Do you use a credit card? Why or why not?
I know this might just reflect financial culture differences across countries, but let's give it a try
Edit: as a clarification, I meant credit card compared to debit, not to cash
I live in the US. I use a credit card for all my purchases because not only does it shift liability from my money to the bank's money, it also pays me a % in the form of cash back and I pay it off in full every month to avoid any interest charges. It's extremely important that my credit card balance is never higher than my checking and savings combined to ensure I really can pay it off in full.
This is exactly my use case. Get free rewards but treat it like a debit card. Don't spend more than you couldn't pay back by the end of the month and you get free perks like cash back or airline points for travel.
I use a credit card for all my purchases because not only does it shift liability from my money to the bank's money
Yes! My bank gives me 30 days to identify and contact them about fraudulent charges on the credit card, but only 3 for the debit card. Therefore I don't use my debit card unless I absolutely have to.
A few years ago my local gas station was victim of a skimmer - thank goodness I had the 30 days, because it took them two weeks to realize what happened and contact everyone! I don't check my bank every day for fraud so I would've had to eat those losses if it was a debit card.
Interesting, thanks
US here. Yes, I use it for everything that I can because:
I haven't used a debit card in years (though I have two), and I haven't regularly used cash pretty much ever (though I carry some). I actually have like 10 credit cards, though I only regularly use 2.
If I had to pay extra to use credit, I would probably use it a lot less.
No foreign transaction fees? Could you expand on that?
Most cards charge a fee for any transactions outside your economic zone, e.g. the US and a Canada are separate economic zones, whereas much of the EU is one economic zone. Usually these fees are 3-5%, and sometimes there's also a currency conversion fee, but usually just the foreign transaction fee.
I'm in the US, so if I travel to any other country, I'd have to pay that fee. It turns out that some online retailers also charge this fee, such as Fanatical, even if the price is listed in dollars. My wife likes to order things intentionally, so we're careful about which card we use.
Most travel credit cards and some others have no or reduced foreign transaction fees, whereas most debit cards don't (Schwab and Fidelity in the US offer no foreign transaction fee cards in the US). For example, the a Capital One Quicksilver offers 1.5% cash back and no foreign transaction fees, and my Fidelity Visa offers 2% cash back and a 1% foreign transaction fee.
We like to visit Canada and my wife's home country, so we have some no foreign transaction fees hanging around that we bring on those trips. The rest of our cards all charge 3%.
In the UK, as long as you are able to track your finances well enough to ensure you repay the balance in full each month (you can arrange for this to happen automatically), there's no reason not to use a credit card.
You should especially use it for purchases over £100 as by law card issuers are jointly liable for problems with goods purchased, so if I have a warranty issue the retailer won't help with I can go through section 75 with my bank
I have never purchased something on a credit card and had it on the balance long enough to pay interest though, the rates are insane.
Plus, some cards give you points. Which can later be used for things like upgrades on flights.
This is exactly what I use mine for, and I'm trying to convince my wife to do the same. We've had to buy some relatively expensive things for the house recently, so I've been using the credit card for the extra protection, while she's been paying in cash / debit card.
Luckily, we haven't had any major problems yet, but she doesn't seem to understand that the extra protection is worth it.
Honestly I've found that women have a different relationship with cash. It feels safer, more secure, it's tangible - I don't think that translates to credit so well. Just my experience however.
If in the US, there is almost no downside to credit cards as long there's no annual fee and you pay it off in full every month. Most credit cards have some kind of rewards like cashback, miles, discounts, etc., so you gain something from using them. Banks are also very strict with fraud (because it's their money you're spending), so they will most likely side with you if you file a claim for unauthorized purchases. If you used a debit card, it's your money that gets stolen; and while the bank will try its best to recover it, they have less incentive to work for it compared to a credit card.
I used to limit myself to the card that didn’t have any annual fees. Practically all my purchases are made with a credit card (all paid back in full by the end of the month), so it turns out to be really worth it to take the card with the most advantages and highest cashback rates. They pay me back the yearly cost of the card many many times over.
The catch is, if the amount of transactions starts to drop below a certain threshold, it might not be worth it anymore.
Note that I am in Canada, not the US. Not sure if that makes any difference here.
I think US cards tend to have better rewards than Canadian ones, but echo on the fees thing. If a person is spending $1000/month on their card(which isn’t much once you put all your utilities/gas/grocery/etc. purchases together), and youre getting a 1% cash back/reward, that’s $120/year worth of rewards. So depending on your yearly spending, it can be worth paying that annual fee to get a card with better rewards.
I use a credit card because our laws in the USA protect credit-card purchases better than they do debit-card and other electronic purchases.
Although I use a credit card with revolving credit, I always pay the full balance each month. In this way, it acts as a debit card, but I get the benefits of a credit card. I have to remember to pay it on time, but I can set up autopay even for that.
My credit union (a kind of non-profit bank owned by its members) is the issuer of the card, and it gives a 2% cash award for credit-card usage.
I do this, too. Anyone with any sort of self control should do the same, unless they prefer cash.
Using a debit card is too risky.
I feel exactly the same way. The only case I would recommend a debit card is if it's at a separate institution from your main savings. That way, you'd only lose up to whatever that account has.
I've seen too many stories of people losing their savings because of a compromised debit card.
I use a credit card for everything, especially large purchases that don't charge an additional transaction fee to use the card. I also pay it off each month. I get 3-5% back when I use it. It would be quite stupid/lazy not to take free money, while also keeping my credit score at 847 (last I checked).
Use a credit card for every single purchase that will allow it. I have the Amazon prime rewards card, and we order our dog food and many household items from there at 5% cash back.
I acquire cash back and it goes towards the balance each month. I pay the balance in full each month, thereby reaping the rewards (free money) and never pay a cent in interest. Been doing this for years.
Another reason I do this is because I do not want my routing and account numbers online with any business.
One small breach of your bank account and your life savings can be gone. I'm not trusting any big business with that, not to mention the fraud protections other users have mentioned.
If you can exercise discipline it's a no brainier.
Costco card here, but pretty much the same argument. Aside from the points/miles/cash back rewards, most also include some minor insurance/extended warranty/travel/etc. benefits. It’s kind of shitty because transaction fees just drive up costs for merchants, but from the user’s point of view the financially beneficial option is to use a credit card for ad many purchases as possible.
How are you liking that Costco card? We were considering switching to that actually.
American here. Not only do I use credit cards for all of my purchases (and pay them off every month, so no debt builds up), but I am finding it increasingly hard to use cash on a daily basis, even when I want to. I used to prefer cash, especially on trips, as a way to control spending when needing to stick to a budget. But now so many places here have stopped taking cash altogether, or shuffle cash purchases off to a separate process which takes longer. I still carry cash, but find I rarely use it.
But all the different types of electronic payments now are confusing. I recall getting stuck at an airport once, and sitting near a place that had food for a few hours. They took cash, credit, and Google Pay, but not Apple Pay. I was amazed by the number of people who end up walking away when they realized that, and who didn't have an alternate way to pay.
I never did, because in Europe people don't need to build a credit score, and it is usually advised to only use money you have.
Anecdotal evidence, but the only people I know that use them have a tendency to overspend.
Norwegian here.
People here with shitty economic sense overspend using them and end up in debt. People with good economic sense use them for most of their transactions to get cashback/other benefits like bonus flights, etc. Some credit issuers also negotiate good deals with shops where you get the reduced price if you pay with their card.
We also use them for better fraud protection (liability shifts to the bank) and we usually get travelers insurance from the card issuer if more than half the price of the trip is payed with their credit card.
Argentinian here, and same.
I just feel comfortable spending with the money that I have, and forgetting about it.
Where in Europe, if you don't mind me asking?
I'm in the UK, and we have to build a credit score if we want to get a mortgage, a loan, or any sort of finance, unless it's from somewhere predatory like a payday lender.
Spain. Interesting, I didn't know you had credit scores in the UK
I'm in the US. I use my credit card for utility bills, groceries, gas, and whatever else I'm buying during the month. Anything like a mortgage or car payment I pay from my bank account. Every month I pay off the card so I don't get interest charges.
I use credit cards for almost all purchases.
As long as you pay it off completely monthly, even modest perks make it an easy choice.
American here, 99% of the time I use credit cards. It's just generally easier than carrying cash and nearly all vendors accept it. Beyond that I get a % back as points to trade for gift cards or in my case plane tickets. Another item is that if I get robbed I can quickly recover or head off any lost money.
Do you guys not have debit cards?
If you get a cash back/rewards card and pay in full every month, you get paid for shopping.
NZ here, I use it for online purchases. Credit cards have the advantage of extra fraud protection, as well as having a safety net of being able to do a chargeback in case the seller does fraud or something. I don't need to pay any interest on it either because I make use of the interest free days. I have a direct debit set up so the bill gets cleared on its own every month, so I don't forget and accidentally pay interest or something.
I don't. Used to have a prepaid credit card, but the services is gone now. I am seriously considering it for some time now, given that a lot of services, especially US based, require credit cards.
Totally! I always pay it off each month so there is no interest and I get tons of points.
They also give tons of other benefits, like accidental damage and theft protect on stuff for the first 30 days, double the manufacturers warranty, if I die over seas they will cover the cost to repatriate my body (I live in a foreign country)
There are tons of other things, too. Just don’t care to list them off. I do have to pay about $200/year to have the card, but I think it’s worth it due to the points back.
I have one to shift large expenses to the end of the month. Just to have more room. I dont spend money I dont have or saved
Based in germany
US resident, I use a rewards card for most purchases because I earn points that I can redeem for plane tickets, hotel rooms, rental cars etc. I also make sure to pay the balance off every month to avoid interest.
No, because if I use the credit card issued by my bank, I have to remember to pay it back. The bill doesn't appear the same day, so I have to check back a few days later. Just long enough to forget half the time. There is no automatic payoff, so I see it as a trap to charge interest from me.
Edit, I'm in the USA
Consider downloading some kind of checkbook ledger app. Anytime you get paid, re-balance it and make sure it's correct. Then, use it for EVERY purchase that isn't cash. Once you get into the habit of not needing to re-balance it, switch 100% of your purchases to credit card, and keep the habit up. When it comes time to pay your credit card bill, you will have the cash you need to pay it off, and you will also be building credit which will give you more purchasing power down the road.
You can get email reminders when your statement comes out. You don't pay interest on anything until a month after the statement.
For example:
Buy an apple on Jan 1st. Statement sent to you on Feb 1st. Interest starts March 1st unless you pay it off before then.
You can set up autopayment, but it'll be for the full statement balance once a month.
Get a better credit card. I have like 10, and they are all automatically paid every month. Go with one of the big credit card issuers, like Chase, Discover, Citi, or Capital One.
But it absolutely is intended to trap people into paying interest. They want you to charge more than you can afford to pay back, but if you have a healthy amount of cash in your bank account, you'll never need to worry about paying interest with a credit card. I haven't had an issue with autopay in over 10 years of using credit cards.
A lot of the stuff Ramsey says is good for Ramsey; not anyone else, and certainly not the public. I 100% agree with him that (most) debt is bad, but having no credit is worse than bad credit. If you want a strain on the system (what we have now), you deny credit to people that aren't credit worthy (people without credit) so that they cannot afford to purchase homes. A mortgage is debt, but it's not "bad-debt."
Sure, and Ramsay argues that a mortgage is fine. His contention is that ideally you wouldn't need to have any debt. So once your retirement is on track, you would pay down the mortgage because it's no longer needed.
I disagree with him, but that's probably because I'm very disciplined and have never had an issue where I have more non-mortgage debt than cash on hand. In fact, I was very nervous about my mortgage debt, so I aggressively saved after getting a house to build up investments so they would exceed my mortgage (I can now theoretically pay it off if I liquidate my retirement accounts). I have never financed a car (my cars are both 15+ years old), never paid credit card interest, and never needed a personal loan. I have maintained an emergency fund since I was 16 (didn't call it that until my late 20s). I see debt as a tool, if I can get lower interest debt than I can make with guaranteed returns, I consider it foolish to not take it. In fact, I have a few thousand in 0% credit card debt right now because I refuse to pay it back until the promo is about up.
That said, many people have a problem handling debt, so if that's you, Ramsay's advice is perfect. I actually like listening to his show, and I recommend him all the time, despite disagreeing with him on practically everything. He offers a very structured program that works for a lot of people, and that's way better than trying something perhaps mathematically better but relies on discipline.
A debit card is not recommended for day to day. If it gets picked up by a skimmer or otherwise used in a fraudulent manner, your bank account gets debited until the investigation is done.
This can take months and can involve large sums of money.
With a credit card, no money leaves your bank account during the investigation.
Japan here. I use credit or cashless payments linked through credit almost exclusively. It makes it easy to manage family finances, as although there are no joint bank accounts here, you can have family credit cards. So one card for family expenses, and another for personal expenses.
Plus by default, credit cards in Japan are basically charge cards; they are paid off every month by direct debit. There is no interest in this case. You can also split payments over two months without incurring interest. Also, many credit cards offer bonus payment (typically workers receive summer and winter bonuses, card companies allow you to delay payment until that time without incurring interest).
No. I'd rather not owe the bank anything.
(I live in France. They are not a thing here.)
In Europe they are basically featureless, and the only people I have seen using them were those who struggle with consumerism.
Interesting to see our experiences align
I've only really used them when theres a 0% offer and I've been making a big purchase. I use my debit card day-to-day.
what i have (which usually isn't much) is in my pocket. if i can't pay for it, it doesn't get bought (u.s.)
at the office (it's just two of us), it's different. we use cards for convenience, but we still don't spend what we don't have in the bank.
I do the same, but with a credit card. I never allow my credit card balance to exceed my non-emergency fund cash, unless it's an emergency, in which case it can eat into my emergency fund reserves.
Essentially, I use it the same way I would a debit card, but it gets paid monthly instead of being pulled out instantly. I use a budgeting tool that pulls down transactions, so I always know my bank and credit balances.
[united states] i use a credit card for anything that i can. the perks are nice (as others have mentioned), and i never spend more than i have. i’ve never paid a penny in interest. i always pay the statement balance on the day it’s due.
I use a prepaid credit card. Same benefits, more control over my money :)
I used to only have debit card in my youth but got a credit card. I used to charge most things to debit card still out of habit until recently where I've started to exclusively use my CC for purchases. I have a good credit score, not that it really matters since we already made big purchases (car, home)