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Credit Cards are so frightening. I remember having to hide from my Mom that I had gotten one when I was 18, because she was so scared I would ruin my life with

Credit Cards are so frightening. I remember having to hide from my Mom that I had gotten one when I was 18, because she was so scared I would ruin my life with it. Of course it's done the opposite.. I've built credit and saved lots of money in doing so, but I do get her fear. These cards are accepted by society because they benefit those who know how to use them, but it's hard to look past the fact that so many people, if not most, are financially illiterate (because of failings of education due to lack of funding) and so many people screw themselves financially for decades if not their whole lives because of them. Part of me wonders what the world would look like if we massively regulated credit card terms, like no more than 5% APR. Of course I wouldn't get my 3% cash back for being a responsible user of my card, but we also wouldn't be screwing people so hard on the other end. We can say "but they signed the terms!" all we want, but we all know that people agree to things that are a detriment to them and the world for short-term gain. Regulation should be there to prevent that as much as possible.

brianwawok 4y ago
Everyone has to avoid getting screwed until a pile of CC debt. While refusing to own one isn't my personal plan, I appreciate people like your mother. She sees the downside as >>>> the upside, and just swears off the entire thing. Day to day, the only use of my credit card is just buying stuff online - so when my # gets stolen, my money isn't taken out of my bank account (like it would be if I used a debit).
- dahfizz 4y ago
  This is the way. A Credit Card is just a Debit Card, but with rewards and better fraud protection.
WheatMillington 4y ago
5% on unsecured debt? Absolutely no one would offer credit cards, period. They wouldn't exist. I'm not saying a lower regulated rate couldn't work, but it would be to be considerably higher than 5%.
- dghlsakjg 4y ago
  Right? There are people paying higher rates than that on a mortgage, which is usually a pretty safe bet to underwrite
- watwut 4y ago
  Which would be OK, I think. There is no reason fer credit cards to exist. Debit cards are just fine for what most people do.
  - niij 4y ago
    Not everyone has as much liquid capital as you do. Short term loans can help cover necessary expenses (broken AC, car, etc) for those with less means.
    - watwut 4y ago
      Taking these loans for someone without my means is even worst idea, because the interest payment will hit them more. And I mean, broken AC is not necessary expense. It is a luxury item. A car may be necessary expense if your place don't have public transport, but at least here, poor people don't have cars.
  - dahfizz 4y ago
    The #1 feature of a CC is the fraud protection. If my credit card gets stolen, the criminal has access to the bank's money. If my debit card gets stolen, the criminal has access to my money.
    - notch898a 4y ago
      Just don't be an idiot like me, have your credit card at the same bank that you have your bank account at. Then have someone steal your card info, spend lots of money, and then use the vast legal resources of eBay to fight your fraud claim with piles of paperwork. I've found the fraud protection of CC quite lacking. Bank puts up no real fight to the counterparty appeal of the charge back and then you're fucked, especially if the bank already has your assets. In my case the appeal was from some guy with literally 'pirateArrrggh' in his email address and they stated it absolutely must have been me. My bank literally laughed at me and insinuated I was a fraud for daring to claim I couldn't have been the buyer of religious and women's beauty products as a straight atheist man.
ejb999 4y ago
>>Part of me wonders what the world would look like if we massively regulated credit card terms, like no more than 5% APR. What would happen is there would be no credit cards for anyone. Nobody is going to lend money to the general public at 5% for unsecured debt. IIRC, they used to be capped at 18% many years ago, still high, but much more reasonable then some of the rates that are out there now; so not opposed to a cap, but it can't be so low that it kills the business altogether.
- cowpig 4y ago
  I think what would happen is that collateral for credit cards would become commonplace
  - yamtaddle 4y ago
    And much lower limits.
  - Pfhortune 4y ago
    Which has a similar effect to the cards not being available. If you're renting an apartment and riding a bus to work, what exactly are you going to put up as collateral? Organs?
    - ejb999 4y ago
      If you live in Massachusetts, you might be able to soon: https://www.technologyreview.com/2023/02/03/1067768/massachusetts-bill-prisoners-swap-organs-freedom/ https://www.technologyreview.com/2023/02/03/1067768/massachu...
      - midasuni 4y ago
        I was really holding out hope this would be a story about piano playing
  - aynyc 4y ago
    That's called debit card. Limit is the money in your back account.
lotsofpulp 4y ago
> These cards are accepted by society because they benefit those who know how to use them, but it's hard to look past the fact that so many people, if not most, are financially illiterate (because of failings of education due to lack of funding) and so many people screw themselves financially for decades if not their whole lives because of them. I went through the U.S. education system in 8 different states in schools in poorer areas, and even then, the education was sufficient to understand the concept of not spending money you do not have. Set the thing to auto pay the balance every month, and do not spend more than you earn. I expect that much from the 95% of the population that has had the opportunity to learn how to read and write.
- syzarian 4y ago
  Almost everyone in the U.S. spends money they don’t have. We borrow to buy a car, a house, to go to college. When one does not live on the precipice of missing rent and whatnot it is easy to say, “ Don’t spend money you don’t have.” Such advice is as useless as it is easy to say.
  - lotsofpulp 4y ago
    Edit to “spending money they do not have for unnecessary purchases at huge interest rates”. Obviously, certain circumstances can cause someone to need to use credit card debt to shelter/feed themselves and their family. I would be willing to bet the vast majority of credit card interest is not caused by essential needs.
  - Marsymars 4y ago
    The thing is, if you go into debt, you eventually reach a balance of income and expenses. (Or you declare bankruptcy.) You can’t keep going into deeper debt indefinitely. If you’d taken those same actions to equalize income and expenses before going into debt, you’d be better off.
  - deleted 4y ago
    [deleted]
  - sleton38234234 4y ago
rhino369 4y ago
Really, most people should have charge cards and not credit cards. Charge cards are meant to be paid off at the end of every month.
- capableweb 4y ago
  Why not just debit cards? Pulls money directly from your account, you can only spend what you have, expenses are visible directly and works everywhere a credit card works. In many parts of the world, people basically use debit cards for everything, credit cards only for some cases.
  - elijaht 4y ago
    From the (US-based) user perspective: better buyer protections, non-negligible rewards
  - dghlsakjg 4y ago
    In the US, using a debit card frequently means that you are liable for fraudulent use, lost money, etc. A credit card offers a ton of legal protection (stolen number is not your problem) and frequently other protections as a benefit. For example, anything I buy with my cc has the warranty doubled up to 3 years as a benefit.
    - capableweb 4y ago
      > In the US, using a debit card frequently means that you are liable for fraudulent use, lost money, etc. Sounds like the US needs to modernize a little bit then, I have the same protections with my debit cards, besides the extended warranty.
      - WillPostForFood 4y ago
        There are fraud protections on debit cards in the US as well, but the problem still starts with your losing your money, and you have to take action and time to get it back. With a credit card, the bank is out the money initially instead of you.
Forgeties79 4y ago
>We can say "but they signed the terms!" I've always hated this "caveat emptor" mentality. It just assumes the seller can't be blamed out the gate, no matter how manipulative or opaque they may have been. See: the classic memes about fresh army recruits buying expensive cars/truck at 25% APR. There are car dealerships outside of bases that make it their sole mission to separate fresh 18 year old recruits from their money.
- smabie 4y ago
  The world is a hostile place and everyone wants to drink your milkshake (including me). Don't think there's anything that can or should be done about it. This is how it's always been and this how it will always be: it's fundamental to humanity.
  - watwut 4y ago
    Practically, a lot of these can be dealt with regulation, warning people in advance about known frauds and so on. It is not true that all societies would be equally corrupt, fraudulent or dishonest. They differ due to laws differing, law enforcement differing and culture differing.
  - Forgeties79 4y ago
    > The world is a hostile place and everyone wants to drink your milkshake (including me). This is a cynical take that frankly I find very grating and pointless. “Life’s hard nothing we can do about it.” Just hand waving it away and deciding there’s noting that can be done when there’s plenty we can do, as we have done since we first organized into groups. >Don't think there's anything that can or should be done about it. This is how it's always been and this how it will always be: it's fundamental to humanity. Consumer protection laws exist. Laws against murder, stealing, etc. exist. Would you agree we have fewer people taken advantage of and fewer people murdered and stolen from as as a result? As for saying we shouldn’t do anything…that I can’t make heads or tails of. You want the world to be cutthroat? By choice?
- leetcrew 4y ago
  they're already required to clearly display the total interest over the full loan term on the contract you sign. there's no hiding the fact that 25% APR with a 72 month term means paying ~100% of the principal again in interest. I honestly don't see how it could be made more clear that this is a terrible financial decision. it's like it just doesn't occur to people that they might have to pay for things other than a car note sometime in the next six years.
lizknope 4y ago
We need more basic financial education in the US and probably the world. I know people some people with thousands of dollars in credit card debt. Currently I make about $50 a month in credit card rewards and after using them for 30 years I have never paid a penny in credit card interest. I looked at the credit card interest rate and it just seems ridiculous so I just don't buy things I can't pay off at the end of the month. I know that most of the financial institutions purposely advertise and try to deceive people into going into debt so they can make more money from them. I know that people run into difficult times but I see so many people buying things they don't really need with a credit card.
- unshavedyak 4y ago
  > We need more basic financial education in the US and probably the world. We do, definitely. However wouldn't that also produce the same result as regulating the cards? Ie i imagine cards are profitable for the responsible folk because they so heavily abuse the irresponsible and/or uneducated folk. If we were to educate everyone then the cards wouldn't exploit "anyone" and suddenly the card makers have no incentive to offer the profitable cash back/etc. Now of course, we can't educate "everyone". And i'm not a fan of systems that build themselves on the back of the exploited. Do i have the wrong framing here?
time_to_smile 4y ago
> These cards are accepted by society because they benefit those who know how to use them No, they're accepted because the only way we can figure out how to continue economic growth is through a massive credit system. This means doubling down on a strategy of infinite growth as that is the only way such a system is sustainable. Cheap money coupled with expanding credit is the foundation of the global economy for the last decade. You could also argue pretty easily that cheap money is just another view of expanding credit. If we increased the cost of money and reduced the amount of consumer credit available the global economy would collapse. Ever since the GFC we've pushed off collapse only by expanding global debt.
bell-cot 4y ago
> Of course I wouldn't get my 3% cash back for being a responsible user ... My impression is that the cash back (& similar rewards) are mostly paid for by the merchants - who do not get (say) $100.00 when you pay them $100.00 with your credit card.
- jlmorton 4y ago
  Exactly. The interest covers the cost of capital, delinquencies, administration, but it's the merchant fees that are paying the rewards. Before Dodd-Frank and the regulation of debit card interchange fees, many debit cards were also offering lucrative rewards, despite there being no interest at all. With debit cards now limited to $0.20 + 0.05%, those debit rewards cards are gone.
- david422 4y ago
  Right, and then they in turn need to charge higher prices to make up this loss. Cashback is a scam.
  - Anderkent 4y ago
    but since they charge the same prices to holders of credit (2% fee) and debit (0.05% fee), users of credit cards are de facto subsidized by cash/debit payers in the US so as an individual it still may pay you to have one
    - david422 4y ago
      > users of credit cards are de facto subsidized by cash/debit payers in the US Yes, sadly. So you have to play the game in order not to lose, and playing the game means that the credit cards take their cut, which means everyone loses except the credit cards.
giantg2 4y ago
"(because of failings of education due to lack of funding)" I think there are other reasons for the failed education. Even with more money, I doubt they would prioritize it. Most schools offer personal finance as an elective. It should probably be part of the core curriculum. Even then, you will have students that are unintered or don't apply themselves. The easy fix is to reign in the lending by setting low limits that only increase with good payment history and cap lifetime interest payments as an percentage of the original purchase, like 200% adjusted for inflation. Want a credit card? Here's one with a $250 limit. Didn't pay it back? Now you'll owe $500 adjusted for inflation, and you can't get another card or more credit unless this one is paid back. The political/legal ability to do this is more questionable.
- zeven7 4y ago
  > cap lifetime interest payments as an percentage of the original purchase, like 200% adjusted for inflation. Is people paying more than 200% lifetime interest on credit card purchases a normal thing?
  - giantg2 4y ago
    I don't know how common it is. I have heard of people making interest only payments for a long time, or taking years to pay off credit card debt. At something like a 20% rate, it's possible to pay back double the original purchase price if it's taking years to pay it off. In general it's probably fairly rare, just like the people who ruin their lives by carrying over a high balance to begin with.
- mrep 4y ago
  Anecdote, but I was required to take an economics class in high school with the basic one being consumer economics which taught me all about personal finance.
georgeplusplus 4y ago
It amazes me that people's default way of dealing with something they don't like is to ban it. It's the most neanderthalic way of regulation.
sacrosancty 4y ago
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polalavik 4y ago
Im not sure where this incredible fear of CCs comes from. It literally doesn’t matter what the APR is unless you’re irresponsible. Just pay the card off before it’s due. CCs are not complex beasts you don’t need a degree to understand them you barely need a high school diploma. The rules are simple: - don’t pay for one, unless you can justify the perks - don’t spend more money than you have. That’s a general rule of finances. I know people get into emergencies. Try to keep the overage as small as possible for as little time as possible. As soon as you have an overage your whole goal should be getting that debt cleared up as fast as possible. - credit cards are only a tool to tell the financial world you are are responsible. So don’t use one if you can’t pay it back.
- bluedino 4y ago
  The same way obesity is a problem. The rules are simple: - don't eat unless you're hungry - don't eat more calories than you expend. That's a general rule of health. As soon as you have an overage your whole goal should be getting that cleared up as fast as possible - calories are only a tool to fuel your body. so don't eat them if you don't need them.
  - notch898a 4y ago
    The overabundance of unhealthy but relatively cheap food that makes people fat and the abundance of large unsecured credit at high interest is actually a pretty good comparison.
- Merad 4y ago
  > Im not sure where this incredible fear of CCs comes from. It literally doesn’t matter what the APR is unless you’re irresponsible. That's exactly where the fear comes from. Credit cards are really a test of financial self control, and a lot of people have really poor self control. Many people also don't seem to truly understand how interest works, they just see easy access to money in exchange for a monthly payment that they can afford. Credit card companies have also intentionally targeted people with poor financial literacy. When I was high school and college (late 90s/early 2000s) it was really common for companies to set up booths on college campuses offering credit to kids who had little or no understanding of what they were signing up for and no source of income. I think regulations were eventually passed after some public outrage in response to news stories about college kids wracking up five figures of CC debt with no means to pay it off.
s1artibartfast 4y ago
I think the factor of financial literacy is overstated. I think the biggest factor is self control and addiction, mirroring a lot of other issues we see, EG obesity. As an example, I have a friend who is really struggling with credit card debt, but they are in no way financially illiterate. They have an accounting degree and work in finance. It is extremely sad to watch them suffer because they know exactly what's going on, but they can't control their spending habits. I think this is a more common situation than the alternative.
- bcrosby95 4y ago
  My mom was an accountant and she looked flabbergasted when I told her her $2k/month timeshare was costing her $24k/year, sucking up almost all of her social security.
  - notch898a 4y ago
    I'm not at all disparaging accountants here but I don't see any reason why they would have superior budgeting capabilities. Accountants are generally in charge of recording the accounts and not actually setting and spending the budget no? The person I would be shocked to be bad at this would be someone like the owner of a boring and non-expanding local business, like a tire repair shop.
  - s1artibartfast 4y ago
    Does this not point to more of a psychological issue such as avoidance, not a financial illiteracy one? I don't want to come off as aggressive because this is your family, but I'm guessing your mother can multiply 2 by 12.
- kerpotgh 4y ago
  I agree with this. Most people that abuse credit card debt know the ins and outs of every bylaw on credit cards, they just… need the money and don’t care about their credit rating.
- Mikealcl 4y ago
  This is real. I approach these conversations based on if the person would be open to learning the same way I avoid religious and political discussions. It is a deeply emotional response from most people, they know what they are doing is stupid. They almost never need me to tell them.
sleton38234234 4y ago
Failure of financial literacy is not because eduction has a lack of funding. The subject isn't even being taught, at least not when I was in school.
- willio58 4y ago
  Could that be because of lack of funding? I had friends in a private highschool and they were taught financial literacy, which isn't a big surprise. The rich getting richer.
dudul 4y ago
What is so complicated to understand about credit cards? Do you really need to have a Nobel in economy to understand that you shouldn't charge for things you won't be able to pay at the end of the cycle?
rhaway84773 4y ago
Are you sure your cash back is funded by people paying interest on the loans as opposed to businesses paying credit card fees?

brianwawok 4y ago

Everyone has to avoid getting screwed until a pile of CC debt. While refusing to own one isn't my personal plan, I appreciate people like your mother. She sees the downside as >>>> the upside, and just swears off the entire thing. Day to day, the only use of my credit card is just buying stuff online - so when my # gets stolen, my money isn't taken out of my bank account (like it would be if I used a debit).

dahfizz 4y ago
This is the way. A Credit Card is just a Debit Card, but with rewards and better fraud protection.

WheatMillington 4y ago

5% on unsecured debt? Absolutely no one would offer credit cards, period. They wouldn't exist. I'm not saying a lower regulated rate couldn't work, but it would be to be considerably higher than 5%.

dghlsakjg 4y ago
Right? There are people paying higher rates than that on a mortgage, which is usually a pretty safe bet to underwrite
watwut 4y ago
Which would be OK, I think. There is no reason fer credit cards to exist. Debit cards are just fine for what most people do.
- niij 4y ago
  Not everyone has as much liquid capital as you do. Short term loans can help cover necessary expenses (broken AC, car, etc) for those with less means.
  - watwut 4y ago
    Taking these loans for someone without my means is even worst idea, because the interest payment will hit them more. And I mean, broken AC is not necessary expense. It is a luxury item. A car may be necessary expense if your place don't have public transport, but at least here, poor people don't have cars.
- dahfizz 4y ago
  The #1 feature of a CC is the fraud protection. If my credit card gets stolen, the criminal has access to the bank's money. If my debit card gets stolen, the criminal has access to my money.
  - notch898a 4y ago
    Just don't be an idiot like me, have your credit card at the same bank that you have your bank account at. Then have someone steal your card info, spend lots of money, and then use the vast legal resources of eBay to fight your fraud claim with piles of paperwork. I've found the fraud protection of CC quite lacking. Bank puts up no real fight to the counterparty appeal of the charge back and then you're fucked, especially if the bank already has your assets. In my case the appeal was from some guy with literally 'pirateArrrggh' in his email address and they stated it absolutely must have been me. My bank literally laughed at me and insinuated I was a fraud for daring to claim I couldn't have been the buyer of religious and women's beauty products as a straight atheist man.

ejb999 4y ago

>>Part of me wonders what the world would look like if we massively regulated credit card terms, like no more than 5% APR. What would happen is there would be no credit cards for anyone. Nobody is going to lend money to the general public at 5% for unsecured debt. IIRC, they used to be capped at 18% many years ago, still high, but much more reasonable then some of the rates that are out there now; so not opposed to a cap, but it can't be so low that it kills the business altogether.

cowpig 4y ago
I think what would happen is that collateral for credit cards would become commonplace
- yamtaddle 4y ago
  And much lower limits.
- Pfhortune 4y ago
  Which has a similar effect to the cards not being available. If you're renting an apartment and riding a bus to work, what exactly are you going to put up as collateral? Organs?
  - ejb999 4y ago
    If you live in Massachusetts, you might be able to soon: https://www.technologyreview.com/2023/02/03/1067768/massachusetts-bill-prisoners-swap-organs-freedom/ https://www.technologyreview.com/2023/02/03/1067768/massachu...
    - midasuni 4y ago
      I was really holding out hope this would be a story about piano playing
- aynyc 4y ago
  That's called debit card. Limit is the money in your back account.

lotsofpulp 4y ago

> These cards are accepted by society because they benefit those who know how to use them, but it's hard to look past the fact that so many people, if not most, are financially illiterate (because of failings of education due to lack of funding) and so many people screw themselves financially for decades if not their whole lives because of them. I went through the U.S. education system in 8 different states in schools in poorer areas, and even then, the education was sufficient to understand the concept of not spending money you do not have. Set the thing to auto pay the balance every month, and do not spend more than you earn. I expect that much from the 95% of the population that has had the opportunity to learn how to read and write.

syzarian 4y ago
Almost everyone in the U.S. spends money they don’t have. We borrow to buy a car, a house, to go to college. When one does not live on the precipice of missing rent and whatnot it is easy to say, “ Don’t spend money you don’t have.” Such advice is as useless as it is easy to say.
- lotsofpulp 4y ago
  Edit to “spending money they do not have for unnecessary purchases at huge interest rates”. Obviously, certain circumstances can cause someone to need to use credit card debt to shelter/feed themselves and their family. I would be willing to bet the vast majority of credit card interest is not caused by essential needs.
- Marsymars 4y ago
  The thing is, if you go into debt, you eventually reach a balance of income and expenses. (Or you declare bankruptcy.) You can’t keep going into deeper debt indefinitely. If you’d taken those same actions to equalize income and expenses before going into debt, you’d be better off.
- deleted 4y ago
  [deleted]
- sleton38234234 4y ago

rhino369 4y ago

Really, most people should have charge cards and not credit cards. Charge cards are meant to be paid off at the end of every month.

capableweb 4y ago
Why not just debit cards? Pulls money directly from your account, you can only spend what you have, expenses are visible directly and works everywhere a credit card works. In many parts of the world, people basically use debit cards for everything, credit cards only for some cases.
- elijaht 4y ago
  From the (US-based) user perspective: better buyer protections, non-negligible rewards
- dghlsakjg 4y ago
  In the US, using a debit card frequently means that you are liable for fraudulent use, lost money, etc. A credit card offers a ton of legal protection (stolen number is not your problem) and frequently other protections as a benefit. For example, anything I buy with my cc has the warranty doubled up to 3 years as a benefit.
  - capableweb 4y ago
    > In the US, using a debit card frequently means that you are liable for fraudulent use, lost money, etc. Sounds like the US needs to modernize a little bit then, I have the same protections with my debit cards, besides the extended warranty.
    - WillPostForFood 4y ago
      There are fraud protections on debit cards in the US as well, but the problem still starts with your losing your money, and you have to take action and time to get it back. With a credit card, the bank is out the money initially instead of you.

Forgeties79 4y ago

>We can say "but they signed the terms!" I've always hated this "caveat emptor" mentality. It just assumes the seller can't be blamed out the gate, no matter how manipulative or opaque they may have been. See: the classic memes about fresh army recruits buying expensive cars/truck at 25% APR. There are car dealerships outside of bases that make it their sole mission to separate fresh 18 year old recruits from their money.

smabie 4y ago
The world is a hostile place and everyone wants to drink your milkshake (including me). Don't think there's anything that can or should be done about it. This is how it's always been and this how it will always be: it's fundamental to humanity.
- watwut 4y ago
  Practically, a lot of these can be dealt with regulation, warning people in advance about known frauds and so on. It is not true that all societies would be equally corrupt, fraudulent or dishonest. They differ due to laws differing, law enforcement differing and culture differing.
- Forgeties79 4y ago
  > The world is a hostile place and everyone wants to drink your milkshake (including me). This is a cynical take that frankly I find very grating and pointless. “Life’s hard nothing we can do about it.” Just hand waving it away and deciding there’s noting that can be done when there’s plenty we can do, as we have done since we first organized into groups. >Don't think there's anything that can or should be done about it. This is how it's always been and this how it will always be: it's fundamental to humanity. Consumer protection laws exist. Laws against murder, stealing, etc. exist. Would you agree we have fewer people taken advantage of and fewer people murdered and stolen from as as a result? As for saying we shouldn’t do anything…that I can’t make heads or tails of. You want the world to be cutthroat? By choice?
leetcrew 4y ago
they're already required to clearly display the total interest over the full loan term on the contract you sign. there's no hiding the fact that 25% APR with a 72 month term means paying ~100% of the principal again in interest. I honestly don't see how it could be made more clear that this is a terrible financial decision. it's like it just doesn't occur to people that they might have to pay for things other than a car note sometime in the next six years.

lizknope 4y ago

We need more basic financial education in the US and probably the world. I know people some people with thousands of dollars in credit card debt. Currently I make about $50 a month in credit card rewards and after using them for 30 years I have never paid a penny in credit card interest. I looked at the credit card interest rate and it just seems ridiculous so I just don't buy things I can't pay off at the end of the month. I know that most of the financial institutions purposely advertise and try to deceive people into going into debt so they can make more money from them. I know that people run into difficult times but I see so many people buying things they don't really need with a credit card.

unshavedyak 4y ago
> We need more basic financial education in the US and probably the world. We do, definitely. However wouldn't that also produce the same result as regulating the cards? Ie i imagine cards are profitable for the responsible folk because they so heavily abuse the irresponsible and/or uneducated folk. If we were to educate everyone then the cards wouldn't exploit "anyone" and suddenly the card makers have no incentive to offer the profitable cash back/etc. Now of course, we can't educate "everyone". And i'm not a fan of systems that build themselves on the back of the exploited. Do i have the wrong framing here?

time_to_smile 4y ago

> These cards are accepted by society because they benefit those who know how to use them No, they're accepted because the only way we can figure out how to continue economic growth is through a massive credit system. This means doubling down on a strategy of infinite growth as that is the only way such a system is sustainable. Cheap money coupled with expanding credit is the foundation of the global economy for the last decade. You could also argue pretty easily that cheap money is just another view of expanding credit. If we increased the cost of money and reduced the amount of consumer credit available the global economy would collapse. Ever since the GFC we've pushed off collapse only by expanding global debt.

bell-cot 4y ago

> Of course I wouldn't get my 3% cash back for being a responsible user ... My impression is that the cash back (& similar rewards) are mostly paid for by the merchants - who do not get (say) $100.00 when you pay them $100.00 with your credit card.

jlmorton 4y ago
Exactly. The interest covers the cost of capital, delinquencies, administration, but it's the merchant fees that are paying the rewards. Before Dodd-Frank and the regulation of debit card interchange fees, many debit cards were also offering lucrative rewards, despite there being no interest at all. With debit cards now limited to $0.20 + 0.05%, those debit rewards cards are gone.
david422 4y ago
Right, and then they in turn need to charge higher prices to make up this loss. Cashback is a scam.
- Anderkent 4y ago
  but since they charge the same prices to holders of credit (2% fee) and debit (0.05% fee), users of credit cards are de facto subsidized by cash/debit payers in the US so as an individual it still may pay you to have one
  - david422 4y ago
    > users of credit cards are de facto subsidized by cash/debit payers in the US Yes, sadly. So you have to play the game in order not to lose, and playing the game means that the credit cards take their cut, which means everyone loses except the credit cards.

giantg2 4y ago

"(because of failings of education due to lack of funding)" I think there are other reasons for the failed education. Even with more money, I doubt they would prioritize it. Most schools offer personal finance as an elective. It should probably be part of the core curriculum. Even then, you will have students that are unintered or don't apply themselves. The easy fix is to reign in the lending by setting low limits that only increase with good payment history and cap lifetime interest payments as an percentage of the original purchase, like 200% adjusted for inflation. Want a credit card? Here's one with a $250 limit. Didn't pay it back? Now you'll owe $500 adjusted for inflation, and you can't get another card or more credit unless this one is paid back. The political/legal ability to do this is more questionable.

zeven7 4y ago
> cap lifetime interest payments as an percentage of the original purchase, like 200% adjusted for inflation. Is people paying more than 200% lifetime interest on credit card purchases a normal thing?
- giantg2 4y ago
  I don't know how common it is. I have heard of people making interest only payments for a long time, or taking years to pay off credit card debt. At something like a 20% rate, it's possible to pay back double the original purchase price if it's taking years to pay it off. In general it's probably fairly rare, just like the people who ruin their lives by carrying over a high balance to begin with.
mrep 4y ago
Anecdote, but I was required to take an economics class in high school with the basic one being consumer economics which taught me all about personal finance.

georgeplusplus 4y ago

It amazes me that people's default way of dealing with something they don't like is to ban it. It's the most neanderthalic way of regulation.

sacrosancty 4y ago

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polalavik 4y ago

Im not sure where this incredible fear of CCs comes from. It literally doesn’t matter what the APR is unless you’re irresponsible. Just pay the card off before it’s due. CCs are not complex beasts you don’t need a degree to understand them you barely need a high school diploma. The rules are simple: - don’t pay for one, unless you can justify the perks - don’t spend more money than you have. That’s a general rule of finances. I know people get into emergencies. Try to keep the overage as small as possible for as little time as possible. As soon as you have an overage your whole goal should be getting that debt cleared up as fast as possible. - credit cards are only a tool to tell the financial world you are are responsible. So don’t use one if you can’t pay it back.

bluedino 4y ago
The same way obesity is a problem. The rules are simple: - don't eat unless you're hungry - don't eat more calories than you expend. That's a general rule of health. As soon as you have an overage your whole goal should be getting that cleared up as fast as possible - calories are only a tool to fuel your body. so don't eat them if you don't need them.
- notch898a 4y ago
  The overabundance of unhealthy but relatively cheap food that makes people fat and the abundance of large unsecured credit at high interest is actually a pretty good comparison.
Merad 4y ago
> Im not sure where this incredible fear of CCs comes from. It literally doesn’t matter what the APR is unless you’re irresponsible. That's exactly where the fear comes from. Credit cards are really a test of financial self control, and a lot of people have really poor self control. Many people also don't seem to truly understand how interest works, they just see easy access to money in exchange for a monthly payment that they can afford. Credit card companies have also intentionally targeted people with poor financial literacy. When I was high school and college (late 90s/early 2000s) it was really common for companies to set up booths on college campuses offering credit to kids who had little or no understanding of what they were signing up for and no source of income. I think regulations were eventually passed after some public outrage in response to news stories about college kids wracking up five figures of CC debt with no means to pay it off.

s1artibartfast 4y ago

I think the factor of financial literacy is overstated. I think the biggest factor is self control and addiction, mirroring a lot of other issues we see, EG obesity. As an example, I have a friend who is really struggling with credit card debt, but they are in no way financially illiterate. They have an accounting degree and work in finance. It is extremely sad to watch them suffer because they know exactly what's going on, but they can't control their spending habits. I think this is a more common situation than the alternative.

bcrosby95 4y ago
My mom was an accountant and she looked flabbergasted when I told her her $2k/month timeshare was costing her $24k/year, sucking up almost all of her social security.
- notch898a 4y ago
  I'm not at all disparaging accountants here but I don't see any reason why they would have superior budgeting capabilities. Accountants are generally in charge of recording the accounts and not actually setting and spending the budget no? The person I would be shocked to be bad at this would be someone like the owner of a boring and non-expanding local business, like a tire repair shop.
- s1artibartfast 4y ago
  Does this not point to more of a psychological issue such as avoidance, not a financial illiteracy one? I don't want to come off as aggressive because this is your family, but I'm guessing your mother can multiply 2 by 12.
kerpotgh 4y ago
I agree with this. Most people that abuse credit card debt know the ins and outs of every bylaw on credit cards, they just… need the money and don’t care about their credit rating.
Mikealcl 4y ago
This is real. I approach these conversations based on if the person would be open to learning the same way I avoid religious and political discussions. It is a deeply emotional response from most people, they know what they are doing is stupid. They almost never need me to tell them.

sleton38234234 4y ago

Failure of financial literacy is not because eduction has a lack of funding. The subject isn't even being taught, at least not when I was in school.

willio58 4y ago
Could that be because of lack of funding? I had friends in a private highschool and they were taught financial literacy, which isn't a big surprise. The rich getting richer.

dudul 4y ago

What is so complicated to understand about credit cards? Do you really need to have a Nobel in economy to understand that you shouldn't charge for things you won't be able to pay at the end of the cycle?

rhaway84773 4y ago

Are you sure your cash back is funded by people paying interest on the loans as opposed to businesses paying credit card fees?