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  • #46
    I think this has been a very rich discussion, maybe it has run its course.

    For those of you who are curious: I will begrudgingly keep my cards, becasue the system is designed to favor those who treat credit cards like debit cards (i.e. establishment of a sterling credit report, some fraud protection in purchases, among other "benefits").

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    • #47
      Originally posted by spiritrider View Post
      Nope, credit card issuers are in the business of making money from customers carrying high interest rate balances. This creates a Bizarro World where customers who pay in full every month are called deadbeats. An actual industry term for unprofitable customers.


      Maybe to you, but not to the credit industry. They absolutely love people who carry a moderate non-increasing balance every month. They are the profitable customers. You will actually have a higher credit score carrying a modest balance than no balance.
      Heard and read about the first statement as true. The second one I always have known to be false. But if the second one were true, then that goes to show that credit scores are for sale, which undermines the whole system as being egalitarian and based upon your financial behaviors.

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      • #48
        Originally posted by F0017S0 View Post

        Heard and read about the first statement as true. The second one I always have known to be false. But if the second one were true, then that goes to show that credit scores are for sale, which undermines the whole system as being egalitarian and based upon your financial behaviors.
        I don’t think you’re looking at what a credit score really signifies. It doesn’t signify somebody who is wealthy or has assets. It’s looks to see if someone is worthy of credit. Look what goes into a credit score. Assets and income don’t appear to be the major players.

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        • #49
          Originally posted by CordMcNally View Post

          I don’t think you’re looking at what a credit score really signifies. It doesn’t signify somebody who is wealthy or has assets. It’s looks to see if someone is worthy of credit. Look what goes into a credit score. Assets and income don’t appear to be the major players.
          Correct, but, statistically speaking: those with assets and money are more likely to have higher credit scores than someone with fewer assets and money. Those with money are more likely to be able to pay the balance in full every month, whereas poorer folks are more likely to revolve. So for those with resources, the upside is minimal (the bank always wins), but the downside is astronomical. Very asymmetric.

          I begrudgingly accept this as true: but I do think that the credit card isn't a beneficial tool by a long shot. I think it is something forced upon us to keep us in the credit universe to be able to do some of the real wealth-building activities (i.e. buying a house) for long term success.

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          • #50
            Originally posted by F0017S0 View Post

            Correct, but, statistically speaking: those with assets and money are more likely to have higher credit scores than someone with fewer assets and money. Those with money are more likely to be able to pay the balance in full every month, whereas poorer folks are more likely to revolve. So for those with resources, the upside is minimal (the bank always wins), but the downside is astronomical. Very asymmetric.

            I begrudgingly accept this as true: but I do think that the credit card isn't a beneficial tool by a long shot. I think it is something forced upon us to keep us in the credit universe to be able to do some of the real wealth-building activities (i.e. buying a house) for long term success.
            Blink once if it’s Visa who has the gun to your head. Blink twice if it’s MasterCard. Blink three times if it’s neither and you’re making your own conscious decision.

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            • #51
              •The credit industry does give access to credit for those with no assets. That is a good thing.
              • Many of those behave responsibly and reap benefits for performance. Spend within your means allows excellent credit scores. Still no significant assets, but the credit door is open.
              • No penalty for making minimum payment. It comes with a high cost, for that month. Zero impact on credit score. NO penalty whatsoever and no permanent mark.
              • High risk unsecured credit is going to lead to write-offs. That means principal, interest and late fees are uncollected. Bad debt write offs are expensive. Goes on the credit record.
              •Even the debt collectors make money.

              Wealthy people pay their bills on time. It benefits you with a credit history that you don’t really pay for. Vendors pay the fees on the purchases.
              No fee card with perks and a free credit rating.
              What impacts you personally? It’s free. One of the most valuable rights is to contest a charge and the bank reimbursing for fraudulent charges. All free. What more do you want for free?
              Adding wealth? Just call them and they will raise your limit.

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              • #52
                Originally posted by F0017S0 View Post

                Correct, but, statistically speaking: those with assets and money are more likely to have higher credit scores than someone with fewer assets and money. Those with money are more likely to be able to pay the balance in full every month, whereas poorer folks are more likely to revolve. So for those with resources, the upside is minimal (the bank always wins), but the downside is astronomical. Very asymmetric.

                I begrudgingly accept this as true: but I do think that the credit card isn't a beneficial tool by a long shot. I think it is something forced upon us to keep us in the credit universe to be able to do some of the real wealth-building activities (i.e. buying a house) for long term success.
                During my last year of med school my wife got a job as a pharmacist a close to where I was planning on doing residency but 2.5 hours from where I was finishing school. We got her an apartment and lived separately and did a lot of driving that year. It really sucked.

                But getting the apartment was such a pain. They wanted proof of income which was no problem as she had a full time good job by a stable employer. But her credit score was so low they would not rent to her. However they let her use me as a cosigner since I had a great credit score. But no job and currently in school and massively in debt. Go figure.

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                • #53
                  •The credit industry does give access to credit for those with no assets. That is a good thing.

                  Someone with no assets has no business using other people's money; the fact that lending institutions are willing to do that doesn't make it a good thing because most people are unreliable and won't be able to pay in full on time, so they can extract fees and interest.

                  • Many of those behave responsibly and reap benefits for performance. Spend within your means allows excellent credit scores. Still no significant assets, but the credit door is open.

                  As the system is set up now, you are correct: responsible spending on a credit card establishes a credit history that can enable access to more credit. But it strikes me that there is a compelling argument that the flood of additional credit is another significant inflationary pressure. It's just more money sloshing around the system.

                  • No penalty for making minimum payment. It comes with a high cost, for that month. Zero impact on credit score. NO penalty whatsoever and no permanent mark.

                  Agreed: no "permanent" (i.e. 7 year) mark for making the minimum payment. But that was not designed to be helpful to the consumer: it was designed to make credit appear cheap to induce people to spend beyond their means. It's a gimmick.

                  • High risk unsecured credit is going to lead to write-offs. That means principal, interest and late fees are uncollected. Bad debt write offs are expensive. Goes on the credit record.

                  The existence of write-offs means that that there is too much credit sloshing around to people who don't need it for purposes credit was not intended for (i.e. consumer spending).

                  •Even the debt collectors make money.

                  Not something I would celebrate, but yes, this is true. I don't think these people really have any value add in life, but they exist.

                  Wealthy people pay their bills on time. It benefits you with a credit history that you don’t really pay for. Vendors pay the fees on the purchases.

                  Vendors are passing along those fees to us; we might get most of that back in the form of points/cash back, but we still don't come out ahead.

                  No fee card with perks and a free credit rating.
                  What impacts you personally? It’s free. One of the most valuable rights is to contest a charge and the bank reimbursing for fraudulent charges. All free. What more do you want for free?

                  Fraud protections are superior, that is true. But that is by design of the law as lobbied by the credit industry to make sure (most) everyone has a card.

                  Adding wealth? Just call them and they will raise your limit.

                  Perhaps I am misunderstanding this last one, but do you mean to imply that we should be including our credit limits as a marker of our wealth?

                  Comment


                  • #54
                    Originally posted by Lordosis View Post

                    During my last year of med school my wife got a job as a pharmacist a close to where I was planning on doing residency but 2.5 hours from where I was finishing school. We got her an apartment and lived separately and did a lot of driving that year. It really sucked.

                    But getting the apartment was such a pain. They wanted proof of income which was no problem as she had a full time good job by a stable employer. But her credit score was so low they would not rent to her. However they let her use me as a cosigner since I had a great credit score. But no job and currently in school and massively in debt. Go figure.
                    The bold sticks out to me the most in your anecdote, Sir. A good credit score can correspond to a less-than-ideal financial situation (I acknowledge you were in training and couldn't work). Seems like the system is designed to keep people in as much as possible and keep them in that ecosystem.

                    Things my parent's generation paid for in cash are now much more expensive and can typically require credit. Has the availability of credit inflated those prices? Seems like an interesting question to me...

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                    • #55
                      Originally posted by F0017S0 View Post
                      •The credit industry does give access to credit for those with no assets. That is a good thing.

                      Someone with no assets has no business using other people's money; the fact that lending institutions are willing to do that doesn't make it a good thing because most people are unreliable and won't be able to pay in full on time, so they can extract fees and interest.





                      • Many of those behave responsibly and reap benefits for performance. Spend within your means allows excellent credit scores. Still no significant assets, but the credit door is open.

                      As the system is set up now, you are correct: responsible spending on a credit card establishes a credit history that can enable access to more credit. But it strikes me that there is a compelling argument that the flood of additional credit is another significant inflationary pressure. It's just more money sloshing around the system.





                      • No penalty for making minimum payment. It comes with a high cost, for that month. Zero impact on credit score. NO penalty whatsoever and no permanent mark.

                      Agreed: no "permanent" (i.e. 7 year) mark for making the minimum payment. But that was not designed to be helpful to the consumer: it was designed to make credit appear cheap to induce people to spend beyond their means. It's a gimmick.





                      • High risk unsecured credit is going to lead to write-offs. That means principal, interest and late fees are uncollected. Bad debt write offs are expensive. Goes on the credit record.

                      The existence of write-offs means that that there is too much credit sloshing around to people who don't need it for purposes credit was not intended for (i.e. consumer spending).





                      •Even the debt collectors make money.

                      Not something I would celebrate, but yes, this is true. I don't think these people really have any value add in life, but they exist.





                      Wealthy people pay their bills on time. It benefits you with a credit history that you don’t really pay for. Vendors pay the fees on the purchases.

                      Vendors are passing along those fees to us; we might get most of that back in the form of points/cash back, but we still don't come out ahead.





                      No fee card with perks and a free credit rating.
                      What impacts you personally? It’s free. One of the most valuable rights is to contest a charge and the bank reimbursing for fraudulent charges. All free. What more do you want for free?

                      Fraud protections are superior, that is true. But that is by design of the law as lobbied by the credit industry to make sure (most) everyone has a card.





                      Adding wealth? Just call them and they will raise your limit.

                      Perhaps I am misunderstanding this last one, but do you mean to imply that we should be including our credit limits as a marker of our wealth?



                      Not going to go through all of these one by one because clearly "credit cards are the devil" is your hill to die on.

                      But regarding your first point: Have you ever wondered what our economy would look like if "someone with no assets had no business using other people's money?"

                      We had that. It was called the 1700s.

                      Do you understand how a mortgage works, and why it is a completely necessary financial instrument for 99% of the population to ever have any hope of owning a home?

                      Or how businesses (including the self-employed) fund daily operations?

                      Or how farmers procure seeds and equipment?

                      Or how construction takes place?

                      You seem to be fanatical about this, and I'll give you the benefit of the doubt that perhaps you really haven't thought this all the way through beyond "credit = bad," but a little critical thinking about the big picture goes a long way...

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                      • #56
                        The other caveat that debit card users are subject to is, if you’re not getting a discount for paying with cash/cash-equivalent i.e. debit card, then you’re just subsidizing those of us who use credit cards. We’re each paying the same $20 for our Friday night pizza (with ~2-3% markup included to accommodate for credit card transaction costs) but one of us is getting 5% cash back (thanks BoA) and one of us is getting 0% cash back.

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                        • #57
                          Originally posted by IMinMS View Post
                          The other caveat that debit card users are subject to is, if you’re not getting a discount for paying with cash/cash-equivalent i.e. debit card, then you’re just subsidizing those of us who use credit cards. We’re each paying the same $20 for our Friday night pizza (with ~2-3% markup included to accommodate for credit card transaction costs) but one of us is getting 5% cash back (thanks BoA) and one of us is getting 0% cash back.
                          Certainly true; no debate there. But that strikes me as inflationary, to be honest: in a hypothetical world where no credit cards exist, there is no markup. It is what it is, though.

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                          • #58
                            Originally posted by F0017S0 View Post

                            Certainly true; no debate there. But that strikes me as inflationary, to be honest: in a hypothetical world where no credit cards exist, there is no markup. It is what it is, though.
                            In your world where no credit cards exist, everyone is hauling around loads of cash? I don't want to have to have $300 in cash to go to Costco. That's ridiculous.

                            Don't the banks also charge a transaction fee for the use of a debit card?

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                            • #59
                              Originally posted by F0017S0 View Post

                              Certainly true; no debate there. But that strikes me as inflationary, to be honest: in a hypothetical world where no credit cards exist, there is no markup. It is what it is, though.
                              Absolutely no bone to pick with your point of view. No markup actually equates bean and rice on Friday night. Got paid on Friday and the cash hasn't cleared.
                              Or people carry excessive cash in their pocket. That was what I did in college. Sometimes on Friday night it disappeared. Life with no credit was a blessing.
                              The moral of the story is use credit cards wisely. I don't think we have any disagreement.

                              Comment


                              • #60
                                Originally posted by F0017S0 View Post

                                Certainly true; no debate there. But that strikes me as inflationary, to be honest: in a hypothetical world where no credit cards exist, there is no markup. It is what it is, though.
                                What seems truly inflationary to me is people being able to spend money they literally dont have through credit cards, carrying a balance, etc. This is why i didn't really understand why people were flipping out about the stimulus checks. seems to me like our whole system is built on all this extra money people spend

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