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Why do we need credit cards, or a credit score? Seems to me we'll all be in better shape if we called them 'debt cards' so we'd be less inclined to load on debt

Why do we need credit cards, or a credit score? Seems to me we'll all be in better shape if we called them 'debt cards' so we'd be less inclined to load on debt. Can't we architect an asset-based economy, rather than debt-based? It would be more resiliant, and the trifecta of credit reporting agencies wouldn't hold any particular power over our economy.

prepend 6y ago
> Why do we need credit cards, or a credit score? So we can reduce risk of default and get lower interest rates. Mortgages sucked a lot before credit scores. Credit scores have many problems, but are pretty useful for getting credit.
lilactown 6y ago
I don't understand the dichotomy of asset vs. debt-based economy. AFAICT an asset-based economy is one whose growth is based on appreciation of equity assets[0], rather than creating value via goods or services. In such an economy, debt would be as relevant if not more so, due to the fact that as asset prices rise the only way for many to buy in is to borrow. [0] https://en.wikipedia.org/wiki/Asset-based_economy#:~:text=The%20asset%2Dbased%20economy%20is,as%20well%20as%20real%20estate https://en.wikipedia.org/wiki/Asset-based_economy#:~:text=Th....
lotsofpulp 6y ago
> It would be more resiliant, and the trifecta of credit reporting agencies wouldn't hold any particular power over our economy. One might argue that one of the most important factors contributing to the US’ economic power is the existence of a reliable credit (and court) system for lending money, enabling it to grow far quicker than others.
- barbazoo 6y ago
  Does that include consumer credit cards though? If it had to be backed by assets, people would just spend the money at a different time. I guess the economy would be missing out on all that predatory interest.
  - lotsofpulp 6y ago
    People spend more money with credit cards than without, hence why almost all stores charge the same price for purchases made with a credit card than cash/debit card. Even though the store makes less money from the transaction due to higher payment processing fees for credit cards, it’s more than offset by the higher number of purchases and sale price of the purchases from people with credit cards.
thrwyoilarticle 6y ago
Debt is money more than assets are money. Debt allows us to trade without bartering or instant closing. When you work before being paid, you extend credit to your employer. When you rent and pay upfront, you extend credit to your landlord. Neither of these relationships would be possible without, at some point, there being credit on the basis of future exchange.

prepend 6y ago

> Why do we need credit cards, or a credit score? So we can reduce risk of default and get lower interest rates. Mortgages sucked a lot before credit scores. Credit scores have many problems, but are pretty useful for getting credit.

lilactown 6y ago

I don't understand the dichotomy of asset vs. debt-based economy. AFAICT an asset-based economy is one whose growth is based on appreciation of equity assets[0], rather than creating value via goods or services. In such an economy, debt would be as relevant if not more so, due to the fact that as asset prices rise the only way for many to buy in is to borrow. [0] https://en.wikipedia.org/wiki/Asset-based_economy#:~:text=The%20asset%2Dbased%20economy%20is,as%20well%20as%20real%20estate https://en.wikipedia.org/wiki/Asset-based_economy#:~:text=Th....

lotsofpulp 6y ago

> It would be more resiliant, and the trifecta of credit reporting agencies wouldn't hold any particular power over our economy. One might argue that one of the most important factors contributing to the US’ economic power is the existence of a reliable credit (and court) system for lending money, enabling it to grow far quicker than others.

barbazoo 6y ago
Does that include consumer credit cards though? If it had to be backed by assets, people would just spend the money at a different time. I guess the economy would be missing out on all that predatory interest.
- lotsofpulp 6y ago
  People spend more money with credit cards than without, hence why almost all stores charge the same price for purchases made with a credit card than cash/debit card. Even though the store makes less money from the transaction due to higher payment processing fees for credit cards, it’s more than offset by the higher number of purchases and sale price of the purchases from people with credit cards.

thrwyoilarticle 6y ago

Debt is money more than assets are money. Debt allows us to trade without bartering or instant closing. When you work before being paid, you extend credit to your employer. When you rent and pay upfront, you extend credit to your landlord. Neither of these relationships would be possible without, at some point, there being credit on the basis of future exchange.