8 ms·

No, credit cards exist because in 1978 the Supreme Court released an opinion allowing banks to export interest rates from one state to the other. So a bank in

by crikli 15y ago

No, credit cards exist because in 1978 the Supreme Court released an opinion allowing banks to export interest rates from one state to the other. So a bank in a state with a 25% interest rate cap could lend to a family in another state with a 12% interest rate cap. Politicians figured out quickly that if they bumped up the credit rate ceiling in their state that the financial institutions would come running, cash in hand. Thirty(ish) years later we have an insidious industry that has saturated US culture with the poison of unsecured credit. They set up stands at colleges, snaring college freshmen with offers of free tee-shirts. They sponsor educational curriculums in grade schools advocating the use of credit cards. They even kick money to toy makers to include a little "Visa" or "Mastercard" with their products. They lobby Congress to pass laws making it harder for people who've dug themselves into a hole to include credit card debt in bankruptcy. Credit is not necessary for modern living, despite the propaganda that permeates every piece of media to which we have access. I know this because 18 years ago I was that ignorant kid that wanted a free teeshirt. Ten years ago I quit using credit as a means of purchase, and six years ago I made my last monthly payment (with the notable exception of student loans, which is a rant for another day).

eridius 15y ago
I'm 26 years old and I have never owned a credit card. Unless you really need to use a credit card as a short-term loan (which has always sounded to me like a really bad idea), they're just not necessary.
- pdovy 15y ago
  That isn't necessarily true. I have and frequently use a credit card, but I do not actually need the line of credit. I have it to establish a credit history so that someday when I actually do need credit (e.g., for a home loan), I'll be able to get it.
- ars 15y ago
  So what do you use to buy stuff electronically? Or rent a car? And if you tell me a debit card then you are making a mistake. There is nothing wrong with using a credit card for a short term loan, especially if you actually have enough money to cover that loan.
  - eridius 15y ago
    I use a debit card. Why is that a mistake? The only real reason I can think of is that I don't believe debit cards are covered under the consumer protection laws that credit cards are. Unless you mean because I'm missing out on the reward points that a credit card would offer me?
    - ars 15y ago
      Yes, you thought of exactly the reason - debit cards are not safe. And I don't just mean fraud - mistakes happen too. Additionally with a debit card you have to make sure to have enough to cover all your purchases. With a credit card, you (hopefully) have a limit much greater than you need. Then once a month you go over your finances, pay the bills and you don't need to micromanage your account. And http://news.ycombinator.com/item?id=3240408 http://news.ycombinator.com/item?id=3240408 brings up an additional point. Leave your money in savings, and transfer to checking only when it's time to pay the monthly bills.
- mahyarm 15y ago
  If you travel and use hotels and rental cars, credit cards are very much a benefit. These companies insist on credit cards or require you to put onerous deposits and sometimes will refuse cash or debit cards outright. Airlines seem similar for their preference for credit cards. Also most of the benefits from credit cards are travel related. Like rental car collision insurance, travel insurance, etc if you use the credit card.
  - crikli 15y ago
    All it takes is little planning ahead. For example, our business requires that I travel all over the US and I use a debit card exclusively. Never have a problem with the airlines, hotels, or renting cars, but that's because we've taken the time to know which businesses will accept debit cards without a hassle. "Also most of the benefits from credit cards are travel related. Like rental car collision insurance, travel insurance, etc if you use the credit card." I'm beginning to sound like a tin-foil-hatter here, I know, but things like travel insurance are fluff that the credit card companies throw out to induce people to use them.
    - mahyarm 15y ago
      Of course they throw that in to incentivize people to use them. Many people are unaware of these benefits since banks tend to not market them much, but it's there in your card holder agreement. That extra due diligence costs time and reduces flexibility. Did those rental places accept your debit card without a deposit? Did they notice it was a debit card?
- flacon 15y ago
  "they're just not necessary" I am 29 years old. I thought the same thing as you until about age 25 when someone explained to me that CC's are a great way to build your credit rating. Since I avoided getting a credit card for so long...I had no credit and a very low credit rating! Whereas my wife who had had a CC for 10 years already had great credit. As a result, we had to utilize her credit rating when getting car loans/ home loans etc until my credit rating improved! Without good credit you can really get owned (bad loan rates) when pursuing a loan for any reason.
  - crikli 15y ago
    Take a step back though. Why were you pursuing these loans in the first place? Did you really need to get a car loan or did you just not have the cash to buy the car that you wanted. Could you have bought a little less car, paid cash, and have been payment free? Or could you have stayed in what you had, saved up, and then paid cash. Same with a home. Did you need to buy a home? Or did you want to buy a home. My point here isn't to indict your decision making, so please don't take my questioning as a personal attack. My point is that this idea of borrowing money to make purchases has become so engrained in our thinking that very few people stop and question it. There are cases where a clear need exists and sometimes the only way is to borrow money. I've been there. But the messages we hear on a daily basis don't talk about borrowing to satisfy needs; rather they serve to support the idea of borrowing to satisfy wants.
    - underwater 15y ago
      I'm completely with you on car loans (why pay so much interest for something that depreciates in value so quickly; you're losing out twice). But for the majority of people it is simply not possible to buy a house without either making massive life changes or getting a loan. I don't think that becoming a life-long renter is a smart choice either.
      - waqf 15y ago
        For a fair number of people it is simply not possible to get their finances in order without massive life changes. Doesn't mean they shouldn't do it, for values of "shouldn't" such as "wouldn't be better off and happier, five or ten years down the road".
- sbalea 15y ago
  They're not necessary, but they sure are useful. You get all sorts of perks, like fraud protection, extended warranties, etc, etc. You get cashback (or miles or points, or whatever). All you need to do to stay in the black is to pay your balance at the end of the month. Best thing ever if you ask me.
- cobrausn 15y ago
  Credit cards are incredibly useful for two reasons, IMHO. 1. It's like having a proxy between your actual accounts and your purchasing. A stolen credit card is annoying and easy to rectify. A stolen debit card is terrifying. 2. Sometimes in life, an expense arises that exceeds both income and savings. When this happens, we either pay with credit (of some kind), we don't meet our financial responsibilities, or we go without. Sometimes the best option is to go without. When that is not possible, the credit card is a good answer. Pay off your balance responsibly and as quickly as possible and either save more in the future or be prepared to pay interest again.
deleted 15y ago
[deleted]
underwater 15y ago
It's worse than that. The fact that credit is so easy means more people get themselves into debt. This means other services providers and lenders over rely on credit scores to determine whether they should accept new customers. It's cyclical. I hear my friends talk about applying for multiple cards at the same time; cycling between cards so that a minimum spend is maintained and keeping and paying for cards that they don't need all so they can maintain a credit score. This is all guess work anyway, because no one really knows what contributes to this secret score. The credit card companies must love the lack of transparency because instead of having to compete with each other and with other forms of payment we are now in a world where everyone believes they need to use multiple cards from multiple vendors. They use these cards even when they don't need or want to because of how much they fear their credit score dropping.

by crikli 15y ago

eridius 15y ago

I'm 26 years old and I have never owned a credit card. Unless you really need to use a credit card as a short-term loan (which has always sounded to me like a really bad idea), they're just not necessary.

pdovy 15y ago
That isn't necessarily true. I have and frequently use a credit card, but I do not actually need the line of credit. I have it to establish a credit history so that someday when I actually do need credit (e.g., for a home loan), I'll be able to get it.
ars 15y ago
So what do you use to buy stuff electronically? Or rent a car? And if you tell me a debit card then you are making a mistake. There is nothing wrong with using a credit card for a short term loan, especially if you actually have enough money to cover that loan.
- eridius 15y ago
  I use a debit card. Why is that a mistake? The only real reason I can think of is that I don't believe debit cards are covered under the consumer protection laws that credit cards are. Unless you mean because I'm missing out on the reward points that a credit card would offer me?
  - ars 15y ago
    Yes, you thought of exactly the reason - debit cards are not safe. And I don't just mean fraud - mistakes happen too. Additionally with a debit card you have to make sure to have enough to cover all your purchases. With a credit card, you (hopefully) have a limit much greater than you need. Then once a month you go over your finances, pay the bills and you don't need to micromanage your account. And http://news.ycombinator.com/item?id=3240408 http://news.ycombinator.com/item?id=3240408 brings up an additional point. Leave your money in savings, and transfer to checking only when it's time to pay the monthly bills.
mahyarm 15y ago
If you travel and use hotels and rental cars, credit cards are very much a benefit. These companies insist on credit cards or require you to put onerous deposits and sometimes will refuse cash or debit cards outright. Airlines seem similar for their preference for credit cards. Also most of the benefits from credit cards are travel related. Like rental car collision insurance, travel insurance, etc if you use the credit card.
- crikli 15y ago
  All it takes is little planning ahead. For example, our business requires that I travel all over the US and I use a debit card exclusively. Never have a problem with the airlines, hotels, or renting cars, but that's because we've taken the time to know which businesses will accept debit cards without a hassle. "Also most of the benefits from credit cards are travel related. Like rental car collision insurance, travel insurance, etc if you use the credit card." I'm beginning to sound like a tin-foil-hatter here, I know, but things like travel insurance are fluff that the credit card companies throw out to induce people to use them.
  - mahyarm 15y ago
    Of course they throw that in to incentivize people to use them. Many people are unaware of these benefits since banks tend to not market them much, but it's there in your card holder agreement. That extra due diligence costs time and reduces flexibility. Did those rental places accept your debit card without a deposit? Did they notice it was a debit card?
flacon 15y ago
"they're just not necessary" I am 29 years old. I thought the same thing as you until about age 25 when someone explained to me that CC's are a great way to build your credit rating. Since I avoided getting a credit card for so long...I had no credit and a very low credit rating! Whereas my wife who had had a CC for 10 years already had great credit. As a result, we had to utilize her credit rating when getting car loans/ home loans etc until my credit rating improved! Without good credit you can really get owned (bad loan rates) when pursuing a loan for any reason.
- crikli 15y ago
  Take a step back though. Why were you pursuing these loans in the first place? Did you really need to get a car loan or did you just not have the cash to buy the car that you wanted. Could you have bought a little less car, paid cash, and have been payment free? Or could you have stayed in what you had, saved up, and then paid cash. Same with a home. Did you need to buy a home? Or did you want to buy a home. My point here isn't to indict your decision making, so please don't take my questioning as a personal attack. My point is that this idea of borrowing money to make purchases has become so engrained in our thinking that very few people stop and question it. There are cases where a clear need exists and sometimes the only way is to borrow money. I've been there. But the messages we hear on a daily basis don't talk about borrowing to satisfy needs; rather they serve to support the idea of borrowing to satisfy wants.
  - underwater 15y ago
    I'm completely with you on car loans (why pay so much interest for something that depreciates in value so quickly; you're losing out twice). But for the majority of people it is simply not possible to buy a house without either making massive life changes or getting a loan. I don't think that becoming a life-long renter is a smart choice either.
    - waqf 15y ago
      For a fair number of people it is simply not possible to get their finances in order without massive life changes. Doesn't mean they shouldn't do it, for values of "shouldn't" such as "wouldn't be better off and happier, five or ten years down the road".
sbalea 15y ago
They're not necessary, but they sure are useful. You get all sorts of perks, like fraud protection, extended warranties, etc, etc. You get cashback (or miles or points, or whatever). All you need to do to stay in the black is to pay your balance at the end of the month. Best thing ever if you ask me.
cobrausn 15y ago
Credit cards are incredibly useful for two reasons, IMHO. 1. It's like having a proxy between your actual accounts and your purchasing. A stolen credit card is annoying and easy to rectify. A stolen debit card is terrifying. 2. Sometimes in life, an expense arises that exceeds both income and savings. When this happens, we either pay with credit (of some kind), we don't meet our financial responsibilities, or we go without. Sometimes the best option is to go without. When that is not possible, the credit card is a good answer. Pay off your balance responsibly and as quickly as possible and either save more in the future or be prepared to pay interest again.

deleted 15y ago

[deleted]

underwater 15y ago

It's worse than that. The fact that credit is so easy means more people get themselves into debt. This means other services providers and lenders over rely on credit scores to determine whether they should accept new customers. It's cyclical. I hear my friends talk about applying for multiple cards at the same time; cycling between cards so that a minimum spend is maintained and keeping and paying for cards that they don't need all so they can maintain a credit score. This is all guess work anyway, because no one really knows what contributes to this secret score. The credit card companies must love the lack of transparency because instead of having to compete with each other and with other forms of payment we are now in a world where everyone believes they need to use multiple cards from multiple vendors. They use these cards even when they don't need or want to because of how much they fear their credit score dropping.