Credit Card chat on WAN show: do europeans hate credit cards???

[will0hlep]

I'm confused as to why Linus thinks: Europeans think credit cards are evil.

 

Is this a sterotype americans have of europeans or is this a real belief in large parts of europe?

 

I'm from britain and credit cards seem pretty normal here. I don't know many people who don't use a credit card. I mean there is some chatter that credit cards make it easier for people to get into debt here but I assumed that conversation existed everywhere and in my circles most people understand that there are clear advantages to a credit card if you manage it properly (consumer protection, interest holidays, ect.).

[Avocado Diaboli]

It's not about credit cards being evil. It's because (most, I think) European countries don't have a credit rating system. So to us, it looks stupid when we hear that the average American has around $5000 in credit card debt at any given time. I thought so too, until I had it explained to me that the reason Americans (and in this case Canadians) have to have some kind of debt is to prove they're able to pay it back reliably. If you've proven you're good with debt a million times, you're more likely to get approved for a loan or mortgage, while someone with a blank credit report might seem untrustworthy if they've never had any debt. It seems ass-backwards to many that someone who has been on top of their finances for their whole life and never had any debt would get worse treatment when asking for a loan than someone who's been in debt for decades in one form or another.

[will0hlep]

2 minutes ago, Avocado Diaboli said:

(most, I think) European countries don't have a credit rating system

This would be news to me, the UK has a credit rating system, it does the same things here as it does in the US.

2 minutes ago, Avocado Diaboli said:

the average American has around $5000 in credit card debt at any given time

$5000 seems alot but I assume that is just a number you pulled from thin air?

[Erioch]

1 minute ago, Avocado Diaboli said:

I thought so too until I had it explained to me that the reason Americans (and in this case Canadians) have to have some kind of debt is to prove they're able to pay it back reliably.

I can guarentee you that the vast majority of Americans do not think this way.  Most of us get a credit card and then just buy a bunch of stuff.

 

I don't know if it's still done but when I was in college (in the 80s) credit card companies showed up on campus and got people to apply for cards with the gift of a free t-shirt or something.  And most of us got them, with no credit history.

[Levent]

5 minutes ago, Avocado Diaboli said:

European countries don't have a credit rating system

I dont think I have heard of a european country that doesnt have one.

 

 

[Tan3l6]

"virtual" credit card in the form of debit card with all the features besides growing debt is fine by me in Europe.

[will0hlep]

1 minute ago, Tan3l6 said:

"virtual" credit card in the form of debit card with all the features besides growing dept is fine by me in Europe.

you have those? I don't think I've heard of something like that in Britain.

[Tan3l6]

2 minutes ago, will0hlep said:

you have those?

Yup. Easy to use for purchases on the internet, yet it's a "debit card"

 

At least in Estonia

[Smugel]

The only time I hear about credit cards being used is to book flights because you get some extra insurance with it. And of course you can book your vacation without paying for it right away.

 

But they can be used against you when you apply for a loan. Having 5 cards with a 5000 euro limit each, counts as 25,000 in debt.

[Avocado Diaboli]

4 minutes ago, will0hlep said:

$5000 seems alot but I assume that is just a number you pulled from thin air?

No, I googled it.

 

1 minute ago, Levent said:

I dont think I have heard of a european country that doesnt have one.

We don't really have a credit rating system in Switzerland. There are legal ways to collect debt and that gets recorded and can have an impact on getting a loan or something. But that's not really a credit rating. Anything beyond that, like how diligently you pay off credit card bills doesn't matter. It doesn't get recorded if you've paid a bill somewhat late. Typically you get a first notice after the payment date has passed, then a second one 30 days after that and only after another 30 days do most companies call upon the government for collection. We don't have a unified score to keep track of that's that important to our lives.

[Seccedonien]

All I can imagine is in the past people from other parts of the world would mock the USA for giving a credit card to basically anyone that applied and you supposedly could get one in the name of your dog or something.

It never has been as normalized over here in the EU to have a credit card but they are very useful and you should manage it responsibly like any debt.

Personally I have had one ever since I was 18 since it just is very useful when traveling internationally, my dad served in Afghanistan and when he told me he could trade with the locals with a credit card (while in a active warzone) it just convinced me of how useful they can be, it can literally be more useful then actual physical money.

[PDifolco]

In the EU loans offered with cards are super expensive because they don't rate customers  (we have no global credit score system), so they have the higher rate possible, and then are used by the less trusty people that end in default and make them even higher !

otoh we can easily have cheaper "personnalized" credit but need to file them

[Stahlmann]

I had a credit card for 3 years. I needed it twice in this time. Once when i bought something online and i couldn't use PayPal, so credit card was the only other option. And a few months back my credit card saved my ass because i was flat out broke after a move to the point where i couldn't even afford to pay for food with my regular debit card. I could use the credit card to buy food and supplies for that month and could pay it back the next month. I think in the US using credit cards is mandatory to build credit to get better loans. This system doesn't exist where i live so if i can avoid it, i don't use it. But i will still keep the credit card because it can save my ass if i really need it and know i can pay it back.

[Radium_Angel]

24 minutes ago, Avocado Diaboli said:

If you've proven you're good with debt a million times, you're more likely to get approved for a loan or mortgage, while someone with a blank credit report might seem untrustworthy if they've never had any debt. It seems ass-backwards to many that someone who has been on top of their finances for their whole life and never had any debt would get worse treatment when asking for a loan than someone who's been in debt for decades in one form or another.

Banks can't make money on debt-free people.

If you have lots of CC debt, even (especially!) if you are paying the minimum amount back, the banks get to make money from the interest, and thus consider you a "good risk" (right up until you default) because you are profitable to them.

[will0hlep]

2 minutes ago, Stahlmann said:

This system doesn't exist where i live so if i can avoid it, i don't use it.

4 minutes ago, PDifolco said:

In the EU loans offered with cards are super expensive because they don't rate customers

This is really surprising to me. In the UK credit ratings have just always been a thing and they are pretty normal. However, Google backs this up. Most european countries (excluding the UK and Germany) don't have credit ratings.

[Stahlmann]

15 minutes ago, will0hlep said:

This is really surprising to me. In the UK credit ratings have just always been a thing and they are pretty normal. However, Google backs this up. Most european countries (excluding the UK and Germany) don't have credit ratings.

And because of that there is no real reason to use them whenever it's avoidable. In Germany for example there is a system called SCHUFA that dictates how risky an individual is.

 

But instead of having to build credit, the main difference is that we basically start with good credit and it can only get worse if we fuck up.

 

I don't know if it's normal in Germany or it's because i'm a low-risk individual, (partly because i rarely use it) but everything i do on my credit card is interest free if i pay it back in the next month.

[tkitch]

Fun fact:  
When I was born America didn't have Credit Scores.

Boomers developed them in the 80's (because of stupid credit card companies fucking everything up) and now they're used to absolutely destroy a significant portion of the country. 

[Spotty]

I'm not sure if this is what he was referencing but I know a little while back LMG asked for feedback about advertising a credit service that claimed to repair bad credit ratings. The feedback from the community wasn't too positive towards the prospect of LMG advertising credit services or the particular company in question. Linus dismissed those complaints because he felt people outside of America didn't understand America's credit rating system and how dependant American's are on it.

 

 

I guess on the WAN show he just wanted to make his off hand comment without getting caught up in another debate over how the credit rating system in America works.

[Ziggidy]

 

 

2 hours ago, Erioch said:

I can guarentee you that the vast majority of Americans do not think this way.  Most of us get a credit card and then just buy a bunch of stuff.

 

I agree here, as an American with just under $10k in credit card debt at the moment. The reason is poor fiscal responsibility. At the same time, there ARE fiscally responsible people that carry debt in the forms of loans in certain scenarios where it makes sense. Those are, as I understand it, in circumstances where a bukly loan at a few percent interest saves them money and they can invest the rest and get a rate of return which is more than the interest charged on the loan. That said, I don't live in that world, working toward fiscal responsibility and less frivolous spending.

  

2 hours ago, Smugel said:

But they can be used against you when you apply for a loan. Having 5 cards with a 5000 euro limit each, counts as 25,000 in debt.

While it is possible things are different in Europe, I believe you used an incorrect term here. The LIMIT on a line of credit is the maximum amount you can use on that line of credit at any given time, and is NOT considered a debt. The BALANCE on a line of credit is what you owe to the creditor, and IS debt. If you have a $1000 balance on a $5000 line of credit, your total debt is $1000. 

 

 

1 hour ago, micha_vulpes said:

They have many merits, and when used wisely can be a great asset to an individual to extend purchasing power, level out recurring payments, and function as a instant buffer when needed. Many offer pretty good buyer protection clauses, instant refunds for fraud events, and so forth ( though my bank/credit union does this with debit cards to so it is not unique to CCs)

 

That is pretty fantastic that your bank/credit union does instant refunds for fraud. I have had in the last 2 decades only 2 instances of trouble with fraud on my bank account related to my debit card. In the end I DID get fully reimbursed for the issues, but it took a few business days to get to where I was before the incident. As someone that still doesn't have an emergency savings, it was nearly devastating when it came to rent & mortgage.  Following that I ONLY exclusively use my debit card AT the bank in the ATM to get cash if I need it. ALL of my purchases are on credit cards which then get paid through the bank website. I have an absurd number of cards, and HAVE worked on better fiscal responsibility. At the moment I have several cards that have specific use cases, like a gas card that gets a discount at the gas pump, a few store lines of credit that give large discounts on purchases I would already be making at those stores, etc. Then I have just general cards which I have recurring payments hit such at streaming and gym subscriptions. Those then get paid off automatically monthly which keeps it interest free, keeps the cards active, and impacts my credit score that is actually QUITE good at the moment. I really only have a SINGLE card which is the one I carry around and make purchases on, and I recently moved the balance to a new card that had a 21 month balance transfer with 0% interest for that 21 months. I am only a few months in and I have already paid off $2500.

 

1 hour ago, tkitch said:

Boomers developed them in the 80's (because of stupid credit card companies fucking everything up) and now they're used to absolutely destroy a significant portion of the country. 

           

Credit cards can be GREAT tools, the biggest problem is getting proper education out there to change the mindset of credit card users. It will be infesting toi see if anything changes in the future with credit spending, or education.

[tkitch]

18 minutes ago, Ziggidy said:

            

Credit cards can be GREAT tools, the biggest problem is getting proper education out there to change the mindset of credit card users. It will be infesting toi see if anything changes in the future with credit spending, or education.

They can, but only when there are proper guardrails in place.

 

The reason there's so much regulation now (in the US) is because of the chaos of the 80's credit card market.  They sent out basically "ready to use" cards with semi-low limits, all over the place, and you could make a shell game of using more and more and more of them by just shuffling debt between different cards, and new cards, and more cards, and...  

 

Yeah, you can imagine how that went over.

[Needfuldoer]

40 minutes ago, Ziggidy said:

Credit cards can be GREAT tools, the biggest problem is getting proper education out there to change the mindset of credit card users. It will be infesting toi see if anything changes in the future with credit spending, or education.

Exactly this.

 

Credit cards are an unsecured line of credit. That is, there's no physical item backing them up, like a car loan or home mortgage. That's why their interest rates are so high compared to other lines of credit.

 

People get into trouble when they see their shiny new credit card and think of it as "$7,500 to spend". If you make a few big purchases on credit cards, and let that balance ride, compounding interest will bury you.

 

Credit cards can absolutely be used responsibly, but that takes discipline. Paying the balance every month avoids that snowballing debt. 

 

The big-brain play is to have cards with a high limit and a low-to-zero balance, because credit utilization (how much credit is available to you vs how much you use every month) is a major factor in calculating your credit score. But you need discipline and self-control to not fill those cards up and rarely (if ever) carry a balance to reap benefits from it.

 

(And to put on my tinfoil hat for a moment, they're never going to teach these economic and self-advocacy principles in school because multi-billion dollar industries rely on a populace of undereducated, obedient consumers to perpetuate themselves, but that's a rant for another day...)

[Smugel]

46 minutes ago, Ziggidy said:

 

 

 

 

 While it is possible things are different in Europe, I believe you used an incorrect term here. The LIMIT on a line of credit is the maximum amount you can use on that line of credit at any given time, and is NOT considered a debt. The BALANCE on a line of credit is what you owe to the creditor, and IS debt. If you have a $1000 balance on a $5000 line of credit, your total debt is $1000. 

 

 

New rules. Basically your maximum potential for debt with these cards, counts as debt when you apply for a loan. And you can't get a bigger loan than 5 times your yearly income. So they'll subtract this "debt" from your maximum loan.

I think you can easily circumvent this by closing all your accounts and then getting new credit cards after loan approval.

[art12354]

4 hours ago, Erioch said:

I can guarentee you that the vast majority of Americans do not think this way.  Most of us get a credit card and then just buy a bunch of stuff.

 

I don't know if it's still done but when I was in college (in the 80s) credit card companies showed up on campus and got people to apply for cards with the gift of a free t-shirt or something.  And most of us got them, with no credit history.

Maybe this is a generational thing, but I graduated college this year and everyone I know have had credit cards for a while. We just pay off the monthly balance each month and treat them as an extension of our checking account for the very reason of building our credit.

[IkeaGnome]

I actually had to go out and buy a truck to get into "debt" to buy a house... 

[Erioch]

9 minutes ago, art12354 said:

Maybe this is a generational thing, but I graduated college this year and everyone I know have had credit cards for a while. We just pay off the monthly balance each month and treat them as an extension of our checking account for the very reason of building our credit.

That can be very possible.  I'm almost 60 (yeah, I'm a boomer) and I never even touched a credit card until I got into college.  The worst thing to happen was the liquor stores started taking credit cards for payment.  They didn't initially.