury.