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No, an average person uses it to improve liquidity atop overall solid fundamentals. Literally hundreds of million people worldwide do it with no adverse effects

by varjag 1y ago

No, an average person uses it to improve liquidity atop overall solid fundamentals. Literally hundreds of million people worldwide do it with no adverse effects and improved quality of life. Irresponsible people are relatively a minority (although they tend to make the news). And aversion to financing is in itself a poverty marker more often than not.

al_borland 1y ago
Of those who carry credit cards in the US, 60% of them carry a balance [0]. There are also all those reports that have come out about how nearly 40% of Americans don't have $400 for an emergency [1], with the median being just $600. If the rule of thumb for an emergency fund is 3-6 months of expenses, and we can agree that paying interest on a credit card is a bad finical decision, then I'm not sure how the "average" person has solid fundamentals, where credit cards are being used as a strategic tool. People also tend to spend more when using credit cards [2], which negates most benefits someone may get from using credit card for the points. So even those with solid fundamentals, who are using it as a tool, are probably still losing, just in a less obvious way. [0] https://libertystreeteconomics.newyorkfed.org/2025/03/why-are-credit-card-rates-so-high/ https://libertystreeteconomics.newyorkfed.org/2025/03/why-ar... [1] https://www.empower.com/press-center/37-americans-cant-afford-emergency-expense-over-400-according-empower-research https://www.empower.com/press-center/37-americans-cant-affor... [2] https://link.springer.com/article/10.1023/A:1008196717017 https://link.springer.com/article/10.1023/A:1008196717017
- deleted 1y ago
  [deleted]
- ndriscoll 1y ago
  [1] is better interpreted as 40% of people who are willing to work for less than minimum wage answering marketing surveys don't have $400 for an emergency. It could still be true, but the bias in the methodology is obvious.
- tristor 1y ago
  > Of those who carry credit cards in the US, 60% of them carry a balance [0]. Carrying a balance is not automatically the worst choice. I have a massively positive net worth (for a working stiff), so could effectively have $0 debt at any point in time, inclusive of my mortgage, but all debt is not equal, nor are all investments. Credit card debt is clearly one of the worst forms of debt with the harshest interest rates, yet even in that case selling investments and paying taxes on them and forgoing future earnings on those investments to pay off a credit card immediately vs over a few months is not necessarily the right decision. Credit cards are about providing you float so you can smooth out cash flow. As an example, I am about to do some home renovations, I expect to spend ~$40k to do so, I also expect to earn and pay off that $40k over the following 4 months. My options are I can carry a balance on a credit card, I can keep my home in a partially renovated state for longer to pay cash, or I can take our a HELOC which has a high origination cost and acts as a secondary lein on my house. The credit card + carrying a balance for 4 months and having my home back in a finished livable state faster is clearly the best choice, but it means I'm in that 60%. These choices aren't binary, the problem is that many people are not financially literate enough to consider their options and outcomes and choose the best choice, they either have a default choice with no consideration, or no real choice, both with negative outcomes.
  - al_borland 1y ago
    I suppose. I just did similarly priced renovations and chose to put off the whole thing until I could do the whole thing with cash. But everyone is in a different situation. While I’ve been at my job for nearly 20 years, the layoffs are frequent, and I’ve never felt any meaningful level of job security. This leads me to seek risk reduction, and part of that is eliminating as many financial obligations as possible. In theory I could probably make more investing (if we ignore the psychology aspects), but in practice it’s had the side effect of dramatically increasing how much in invest on a monthly basis after getting all the debt eliminated (which was really only the house). The peace of mind comes more from those low fixed expenses than from the savings. If I had to, I think I could make ends meet working retail, without dipping into savings/investments. I think about this more often than is probably healthy.

by varjag 1y ago

al_borland 1y ago

Of those who carry credit cards in the US, 60% of them carry a balance [0]. There are also all those reports that have come out about how nearly 40% of Americans don't have $400 for an emergency [1], with the median being just $600. If the rule of thumb for an emergency fund is 3-6 months of expenses, and we can agree that paying interest on a credit card is a bad finical decision, then I'm not sure how the "average" person has solid fundamentals, where credit cards are being used as a strategic tool. People also tend to spend more when using credit cards [2], which negates most benefits someone may get from using credit card for the points. So even those with solid fundamentals, who are using it as a tool, are probably still losing, just in a less obvious way. [0] https://libertystreeteconomics.newyorkfed.org/2025/03/why-are-credit-card-rates-so-high/ https://libertystreeteconomics.newyorkfed.org/2025/03/why-ar... [1] https://www.empower.com/press-center/37-americans-cant-afford-emergency-expense-over-400-according-empower-research https://www.empower.com/press-center/37-americans-cant-affor... [2] https://link.springer.com/article/10.1023/A:1008196717017 https://link.springer.com/article/10.1023/A:1008196717017

deleted 1y ago
[deleted]
ndriscoll 1y ago
[1] is better interpreted as 40% of people who are willing to work for less than minimum wage answering marketing surveys don't have $400 for an emergency. It could still be true, but the bias in the methodology is obvious.
tristor 1y ago
> Of those who carry credit cards in the US, 60% of them carry a balance [0]. Carrying a balance is not automatically the worst choice. I have a massively positive net worth (for a working stiff), so could effectively have $0 debt at any point in time, inclusive of my mortgage, but all debt is not equal, nor are all investments. Credit card debt is clearly one of the worst forms of debt with the harshest interest rates, yet even in that case selling investments and paying taxes on them and forgoing future earnings on those investments to pay off a credit card immediately vs over a few months is not necessarily the right decision. Credit cards are about providing you float so you can smooth out cash flow. As an example, I am about to do some home renovations, I expect to spend ~$40k to do so, I also expect to earn and pay off that $40k over the following 4 months. My options are I can carry a balance on a credit card, I can keep my home in a partially renovated state for longer to pay cash, or I can take our a HELOC which has a high origination cost and acts as a secondary lein on my house. The credit card + carrying a balance for 4 months and having my home back in a finished livable state faster is clearly the best choice, but it means I'm in that 60%. These choices aren't binary, the problem is that many people are not financially literate enough to consider their options and outcomes and choose the best choice, they either have a default choice with no consideration, or no real choice, both with negative outcomes.
- al_borland 1y ago
  I suppose. I just did similarly priced renovations and chose to put off the whole thing until I could do the whole thing with cash. But everyone is in a different situation. While I’ve been at my job for nearly 20 years, the layoffs are frequent, and I’ve never felt any meaningful level of job security. This leads me to seek risk reduction, and part of that is eliminating as many financial obligations as possible. In theory I could probably make more investing (if we ignore the psychology aspects), but in practice it’s had the side effect of dramatically increasing how much in invest on a monthly basis after getting all the debt eliminated (which was really only the house). The peace of mind comes more from those low fixed expenses than from the savings. If I had to, I think I could make ends meet working retail, without dipping into savings/investments. I think about this more often than is probably healthy.