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As someone who grew up in Europe and lives in the US now, the whole "credit" thing is still weird to me anyway. In Germany at least, credit cards are mostly onl

• xeromal 6y ago
  If you're middle class or higher, a credit card is a no-brainer in the US. I pay for 1 international trip a year + a few domestic trips just using my card for every day purchases. I rack up points, pay everything off, and benefit tremendously.
  • jjoonathan 6y ago
    I know that getting a very visible 2% back from an invisible 4% fee is psychologically fun in a way that a European-style 0.5% fee isn't, but the net effect of the American style is still to transfer more money from you to the credit card company.
    • throwawayboise 6y ago
      The fact of the matter is that retail goods and services cost the same whether I pay cash or use a credit card. So might as well take the benefits the card offers. Every great once in a while I will run into a small business that doesn't take credit cards, or offers a discount for cash. But it's quite rare.
      • jjoonathan 6y ago
        Yeah, which the CC oligopoly has conveniently arranged through merchant contracts. The Europeans negotiated around this with legislation and won a better deal. In the US, I'm sure people would scream and cry if the evil government tried to take their 2% rewards, even if it meant 3.5% lower prices. We don't like math very much over here -- as this thread is proving.
        • Tempest1981 6y ago
          Or resigned to the massive power of lobbyists.
        • fredophile 6y ago
          I doubt prices on most common purchases would change at all. That extra money would just go to the retailers instead.
      • xeromal 6y ago
        This was exactly my point. The amount of cash discount places are dwindling so you're actively losing money if you pay cash.
      • bogomipz 6y ago
        >"The fact of the matter is that retail goods and services cost the same whether I pay cash or use a credit card. So might as well take the benefits the card offers" The merchant costs for processing the purchase of those products is baked into price though. The net effect is that the fees the merchant pays push your retail price up. You're not really getting a benefit if you get 2% back and the retail price is 2% higher to account for the merchants processing fees.
    • btilly 6y ago
      The invisible fee is paid by the merchant, not the consumer. And fees aren't 4%, they are generally 1.3% to 3.5%. With higher fees for American Express, and merchant types with higher fraud rates. (American Express also offers greater rewards to consumers...) In the end, aside from the complicated consumer reward part, the amount that the credit card companies get isn't that different from the European system.
      • jstanley 6y ago
        > The invisible fee is paid by the merchant, not the consumer. But the customer pays the merchant. It's all paid by the customer.
        • btilly 6y ago
          The customer is paying whether or not they use a credit card. However actual businesses have overhead for dealing with physical cash as well. It is slower at the teller, needs to be manually counted and recounted, transported (sometimes with security) and so on. It is not clear whether real costs of handling money are greater or less than merchant fees.
  • continuational 6y ago
    It's a no-brainer, because whether you have a credit card or not, you're paying for those trips every time you purchase something.
    • xeromal 6y ago
      That's true in a macro sense but so is everyone else, even people paying cash sometimes.
  • watermelon0 6y ago
    Doesn't the money have to come from somewhere? I assume merchants need to pay fees to credit card companies, and in turn this results in higher product/service prices?
    • xeromal 6y ago
      Indeed that's the truth but they charge that for every customer including cash customers except specific places like arco. So if everyone is getting charged, best get some benefit from it!
      • jjoonathan 6y ago
        ...which is a state of affairs the CC companies have arranged through anticompetitive terms in merchant contracts. Cash never had a chance to compete. The moment people realize they could get effectively twice the rewards points by squeezing out the fat cut taken by the CC companies, they absolutely will. CC companies will fight tooth and nail to make sure the fees stay invisible and unavoidable via cash.
        • ImPostingOnHN 6y ago
          Totally -- if the government passes some law that says, for example, credit card companies can't give out 5% rewards, but only if the prices of goods drops 5%, I would be 100% in support of that. Until that happens, I'll take the 5% cash back, since it is preferable to 0% cash back while paying the same price.
    • kj4ips 6y ago
      That's where most of it comes from in the US, interchange rates on credit cards are not regulated, so they're generally somewhere around 2%. Which, coincidentally, is the benchmark for "decent" credit card rewards. Some cards will offer rewards on certain kinds of purchases, often up to 5%, but offering only 1%, or nothing for other purposes. Since the average person only has a single credit card, the majority of cardholders produce more in interchange fees than they collect in rewards. There's also some complicated accounting voodoo that I don't truly understand, that effectively means that banks can treat extended credit as a pseudo asset, plus, whenever alone is outstanding, it's value is added to the virtual money supply. It is possible for an individual customer to get significantly more in rewards than interchange, but as this is a relatively small portion of customers, most issuers do not seem to care.
• cyberpunk 6y ago
  Schufa scores are definitely a thing in Germany; I mean, same thing different name..
  • avh02 6y ago
    haven't been to the US, but you can get a clean schufa if you just move to the country. I've _heard_ that in the US you'd need to get and pay off debt in order to have a good standing, a lack of any record is considered suspicious.
    • SilasX 6y ago
      That is absolutely true. I was treated as subprime despite having no debts and a high credit score (on annualcreditreport.com) merely because I had never taken on debt. I would get rejected even for $500 department store credit cards! It’s ridiculous.
  • ruph123 6y ago
    Its not. Schufa collects negative entries. If you did not pay back loans in time you will have a bad Schufa. To the contrary in the US you have to have “good credit” meaning you have to have participated in the “credit system” and behaved well. If you don’t have any record: Great for Schufa, bad in the US.
    • cyberpunk 6y ago
      Oh I thought no debt history would equal clean credit. That’s bananas, surely it’s safer to lend to someone who has never been in debt? I don’t get the logic..
      • deleted 6y ago
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      • SturgeonsLaw 6y ago
        Depending on the lender, they might actually be after people who are always in debt, and who pay their credit cards bills each month but never entirely pay them off.
• gher-shyu3i 6y ago
  This is how the usurious banking system gets you. People continue to cry about the wealth gap, yet they don't want to fix the problems right under their noses.
• JCM9 6y ago
  Many people in the US use credit cards like “charge cards” and pay them off each month. I’ve never carried a balance on a CC but still use them for nearly all purchases. If something goes wrong a CC give the consumer a lot more leverage than say a debit card. I once had a bad experience with a merchant where they overcharged me and refused to fix it. One phone call to the credit card company had their payment revoked and that was the end of it. Now they have to deal with the CC company on why they are treating CC company’s consumers poorly vs me random consumer that’s not happy with them. I get that the flip side is the above can suck for businesses if consumers file bogus complaints but as a consumer I’m going to take advantage of every tool at my disposal. If I had paid with a debit card it would have been a big mess to fix.
• thepasswordis 6y ago
  Do you only pay for things like a car or a house using cash? Or what about if you are applying for a loan to start a business? Is it all just a 100% cash based society?
  • BeetleB 6y ago
    Last car I bought - the dealer would allow me to put only $3500 via a CC. The remaining balance was via cash/money order/bank check/whatever.
  • anyfoo 6y ago
    No, cars and houses are still common to finance, but those are obviously usually much rarer events and of some great magnitude. And given the usual lack of much of a "credit history", banks rather look at your income, assets, and other things. Business credits exist too of course, but I'd guess that the proportion of the population doing that is even less (and Germans are already much less likely to buy houses or apartments than people in the US). Of course if you did have a credit somewhere, and you defaulted/didn't pay, it's bad, and there is a credit bureau tracking that and more ("SchuFa").
    • thepasswordis 6y ago
      I think there might be some confusion happening here. Nearly every “basic” transaction (like buying coffee) is done with what might appear as a “credit card”, but it is actually a debit card. Some people use “credit” for these daily sorts of purchase, but at least among the people I know, this is extremely rare.
      • astura 6y ago
        >Some people use “credit” for these daily sorts of purchase, but at least among the people I know, this is extremely rare. Really depends. If you know mostly college students, and younger, lower income people, yeah, most are paying with debit. If your circle is high income and older, then it's mostly credit. Especially people who do frequent business travel.
      • 6y ago
• zacharycohn 6y ago
  You don't have to pay immediately to avoid interest. They aggregate all your bills within a given 30-day billing period, then you have 30 days from that date to pay. Interest only begins to get accrued after that last deadline. If you wanted to, you could have the credit card companies float you a purchase for almost 60 days without interest if you timed your charge and the payment right.
  • jjav 6y ago
    > float you a purchase for almost 60 days Indeed! For very large payments I try to time them for the day after the close of the cycle, so I get those ~60 days of free deferral.
  • anyfoo 6y ago
    Thanks, I understand that. Paying "immediately" was partly hyperbole, partly that I wouldn't forget about it when I started out. I've gotten accustomed to it now.
    • zacharycohn 6y ago
      I have met many people who actually don't understand it and think interest starts accruing the moment you swipe! Important to be accurate.
    • dataflow 6y ago
      Btw, for people who aren't living paycheck-to-paycheck, the interest accrual isn't the real issue to worry about. Imagine: if you spend $300 in a month, and miss your payment by a whole month once in a while, even at a crazy 20% APR, you'll have to pay $5. Unless you only have a few dollars to your name, it's probably not going to suddenly break you. The real issue, I think, is the impact on your credit history for missing a payment entirely, i.e. not paying the minimum amount due. Even if it's $1, you need to pay all of it. That's the real penalty to worry about.
      • jjav 6y ago
        > if you spend $300 in a month, and miss your payment by a whole month once in a while, even at a crazy 20% APR, you'll have to pay $5 Careful with this though. The interest rules are very complex. One would think you pay the interest + penalty + balance in full and that's that, but no. Once the account goes into "charging interest" mode, it keeps charging interest on subsequent months even if you pay in full as long as there is a balance on the day of the cycle close (which if you're using the card, there always will be!) The way out of that trap is, if you ever have a late payment, stop using that card entirely and pre-pay the entire balance (including charges not billed yet) before the close of the cycle. The goal is to get a statement with $0 balance. That will reset the account state to normal.
• deleted 6y ago
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• thayne 6y ago
  As someone who lives in the US, and travelled to europe, one of the toughest things was that many more places only took cash than in the states. Which meant I had to carry around a lot more cash than I was used to, knowing that as a tourist I was a target for theft (and I have been stolen from multiple times while abroad). With a credit card, if it was stolen, I could cancel it immediately, and I wouldn't be responsible for purchases the thief made with it. If cash was stolen, it would just be gone. Also, I got a better exchange rate with my credit card than with cash from a bank or ATM. On the other hand, I really liked that I payed for meals at the table instead of giving the card to the waiter, and that listed prices included tax. That's not to say the US system doesn't have problems, it definetely does. But I wouldn't want a cash-only system either.
  • KSteffensen 6y ago
    This is not a general Europe thing. I live in Denmark and I only use cash to try and teach my kids about money. I can't remember the last time I paid cash for anything. I'm tempted to say it has been a decade or so.
    • blntechie 6y ago
      Very good point about using cash to teach kids about money. I just began teaching my kindergarten going son about money and some of the things he has learned watching us is very insightful. For all purposes, money for him is our phone. He has seen countless places where we pay with phone to buy things (using QR codes) and that has given him an impression that a phone can get anything from a store. For me, in my own childhood days, money as in cash was easily understandable as a finite resource because once it’s given to someone, it cannot be taken back. So I learned just by watching that money carries a value and is limited. But just scanning a phone or card with no concept of finiteness will carry some repercussions I think in future. Will be interesting to watch the future generation who might grow without concept of cash money.
  • Haemm0r 6y ago
    I always withdraw cash money using the debit card when I'm abroad. It has acceptable exchange rates(always better than the money exchange rates at the destination country) and much lower fees(mostly just a fixed amount of €) than the credit card (quite high percentage + fixed fee).
• paxys 6y ago
  Credit cards in the USA are backed by very strong consumer protection laws. That is why you can mindlessly give one to wait staff at a restaurant who will disappear with it for an extended amount of time, while in any other country that would be unimaginable. I have also never once cared about credit card skimmers at gas stations or anything of the sort. It's the bank's responsibility to protect the card, not my own. Consumer culture in general means that it is very profitable for banks and payment processors to hand out credit cards like candy (with huge spending incentives), despite knowing that a ton of people are going to rack up debt that they will never be able to pay. The overall credit system is also a lot larger than just credit cards. The country runs on cheap debt. Everything from houses, education, cars all the way to TVs and dresses is financed with long-term payments and low single digit interest rates. Most of what people earn goes towards paying for stuff they bought in the past rather than saving for something they might buy later.
  • Svip 6y ago
    > very strong consumer protection laws What if you go bankrupt as a consumer in the US? Credit cards are scarily easy to come by in the US, which suggests to me that credit card issuers aren't worried about consumers potentially unable to pay them off. Which further suggests to me that it's not really the consumers being protected, but rather the credit card companies. How does consumer bankruptcy work in the US? Raking in a lot of credit card debt, that you cannot afford, could make one liable for life.
    • throwawayboise 6y ago
      > What if you go bankrupt as a consumer in the US You will have difficulty getting credit for 5-7 years. You may think "fine, I'll just pay as I go" but credit checks are often part of the approval process for an apartment lease, or applying for a job.
      • matttb 6y ago
        I had a property management company tell me they wouldn't rent to me if my credit wasn't good enough even if I paid the entire lease up front