5 ms·

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

by 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?

ethanbond 10y ago
Not according to the credit rating agencies, no, it's not. Handling debt responsibly is a different skill from handling cash responsibly. When it comes time to buy a home, for example, which 99% of people will need credit to do, the banks want to see that you can handle debt responsibly, since that's what you're taking on. Edit: Also, see my reply to GP comment that explains some of the other benefits of using a credit card.
nommm-nommm 10y ago
You would think, wouldn't you? It's an interesting concept. If I'm going to loan you $1,000 I'd like to get references, talk to all the other people you've borrowed money from and ask them if you paid it back to show you are able to handle debt. You get other people to vouch for you that you are good on that $1,000. If you have nobody to vouch for you I'd be more hesitant to loan you money. Or ask you for a higher interest rate. This gives you an incentive to borrow money and always pay it back. In fact just having an open line of credit you aren't using makes you look better. "I have the opportunity to max out my cards but I am not." Its perverse but it does make logical sense. Its a different kind of responsible. The other reason people use cards is many cards, as an incentive to get you to use them, give you perks. For example, airline miles, hotel points, cash back, warranty extension, price protection, purchase protection, rental car insurance, etc, etc.
hx87 10y ago
"Best" for what, exactly? The only use for a credit history is getting credit, and having none means you're a risky person to lend to.
bzbarsky 10y ago
> Why can't you use a debit card for that? In practical terms, because in the US the handling of debit card fraud and credit card fraud is vastly different. In the case of debit card fraud the money is gone from your account and you then spend some months trying to get it back. In the meantime, you don't have that money. In the case of credit card fraud, you contact the credit card company, they reverse the charges, and then it's their problem after that point, not yours. Assuming you have any self-discipline at all, a credit card is a _much_ better idea than a debit card in the US. > Isn't the best credit history one where you never need credit in the first place? The best credit history, if being used for the sane "will this person make timely payments on this loan?" reason, would consist of a history of timely payments on exactly this type of loan, with no debt outstanding right now. Never needing credit before may mean you always had lots of money, or that you simply never tried to do anything that involved any large amounts of money and now you want to do such a thing....

by kriro 10y ago

ethanbond 10y ago

Not according to the credit rating agencies, no, it's not. Handling debt responsibly is a different skill from handling cash responsibly. When it comes time to buy a home, for example, which 99% of people will need credit to do, the banks want to see that you can handle debt responsibly, since that's what you're taking on. Edit: Also, see my reply to GP comment that explains some of the other benefits of using a credit card.

nommm-nommm 10y ago

You would think, wouldn't you? It's an interesting concept. If I'm going to loan you $1,000 I'd like to get references, talk to all the other people you've borrowed money from and ask them if you paid it back to show you are able to handle debt. You get other people to vouch for you that you are good on that $1,000. If you have nobody to vouch for you I'd be more hesitant to loan you money. Or ask you for a higher interest rate. This gives you an incentive to borrow money and always pay it back. In fact just having an open line of credit you aren't using makes you look better. "I have the opportunity to max out my cards but I am not." Its perverse but it does make logical sense. Its a different kind of responsible. The other reason people use cards is many cards, as an incentive to get you to use them, give you perks. For example, airline miles, hotel points, cash back, warranty extension, price protection, purchase protection, rental car insurance, etc, etc.

hx87 10y ago

"Best" for what, exactly? The only use for a credit history is getting credit, and having none means you're a risky person to lend to.

bzbarsky 10y ago

> Why can't you use a debit card for that? In practical terms, because in the US the handling of debit card fraud and credit card fraud is vastly different. In the case of debit card fraud the money is gone from your account and you then spend some months trying to get it back. In the meantime, you don't have that money. In the case of credit card fraud, you contact the credit card company, they reverse the charges, and then it's their problem after that point, not yours. Assuming you have any self-discipline at all, a credit card is a _much_ better idea than a debit card in the US. > Isn't the best credit history one where you never need credit in the first place? The best credit history, if being used for the sane "will this person make timely payments on this loan?" reason, would consist of a history of timely payments on exactly this type of loan, with no debt outstanding right now. Never needing credit before may mean you always had lots of money, or that you simply never tried to do anything that involved any large amounts of money and now you want to do such a thing....