Comment by kondbg
4 years ago
Using debit cards means that you need to keep a sufficient balance on a zero interest checking account in order to make transactions.
Using credit cards allows you to keep close to a zero checking account balance and manage your own cash flow, since credit card bill dates are deterministic.
Why would anybody want to keep _any_ amount of money in a non-interest bearing checking account right now especially when the risk free rate of interest (US treasury bills / equivalent money market funds invested in US treasuries) yields 4.00%+ APY now?
> Using debit cards means that you need to keep a sufficient balance on a zero interest checking account in order to make transactions.
Many banks allow linking a savings account to a checking account as a backup funding source.
> Why would anybody want to keep _any_ amount of money in a non-interest bearing checking account right now
Conversely, why would any credit card issuer give you an interest-free loan for a month in a world of 4.00%+ risk-free APYs?
Leaving aside all concerns of repayment risk, somebody is paying for your interest-free loan already.
Depending on how you view it, that's either yourself (via 2-3% of credit card fees baked into all retail prices) or other credit card users that don't pay their credit card bills in full every month, or a combination of both.
> Many banks allow linking a savings account to a checking account as a backup funding source.
And the average American can’t handle a $400 emergency. They don’t have a savings account with thousands of dollars
True, but how high is the chance that somebody that can't handle a $400 emergency today will be able to pay back $400 of credit card debt next month? And if they don't, they usually end up in more problems down the road.
Also, there is nothing that says you couldn't use a debit card for normal spending and resort to using a credit card only for when you actually need credit (assuming that the rewards inefficiency gets fixed).
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