7 ms·

I've see a lot of comments about credit cards and people mentioning stuff like it's better to use a debit card and to "pay the balance off in full each month",

by muninn_ 10y ago

I've see a lot of comments about credit cards and people mentioning stuff like it's better to use a debit card and to "pay the balance off in full each month", but you are absolutely incorrect. Now it is true, obviously, that you should pay the balance off in full every month, not doing so is how the credit card companies make money, but using your credit card is nearly universally better Jan debit for two reasons: 1. At least in the US, you receive cash back for using a credit card. As an example, many cards offer 1-2% straight up cash back. Even if you used it in the most inefficient manner, such as just getting the cash back instead of discounted airfare or something, that's a lifetime of saving 1-2% on all your purchases. That's huge. 2. Protection. It's simple. If I use a card and get scammed (mostly happening in Europe I might add), then if I used a debit card it is my money that has been stolen and now I have to get it back. If I use the credit card? It's the banks money. Now I know obviously that there are people who don't pay their bills, lose their job, or whatever and that's how the companies make money, and maybe if we all used cash things would be cheaper or something, but unless there is a serious movement in that direction you should always use a credit card, even the most basic one you can. I'll also mention that this doesn't cover the plethora of various benefits that you can use for different cards: automatic extension of warranties on purchases made with credit cards, automatic rental car insurance, etc....

zapu 10y ago
In Europe, it's much easier to get debit than credit. You get debit card for any bank account you own, and sometimes it will even be free of charge. Even for accounts in different currency than your local one. Functionally, it's not much different than credit - you can pay on the internet, pay in all the stores, use in ATM. Why bother with applying for credit card, then (for most people)? It used to be different though, for example 10+ years ago I couldn't pay on the internet with my debit card, it had to be credit card - we called them "convex cards" because of the "raised" numbers on the card instead of just flat-printed card number.
- muninn_ 10y ago
  In the US a debit card is free and standard for any checking or savings account. It's functionally the same, yes, in the sense they are just plastic cards that perform transactions, but as I mentioned in my post there's a big difference in the financial impact. I won't pretend to know the rules, regulations, etc in Europe for credit cards, but when I traveled there I used my cards for everything and only had a problem once with CaptaineTrain booking a train ticket. With one of my cards I get 3% cash back on dining. So while I'm traveling throughout Europe I'm getting 3% off every meal. If you're paying in cash you're still paying full price. Soooo why pay in cash and not get a 3% discount. I've also noticed recently that Yelp is offering discounts when people link their credit card in their Yelp account. I saw something like 7% off of your meal for doing so at one restaurant. Now I haven't done that yet, I'm still considering the privacy implications, but it is there. In the US at least, and I suspect Europe, you should use a credit card for every single purchase.
  - ryanlol 10y ago
    >It's functionally the same, yes Not even close. Being able to spend money that's not yet hit your account is a tremendous advantage for credit cards. Oh, and when the hotel front desk screws up their holds you aren't forced to shuffle around money while waiting for the money to be released back to your account.
    - muninn_ 10y ago
      Please read my post above my response as I mentioned these things in more general terms. :) I just meant that the actual card itself worked the same, mostly. You put numbers in an online form, swipe/insert chip, etc.
      - ryanlol 10y ago
        I wasn't trying to imply that you're wrong, rather I was just trying to expand on what you said.
        muninn_ 10y ago
jacobolus 10y ago
The “cash back” is getting pulled right out of merchants’ wallets. If you’re patronizing small local businesses, then using such cards is not very neighborly.
- ryanlol 10y ago
  There's 0 difference between using a "cash back" card and using a non "cash back" card.
  - rsync 10y ago
    That's not true at all. A merchant that takes a big-bonus cashback card pays more in total fees than if they were paid with a "normal" card. The merchant is charged additional (sometimes substantial) additional fees, on top of the normal processing fees, for transactions done with those cards. That is true with any big bonus card - whether it is cash back or miles back or triple-points or gas-bonus or whatever ...
    - zeroer 10y ago
      I've never heard this and it runs contrary to what I've read. Do you have a reference?
    - ryanlol 10y ago
      As far as I am aware the higher interchange fees for premium cards are independent of the cashback, I assume that is what you're referring to.
- muninn_ 10y ago
  Pretty sure that Visa et all. charges a fee regardless of debit/credit cards. There is a difference in the amount charged, perhaps. If a business wants to give me a discount for using cash that might make me consider doing so. Supporting small business, which is something I try to do, is still business. Keep that in mind.
  - 10y ago
Vintila 10y ago
I'd add a caveat to point 1, it is only a huge saving if you were going to buy whatever it is anyway. Has anyone done studies on the effects of cashback on consumer behavior?
- muninn_ 10y ago
  I wouldn't be surprised to see that it increases overall spending. For me it's like second nature. I don't even think about the cash back. It's more like, oh I'm eating out, need to use the 3% cash back for dining card.
- digi_owl 10y ago
  While straight cash is not something i have heard of locally, i know that frequent flier points got a bad rap because it was found to be market distorting.
digi_owl 10y ago
Both your points are a very US POV. Your first point exist in various forms, but is quite often seen as questionable if not downright tacky or dirty. As for your second point, the banks offer the same protection. If i spot weird transactions from my account i inform the bank and they will issue me a new card and revert those transactions.
- muninn_ 10y ago
  I'm sorry but tacky and dirty? In what way is cash back questionable? Lol. And for your second point, banks also are a large portion of those issuing credit cards. While banks do offer some form of fraud protection, it takes time, you could wind up losing your money, and while your waiting for your money to be recovered you could wind up having overdue bills. I can't pay my mortgage with a credit card, for example. With a credit card, if something happens it simply doesn't matter to me. More often than not the banks catch the fraudulent transaction when it happens and notifies you, then they just overnight you a new credit card while they just investigate the transaction as their own problem and not yours. The first and only time I've been a victim of credit card fraud, somebody attempted to purchase ~$2,000 in jewelry. My bank called me, told me they thought it was fraud and that they had declined the transaction. I told them it was fraud and they sent me a replacement card overnight. If that was my debit card? I'm out $2,000 and have to hope that the bank sorts it out in my favor. Even if the benefits didn't exist for travel, cash back, etc..., the security of not having to worry about having cash stolen is very compelling.
  - digi_owl 10y ago
    Market distortion by giving people an incentive outside the product or service itself. And the bank vs credit company issue sounds more and more like an artifact of the US banking system.
    - muninn_ 10y ago
      Sounds good to me. If somebody scams me it's not my problem.
revelation 10y ago
I'll happily give you 2% back after you pay 3% more on everything. Credit card processing fees are enormous in the US. In the EU, fees for debit cards limited to at most 0.2%.
- ChemicalWarfare 10y ago
  >> I'll happily give you 2% back after you pay 3% more on everything. cash discounts are very rare, you pay the same price regardless of whether you use cash or a credit card pretty much everywhere. also large merchants like walmart, target etc, even though they pay tx fees when the customer pays with a CC they actually WANT the customers to use CCs because according to just about every study out there people buy more stuff when using CCs, so they don't mark their prices up to account for CC tx fees.
  - revelation 10y ago
    Someone is paying for all that and the CC company profit on top. It's going to be a mix of everyone including you and the unlucky ones that aren't financially savvy or have some emergency and slip into a vicious circle of debt interest and more debt. I think by last count the latter group accounted for about half of Americans. So the tradeoff is paying more all the time for gimmicky benefits and having to carry a ridiculous number of plastic cards in your wallet (I actually thought this was a sarcastic caricature of the american consumer. Imagine my surprise.)
    - ChemicalWarfare 10y ago
      >> Someone is paying for all that and the CC company profit on top It's a pretty simple equation really. There are issuing banks, acquiring banks, credit card network and payment processors making money off of the merchant-initiated transactions and then the issuing bank also charges the customer interest if they don't pay their bill in full and some issuers charge for cards that carry some special benefits. On the other side of the equation you have merchants paying for the services CC payment industry provides. Most merchants want the customers to use CCs because those customers tend to spend more, they also realize that by accepting CCs they increase their customer base. Talking retail here, online (where things are actually CHEAPER most of the time) CC is king. Prices-wise it's extremely rare merchants to raise the prices when they start accepting CCs or to charge more for non-cash purchases. So now the last piece here is the actual paying customer and their funds. Nobody is forcing the customer to use any specific method of payment. (The only place I'm aware of where cash is not accepted is some airlines won't take cash for on-board purchases.) Using CCs does have it's advantages for the consumer - not having to carry cash or worry whether you have enough cash on you is probably the biggest convenience. Checkout process is typically faster. With Apple pay/Android pay you don't even need to have a physical CC on you. And then there are things like cash back or hotel/airline points etc. There's also chargebacks as an extra layer of consumer protection but that's a bit of a can of worms.
ChemicalWarfare 10y ago
>> you should pay the balance off in full every month, not doing so is how the credit card companies make money... That's how the issuing banks make money, not Credit Card companies. AmEx is the notable exception since they issue cards through their banking subsidiaries but even in their case it's the banking side of the system that generates the profits from the interest payments.
evjim 10y ago
I'm principally against using a credit card, so I've done a lot of research finding the best debit savings. Although card companies make it hard for shops to offer cash or debit discounts, they exist. Aldi only takes debit cards and is way cheaper than any other grocery. A Thai restaurant I used to go to always brought us the bill offering 5% off if paid in cash(lots of neighborhood places like this). Any bar will throw on tax if you start a tab, but paying the cash price per drink is usually the exact advertised price. Paypal debit card offers 1% cash back. Schwab debit card offers rental car insurance and free foreign transaction.
- cocoa19 10y ago
  I'll add that companies have two incentives to favor cash: 1. Tax evasion. 2. Avoid paying the usual 3% charged by credit card issuers for each transaction. Number 1 is specially pervasive in developing countries.

by muninn_ 10y ago

zapu 10y ago

In Europe, it's much easier to get debit than credit. You get debit card for any bank account you own, and sometimes it will even be free of charge. Even for accounts in different currency than your local one. Functionally, it's not much different than credit - you can pay on the internet, pay in all the stores, use in ATM. Why bother with applying for credit card, then (for most people)? It used to be different though, for example 10+ years ago I couldn't pay on the internet with my debit card, it had to be credit card - we called them "convex cards" because of the "raised" numbers on the card instead of just flat-printed card number.

muninn_ 10y ago
In the US a debit card is free and standard for any checking or savings account. It's functionally the same, yes, in the sense they are just plastic cards that perform transactions, but as I mentioned in my post there's a big difference in the financial impact. I won't pretend to know the rules, regulations, etc in Europe for credit cards, but when I traveled there I used my cards for everything and only had a problem once with CaptaineTrain booking a train ticket. With one of my cards I get 3% cash back on dining. So while I'm traveling throughout Europe I'm getting 3% off every meal. If you're paying in cash you're still paying full price. Soooo why pay in cash and not get a 3% discount. I've also noticed recently that Yelp is offering discounts when people link their credit card in their Yelp account. I saw something like 7% off of your meal for doing so at one restaurant. Now I haven't done that yet, I'm still considering the privacy implications, but it is there. In the US at least, and I suspect Europe, you should use a credit card for every single purchase.
- ryanlol 10y ago
  >It's functionally the same, yes Not even close. Being able to spend money that's not yet hit your account is a tremendous advantage for credit cards. Oh, and when the hotel front desk screws up their holds you aren't forced to shuffle around money while waiting for the money to be released back to your account.
  - muninn_ 10y ago
    Please read my post above my response as I mentioned these things in more general terms. :) I just meant that the actual card itself worked the same, mostly. You put numbers in an online form, swipe/insert chip, etc.
    - ryanlol 10y ago
      I wasn't trying to imply that you're wrong, rather I was just trying to expand on what you said.
      - muninn_ 10y ago

jacobolus 10y ago

The “cash back” is getting pulled right out of merchants’ wallets. If you’re patronizing small local businesses, then using such cards is not very neighborly.

ryanlol 10y ago
There's 0 difference between using a "cash back" card and using a non "cash back" card.
- rsync 10y ago
  That's not true at all. A merchant that takes a big-bonus cashback card pays more in total fees than if they were paid with a "normal" card. The merchant is charged additional (sometimes substantial) additional fees, on top of the normal processing fees, for transactions done with those cards. That is true with any big bonus card - whether it is cash back or miles back or triple-points or gas-bonus or whatever ...
  - zeroer 10y ago
    I've never heard this and it runs contrary to what I've read. Do you have a reference?
  - ryanlol 10y ago
    As far as I am aware the higher interchange fees for premium cards are independent of the cashback, I assume that is what you're referring to.
muninn_ 10y ago
Pretty sure that Visa et all. charges a fee regardless of debit/credit cards. There is a difference in the amount charged, perhaps. If a business wants to give me a discount for using cash that might make me consider doing so. Supporting small business, which is something I try to do, is still business. Keep that in mind.
- 10y ago

Vintila 10y ago

I'd add a caveat to point 1, it is only a huge saving if you were going to buy whatever it is anyway. Has anyone done studies on the effects of cashback on consumer behavior?

muninn_ 10y ago
I wouldn't be surprised to see that it increases overall spending. For me it's like second nature. I don't even think about the cash back. It's more like, oh I'm eating out, need to use the 3% cash back for dining card.
digi_owl 10y ago
While straight cash is not something i have heard of locally, i know that frequent flier points got a bad rap because it was found to be market distorting.

digi_owl 10y ago

Both your points are a very US POV. Your first point exist in various forms, but is quite often seen as questionable if not downright tacky or dirty. As for your second point, the banks offer the same protection. If i spot weird transactions from my account i inform the bank and they will issue me a new card and revert those transactions.

muninn_ 10y ago
I'm sorry but tacky and dirty? In what way is cash back questionable? Lol. And for your second point, banks also are a large portion of those issuing credit cards. While banks do offer some form of fraud protection, it takes time, you could wind up losing your money, and while your waiting for your money to be recovered you could wind up having overdue bills. I can't pay my mortgage with a credit card, for example. With a credit card, if something happens it simply doesn't matter to me. More often than not the banks catch the fraudulent transaction when it happens and notifies you, then they just overnight you a new credit card while they just investigate the transaction as their own problem and not yours. The first and only time I've been a victim of credit card fraud, somebody attempted to purchase ~$2,000 in jewelry. My bank called me, told me they thought it was fraud and that they had declined the transaction. I told them it was fraud and they sent me a replacement card overnight. If that was my debit card? I'm out $2,000 and have to hope that the bank sorts it out in my favor. Even if the benefits didn't exist for travel, cash back, etc..., the security of not having to worry about having cash stolen is very compelling.
- digi_owl 10y ago
  Market distortion by giving people an incentive outside the product or service itself. And the bank vs credit company issue sounds more and more like an artifact of the US banking system.
  - muninn_ 10y ago
    Sounds good to me. If somebody scams me it's not my problem.

revelation 10y ago

I'll happily give you 2% back after you pay 3% more on everything. Credit card processing fees are enormous in the US. In the EU, fees for debit cards limited to at most 0.2%.

ChemicalWarfare 10y ago
>> I'll happily give you 2% back after you pay 3% more on everything. cash discounts are very rare, you pay the same price regardless of whether you use cash or a credit card pretty much everywhere. also large merchants like walmart, target etc, even though they pay tx fees when the customer pays with a CC they actually WANT the customers to use CCs because according to just about every study out there people buy more stuff when using CCs, so they don't mark their prices up to account for CC tx fees.
- revelation 10y ago
  Someone is paying for all that and the CC company profit on top. It's going to be a mix of everyone including you and the unlucky ones that aren't financially savvy or have some emergency and slip into a vicious circle of debt interest and more debt. I think by last count the latter group accounted for about half of Americans. So the tradeoff is paying more all the time for gimmicky benefits and having to carry a ridiculous number of plastic cards in your wallet (I actually thought this was a sarcastic caricature of the american consumer. Imagine my surprise.)
  - ChemicalWarfare 10y ago
    >> Someone is paying for all that and the CC company profit on top It's a pretty simple equation really. There are issuing banks, acquiring banks, credit card network and payment processors making money off of the merchant-initiated transactions and then the issuing bank also charges the customer interest if they don't pay their bill in full and some issuers charge for cards that carry some special benefits. On the other side of the equation you have merchants paying for the services CC payment industry provides. Most merchants want the customers to use CCs because those customers tend to spend more, they also realize that by accepting CCs they increase their customer base. Talking retail here, online (where things are actually CHEAPER most of the time) CC is king. Prices-wise it's extremely rare merchants to raise the prices when they start accepting CCs or to charge more for non-cash purchases. So now the last piece here is the actual paying customer and their funds. Nobody is forcing the customer to use any specific method of payment. (The only place I'm aware of where cash is not accepted is some airlines won't take cash for on-board purchases.) Using CCs does have it's advantages for the consumer - not having to carry cash or worry whether you have enough cash on you is probably the biggest convenience. Checkout process is typically faster. With Apple pay/Android pay you don't even need to have a physical CC on you. And then there are things like cash back or hotel/airline points etc. There's also chargebacks as an extra layer of consumer protection but that's a bit of a can of worms.

ChemicalWarfare 10y ago

>> you should pay the balance off in full every month, not doing so is how the credit card companies make money... That's how the issuing banks make money, not Credit Card companies. AmEx is the notable exception since they issue cards through their banking subsidiaries but even in their case it's the banking side of the system that generates the profits from the interest payments.

evjim 10y ago

I'm principally against using a credit card, so I've done a lot of research finding the best debit savings. Although card companies make it hard for shops to offer cash or debit discounts, they exist. Aldi only takes debit cards and is way cheaper than any other grocery. A Thai restaurant I used to go to always brought us the bill offering 5% off if paid in cash(lots of neighborhood places like this). Any bar will throw on tax if you start a tab, but paying the cash price per drink is usually the exact advertised price. Paypal debit card offers 1% cash back. Schwab debit card offers rental car insurance and free foreign transaction.

cocoa19 10y ago
I'll add that companies have two incentives to favor cash: 1. Tax evasion. 2. Avoid paying the usual 3% charged by credit card issuers for each transaction. Number 1 is specially pervasive in developing countries.