10 ms·

> The reality of credit card adoption – and we have decades of data to demonstrate this – is that young consumers don’t like credit cards until, suddenly, they

by asib 4y ago

> The reality of credit card adoption – and we have decades of data to demonstrate this – is that young consumers don’t like credit cards until, suddenly, they do. Older Gen Z consumers are reaching this point. For me, this is only because I will be locked out of access to certain essential financial products as the result of having no credit history. The advice I hear is to get a credit card and use it like a debit card, always paying off on schedule. Why can't decades of debit card use and living within my means demonstrate the same thing? It seems ridiculous to me. The starter credit cards also offer, in my opinion, rather measly rewards, so there is very little upside. It really feels like I'm just being forced to do a dance for the banks. And can someone explain why credit scores aren't just visible in every bank's (web) app? I acknowledge that it is ultimately possible to obtain your credit score free of charge, but how is it not anti-consumer that doing this requires you to jump through hoops and use a service like ClearScore? I believe there's a strong case for saying that credit scores exist in a similar space to criminal records, in that they're often used to further marginalise those most vulnerable in society. Or at the very least, that is the result of their existence. For the avoidance of doubt, I do not believe myself to be a vulnerable member of society and I do not feel as though credit scores are wielded against me in the way I describe in the paragraph above. I also do not think that the marginalising effect due to credit scores is as great as that of having a criminal record.

Mandatum 4y ago
It is insanity that the US still works on a positive credit system. Literally every other developed country in the world has it the other way round, prove you have negative or bad credit with failed payments. The US system is both inequitable and exploitative.
- lupire 4y ago
  Can I get a 1million Euro loan with no credit history?
  - Mandatum 4y ago
    Sure, if you can prove revenue, income or assets. Same process for someone with good credit in the US - except we don't shut the doors on people who haven't got a fucking credit card like some sort of racket.
    - refurb 4y ago
      Sure, if you can prove revenue, income or assets. So basically after some sort of check of credit worthiness?
      - yladiz 4y ago
        Of course, the banks don't just give a large loan without due diligence. The difference is that if you don't need both a "good credit report" and proof of income/assets/revenue, you just need the latter (obviously simplifying but your credit report is considered good as long as it's not bad, rather than bad until it's good).
      - wink 4y ago
        I think what the OP was criticizing mostly is that we (Europeans in my case) don't have to build up a credit score, which has to be done artificially (if you are someone who gets X per month and spends X-Y). It's not a criticism of "some credit worthiness beign checked" but this weird notion that if you decide to route all your bills through your credit card you are suddenly credit worthy, whereas if you pay the exact same amount every month in cash, you are not. Which in turn means if you happen to move here you don't have to start working hard at just building this imaginary score.
- formerkrogemp 4y ago
  > It is insanity that the US still works on X Literally every other developed country in the world has it the other way round, X I think the attitude is known as American exceptionalism or naivete or ignorance. Take your pick.
aaronax 4y ago
> The advice I hear is to get a credit card and use it like a debit card, always paying off on schedule. Why can't decades of debit card use and living within my means demonstrate the same thing? Having a history of using a debit card to only spend as much money as you have does not really reflect much about how you will behave when given the ability to spend money that you don't have (credit).
- brutal_chaos_ 4y ago
  I disagree. As someone with a history of blowing past my debit card allotted overdraft amount (though more recently am much better), I think my history with a debit card would show that I was young and foolish, but I have learned better and I wouldn't be a problem now. But I'm only spit balling, you may have more insight to shoot this down.
  - jgwil2 4y ago
    That's why, in the US at least, overdraft fees have been banned. Allowing overdrafts and then charging exorbitant fees turned debit cards into basically just a worse credit card.
- krono 4y ago
  Could also be interpreted to indicate a lack desire to even have the ability to spend beyond their means.
  - jedberg 4y ago
    Having the ability and not using it is a much more powerful signal than not having the ability.
    - krono 4y ago
      Considering the ease with which credit cards can be obtained, and all the incentives that often come with them, I would argue that argument doesn't nearly carry as much weight here as it would in other cases.
colinsane 4y ago
> And can someone explain why credit scores aren't just visible in every bank's (web) app? my 90-years-old credit union shows FICO score in both the web and mobile app (mobile app even plots this over time). actual scores too, from one of the big three: not some second-order estimate. not namedropping because discussion of this article in particular seems at risk of devolving into promo/self-interested discussion. but if this is a thing you care about when choosing a bank it absolutely is possible to find with a bit of searching. as for regulations, and why aren’t banks required to display FICO scores prominently: as the article discusses, the link between FICO score and borrowing rates/eligibility isn’t always direct (an 850 FICO doesn’t magically open the door for a $1M home, business, or personal loan: you still need proof of income, etc). i don’t know that FICO is actually encoded into law anywhere: more relevant would be requiring lenders to justify why they do/don’t approve loans, and at what rates, IMO. many do this already to some degree, but i’m not sure to what extent that’s regulated.
- reportingsjr 4y ago
  Both banks I've used for credit cards recently, Capital One and U.S. Bank, both show regularly updated credit scores. This is a relatively new thing and quite welcome!
  - SOLAR_FIELDS 4y ago
    Chase does as well.
throwaway0a5e 4y ago
>For me, this is only because I will be locked out of access to certain essential financial products as the result of having no credit history. You mean like, crappy consumer credit products? Solution: Don't use credit. The double plus extra gold platinum card with cashback isn't really improving your life that much anyway. A credit card isn't gonna make that big of an impact on the kinds of purchases you truly need credit for (land/housing/business/capital). You're not locked out of accessing those products. They just cost a little more. God forbid that you be forced to be more selective about the kinds of things you buy on credit as a result of this. Edit: Unlike most people who spew internet advice my money is where my mouth is. My only credit is my mortgage and my rate was refinanced to the low 2s a couple years ago. The initial loan was low 3s ~6yr ago and I did 20% down by pulling money out of investment funds I had contributed to over the years. "Costing tens of thousands of dollars over the life of the loan" my ass.
- nend 4y ago
  Not having credit history will absolutely require you to take on a higher interest rate for your mortgage. It's probably 10's of thousands of dollars difference over the length of the loan, depending on how big the mortgage amount is.
  - AdrianB1 4y ago
    Mortgage is credit, you are contradicting the scenario.
- twblalock 4y ago
  > A credit card isn't gonna make that big of an impact on the kinds of purchases you truly need credit for (land/housing). Yes it will. I know a few people who avoided credit cards well into their 20s. They ran into trouble with credit checks for renting apartments and buying cars. Imagine being nearly 30 years old with a good income and no debts, but needing to ask your parents to cosign on a car loan simply because you have no credit history of any kind. That does happen.
  - 4y ago
starwind 4y ago
> this is only because I will be locked out of access to certain essential financial products as the result of having no credit history. Pretty much every bank offers a credit card with a 1% cash-back rewards rate and their underwriters are more generous to their customers with no credit history to help address this exact problem. Get one, use for like 6 months and build up a credit history then go get an AmEx or whatever
wvenable 4y ago
There is an upside to credit cards over debit cards -- you haven't given up your own money until you pay the credit card balance. This is an important way to keep yourself safe. My wife had her debit card compromised and some money taken and that money is gone. She filed a police report and disputed it with her bank and, after sometime, was able get her money back. If there is fraud on a credit card, the situation is very different because you haven't lost any money. There may be some fraudulent charges that need disputing but during that time you're still entirely whole. And that applies to any number of goods and services as well. If you paid cash for something and didn't receive what you paid for, you're out that money. On credit card, you're whole until you make a payment. In my opinion, nobody should be using debit cards if they have the option to use a credit card. It's safer, there's usually some rewards, and there's often added purchase insurance. I broke an expensive phone one week after purchasing it and the repairs were covered by my credit card.
- jgwil2 4y ago
  Aren't the transaction fees higher for credit cards than for debit cards?
  - anamax 4y ago
    There's no free lunch. You may not value the additional protection that credit cards have but other people do.
  - wvenable 4y ago
    For merchants, yes. But that doesn't affect you as the consumer.
    - jgwil2 4y ago
      Well, it does though, by raising the average cost of transactions for merchants, a cost that they will pass on to consumers. It means that if you're not using a credit card, then you're paying higher prices in order to subsidize people who do use credit cards. In my observation, it's also becoming more common for merchants to have two different prices for credit card users and others, so you may find yourself paying more if you use credit cards everywhere.
deleted 4y ago
[deleted]

by asib 4y ago

Mandatum 4y ago

It is insanity that the US still works on a positive credit system. Literally every other developed country in the world has it the other way round, prove you have negative or bad credit with failed payments. The US system is both inequitable and exploitative.

lupire 4y ago
Can I get a 1million Euro loan with no credit history?
- Mandatum 4y ago
  Sure, if you can prove revenue, income or assets. Same process for someone with good credit in the US - except we don't shut the doors on people who haven't got a fucking credit card like some sort of racket.
  - refurb 4y ago
    Sure, if you can prove revenue, income or assets. So basically after some sort of check of credit worthiness?
    - yladiz 4y ago
      Of course, the banks don't just give a large loan without due diligence. The difference is that if you don't need both a "good credit report" and proof of income/assets/revenue, you just need the latter (obviously simplifying but your credit report is considered good as long as it's not bad, rather than bad until it's good).
    - wink 4y ago
      I think what the OP was criticizing mostly is that we (Europeans in my case) don't have to build up a credit score, which has to be done artificially (if you are someone who gets X per month and spends X-Y). It's not a criticism of "some credit worthiness beign checked" but this weird notion that if you decide to route all your bills through your credit card you are suddenly credit worthy, whereas if you pay the exact same amount every month in cash, you are not. Which in turn means if you happen to move here you don't have to start working hard at just building this imaginary score.
formerkrogemp 4y ago
> It is insanity that the US still works on X Literally every other developed country in the world has it the other way round, X I think the attitude is known as American exceptionalism or naivete or ignorance. Take your pick.

aaronax 4y ago

> The advice I hear is to get a credit card and use it like a debit card, always paying off on schedule. Why can't decades of debit card use and living within my means demonstrate the same thing? Having a history of using a debit card to only spend as much money as you have does not really reflect much about how you will behave when given the ability to spend money that you don't have (credit).

brutal_chaos_ 4y ago
I disagree. As someone with a history of blowing past my debit card allotted overdraft amount (though more recently am much better), I think my history with a debit card would show that I was young and foolish, but I have learned better and I wouldn't be a problem now. But I'm only spit balling, you may have more insight to shoot this down.
- jgwil2 4y ago
  That's why, in the US at least, overdraft fees have been banned. Allowing overdrafts and then charging exorbitant fees turned debit cards into basically just a worse credit card.
krono 4y ago
Could also be interpreted to indicate a lack desire to even have the ability to spend beyond their means.
- jedberg 4y ago
  Having the ability and not using it is a much more powerful signal than not having the ability.
  - krono 4y ago
    Considering the ease with which credit cards can be obtained, and all the incentives that often come with them, I would argue that argument doesn't nearly carry as much weight here as it would in other cases.

colinsane 4y ago

> And can someone explain why credit scores aren't just visible in every bank's (web) app? my 90-years-old credit union shows FICO score in both the web and mobile app (mobile app even plots this over time). actual scores too, from one of the big three: not some second-order estimate. not namedropping because discussion of this article in particular seems at risk of devolving into promo/self-interested discussion. but if this is a thing you care about when choosing a bank it absolutely is possible to find with a bit of searching. as for regulations, and why aren’t banks required to display FICO scores prominently: as the article discusses, the link between FICO score and borrowing rates/eligibility isn’t always direct (an 850 FICO doesn’t magically open the door for a $1M home, business, or personal loan: you still need proof of income, etc). i don’t know that FICO is actually encoded into law anywhere: more relevant would be requiring lenders to justify why they do/don’t approve loans, and at what rates, IMO. many do this already to some degree, but i’m not sure to what extent that’s regulated.

reportingsjr 4y ago
Both banks I've used for credit cards recently, Capital One and U.S. Bank, both show regularly updated credit scores. This is a relatively new thing and quite welcome!
- SOLAR_FIELDS 4y ago
  Chase does as well.

throwaway0a5e 4y ago

>For me, this is only because I will be locked out of access to certain essential financial products as the result of having no credit history. You mean like, crappy consumer credit products? Solution: Don't use credit. The double plus extra gold platinum card with cashback isn't really improving your life that much anyway. A credit card isn't gonna make that big of an impact on the kinds of purchases you truly need credit for (land/housing/business/capital). You're not locked out of accessing those products. They just cost a little more. God forbid that you be forced to be more selective about the kinds of things you buy on credit as a result of this. Edit: Unlike most people who spew internet advice my money is where my mouth is. My only credit is my mortgage and my rate was refinanced to the low 2s a couple years ago. The initial loan was low 3s ~6yr ago and I did 20% down by pulling money out of investment funds I had contributed to over the years. "Costing tens of thousands of dollars over the life of the loan" my ass.

nend 4y ago
Not having credit history will absolutely require you to take on a higher interest rate for your mortgage. It's probably 10's of thousands of dollars difference over the length of the loan, depending on how big the mortgage amount is.
- AdrianB1 4y ago
  Mortgage is credit, you are contradicting the scenario.
twblalock 4y ago
> A credit card isn't gonna make that big of an impact on the kinds of purchases you truly need credit for (land/housing). Yes it will. I know a few people who avoided credit cards well into their 20s. They ran into trouble with credit checks for renting apartments and buying cars. Imagine being nearly 30 years old with a good income and no debts, but needing to ask your parents to cosign on a car loan simply because you have no credit history of any kind. That does happen.
- 4y ago

starwind 4y ago

> this is only because I will be locked out of access to certain essential financial products as the result of having no credit history. Pretty much every bank offers a credit card with a 1% cash-back rewards rate and their underwriters are more generous to their customers with no credit history to help address this exact problem. Get one, use for like 6 months and build up a credit history then go get an AmEx or whatever

wvenable 4y ago

There is an upside to credit cards over debit cards -- you haven't given up your own money until you pay the credit card balance. This is an important way to keep yourself safe. My wife had her debit card compromised and some money taken and that money is gone. She filed a police report and disputed it with her bank and, after sometime, was able get her money back. If there is fraud on a credit card, the situation is very different because you haven't lost any money. There may be some fraudulent charges that need disputing but during that time you're still entirely whole. And that applies to any number of goods and services as well. If you paid cash for something and didn't receive what you paid for, you're out that money. On credit card, you're whole until you make a payment. In my opinion, nobody should be using debit cards if they have the option to use a credit card. It's safer, there's usually some rewards, and there's often added purchase insurance. I broke an expensive phone one week after purchasing it and the repairs were covered by my credit card.

jgwil2 4y ago
Aren't the transaction fees higher for credit cards than for debit cards?
- anamax 4y ago
  There's no free lunch. You may not value the additional protection that credit cards have but other people do.
- wvenable 4y ago
  For merchants, yes. But that doesn't affect you as the consumer.
  - jgwil2 4y ago
    Well, it does though, by raising the average cost of transactions for merchants, a cost that they will pass on to consumers. It means that if you're not using a credit card, then you're paying higher prices in order to subsidize people who do use credit cards. In my observation, it's also becoming more common for merchants to have two different prices for credit card users and others, so you may find yourself paying more if you use credit cards everywhere.

deleted 4y ago

[deleted]