Another stumbling block is inadequate credit for new businesses. When DH opened the shop, the only cards available had exorbitant interest rates. They only now, after nearly 20 years in business, have paid off 2 of the 3 cards with the most horrible interest rates (19.9% and 17%, respectively). Oddly enough, now that they are solvent, the offers for cheap(er) credit are pouring in.
We got a credit card from a credit union with a 9% interest rate. After using it almost exclusively for a year, Chase notified me that it was cutting my line of credit in half on one of my other cards. Since I really didn’t need $25k in credit accessible immediately, shrug. I wonder if they were expecting me to come grovel to be reinstated.
I’ve been a deadbeat for 40+ years and I have a FICO score of over 800! They just can’t wait to give me more credit. My wife just bought a car on a 0% loan! I’m quite happy to use their money and give just that much back. Meanwhile, I get the perks of the credit cards: more free money!
I guess they’re just waiting for the day I can’t pay it back. Hint: I’ll be on my deathbed at that point!
I know we’re the exception but as long as they let it continue, I’ll make use of it.
Never in over 30 years of credit card use have I carried a balance. Every account is paid off fully every month. They can call me a deadbeat if they like, but they still profit from every transaction.
Here in Japan, credit cards are essentially just debit cards; they automatically deduct the full balance from your designated bank account each month. You can (and they are always begging you to) switch to a monthly payment plan, but why would I?
Germany here, my credit card is the same. It’s from my bank, so for me the only real advantage is that it’s good for travelling back to the USA, for some of the perks like travel insurance when renting a car, stuff like that. Or the balancing at the end of the month is useful, but even that makes me anxious.
It was also often the only way to pay for stuff online before PayPal came along. But I keep it on a short leash, especially since the card’s predecessor was stolen online and someone tried to make purchases on it. I was able to catch the order and cancel it, but it still sucks. Since that little incident, I have activated email notifications after every use.
I use my card for everything since there is no cost to me to do so (as there is no balance and, therefore, no interest) and it gives me benefits in the form of airline miles (which I can also convert into cash). Plus, it makes it easier to keep track of what I am actually spending my money on. I would probably be more wary if I were in the US or Europe, but it would be quite hard for somebody to use a card in my name here in Japan.
That said, I probably do spend more than I would if I were using cash for everything…especially when I’m just a few more miles away from treating myself to business class. My god, I sound like a yuppy, don’t I?
I have both a debit ATM card and a proper credit card both issued by my bank. I tend to use both a lot, but I have always paid it the next month. I’m in Italy and rule are different. Basically, when I asked for the credit card before getting it the bank checked if I was eligible to have an overdraft.
Having both cars is because not all the places have both circuits or one of them isn’t working.
That’s good advice, and I may take that route if I do find myself in real need of a credit history. But there’s no getting around another issue that most people haven’t been discussing here: even if you’re using a credit card that you always pay off, that still means that the credit agencies get to look at all of your purchases and spending habits. It’s a bit of a privacy issue. At the very least they can sell the information to marketers for targeted advertising, and I don’t consider anything that I’m required to sacrifice personal information for to be truly “free.” It’s an ecosystem I’d like to opt out of to the extent possible.
I do basically the same, but it still should be pointed out that that is their hope for how we’ll view it. Places we shop are charged fees larger than that by the credit card company, though, and all retailers factor the fees into their prices. So in the end, despite the cash back, we pay higher prices because we all use the credit cards for all purchases. The credit companies are just kicking back part of their grift to us to get us to go along.
Oh, completely agree, but for most retailers, they don’t offer a cash discount. So if you aren’t actively trying to optimize your purchases by maximizing your cash back, you are paying more without financial benefit.
This is similar to, for example, situations where bargaining on price is common (for example, purchasing a vehicle) - if you aren’t making an effort to lower the price you pay, then you are paying more than others and subsidizing those cost reductions for others.
It’s far from ideal, but it’s also not something exclusive to credit cards. In fact, IIRC there are several markets around the world where the expectation is the “list price” is basically a suggestion, and actually paying it is something no one should ever expect to do.
I consider limiting the use of my personal information for targeted marketing, etc. to be a benefit (or, more accurately, sacrificing it to be a cost) but I understand that different people assign different values to their privacy, and that’s everyone’s individual decision to make.
Edit to add, this is EXACTLY how I think about it:
Student loans aren’t treated the same way was consumer debt. Lenders/Credit card companies are more worried about debt you can discharge in bankruptcy, like themselves.
Absolutely. updated above to point out I was referring to financial benefit, but that’s not even entirely true - if you, for example, pay for services that remove your presence from the internet, or use a vpn to hide your IP from sites, or use services to monitor your credit, etc. etc. I don’t think anyone is going to suggest that you are making unsound decisions because these cost money.
There’s nothing wrong with choosing to spend more money on everyday goods because you value your privacy over the savings you could obtain, or because you find yourself in a stable enough financial position, for example, that you don’t need to sign up to use coupons, discounts, or other savings and exchange your personal data to make ends meet. You have to make choices that make the most sense for you, your financial situation, and your personal values.
As per the article, the point is these things don’t happen in a vaccuum. Retailers do alter their pricing assuming you are using credit cards. Your credit history (or lack thereof) does affect what you pay for certain things (and in many cases whether you qualify for certain things at all!), and IMHO it’s important for as many people as possible to realize these forces are in place so that they can make the best decisions that work for them.
This is my first time seeing this, and I find it hilarious. I will say that I spent a good chunk of my 40s paying for my horrid credit card decisions made during my 20s and 30s. At one point I was paying over $300/mo in interest.
A few years back my car was totaled in a rear end collision and it was worth more than I still owed on it. Rather than getting another car with the excess payout, I paid off all of my remaining credit card debt, and finally only had my mortgage as debt.
Since then I’ve been a deadbeat mofo when it comes to my cards. All of them get paid down to $0 each month.
I know if the worst happens in this volatile time, I can use the cards to keep going for awhile. But I really hope it doesn’t come to that, because I don’t want to be back in that position again.
This may be a boring hot take, but I suspect a lot of small businesses that do cash discounts aren’t accounting for the overhead of handling cash. Credit card companies definitely charging a premium, but there is labor and shrinkage associated with collecting, counting, securing, and depositing cash. You could see it when weed was starting to be legal, but companies couldn’t partner with financial institutions. Not being able to partner with a bank for deposits made that specific situation much worse.
I remember years ago working as a cashier dealing with those things knowing credit cards were another order of magnitude more in sales that didn’t rely on me running out of dimes or being off at the end of the night and doing the other bookkeeping. I notice with Covid a lot of shops are going cashless or smartphone-app preorder only. I feel bad for customers who only have cash, but I wonder if the businesses notice a difference in labor costs and fraud without cash?
Sometimes that’s true, but sometimes it isn’t, depending on the technical setup. I worked at a company that had a credit card charge/verification machine separate from the registers. (It was a data security issue, if I’m remembering correctly.) At the end of the night, I had to do an audit to make sure that each credit card type had been entered correctly in the register (Visa/Mastercard, Amex, Discover), and that the amounts entered in the register matched the amounts entered into the card machine.
Most nights, everything tallied correctly. But when it didn’t… it could be a real pain to fix, requiring a comparison between the register’s record and the credit machine’s record, and then going back and fixing what went wrong (if possible.)
That could take extra time, which the payroll-conscious bosses didn’t like… but some things had to be fixed before the credit card machine was closed out for the night, and the ability to fix mistakes was lost.
