Comment by yurishimo
11 hours ago
Morally, they're also quite problematic, imo. Even if you aren't paying interest because you pay off the balance every month, CC companies can only offer points and cash back and all of that other stuff on the backs of the customers who aren't able to pay it off every month. It's a subsidy of the financially illiterate to those who are. If the predatory 20%+ interest rates were banned, the points and rewards programs would disappear overnight.
I know this isn't popular in the USA, but when compared to the rest of the western world, consumer debt is off the charts insane in America and it doesn't have to be that way. I've lived on both sides of the pond and I much prefer a society where people buy things that they can afford instead of financing everything on the back of a hope and dream that they will for sure pay off the balance this month.
As for the "but muh security!!" argument that I can hear someone typing, having a credit card for security is a terrible argument. You should be lobbying your politicians to regulate financial institutions to build better systems that are not susceptible to such obvious exploits and fraud. Again, much of the world has solved this problem to the point where I can post my bank account number on my business website and nothing bad ever happens. Customers can wire me money directly without approval and I have to manually approve all outgoing transactions at least once (scheduled transfers are still possible); it's not rocket science!
In your moral dilemma your assertion is that the credit card companies are only making money off of people who aren't paying off their cards each month which must mean that people like me are costing them money by paying off each month. Since I'm costing these evil companies money then don't I have a moral obligation to continue using my credit card?
As for saying that the argument that using credit cards because they have more fraud and security measures is not a good argument because the world should be different is also quite silly and naive since arguments should be made based on how the world currently operates not how you wish it might operate in the future. Life is much easier when you live in reality
Credit card companies make money from interest on debt. That is undisputed. To pay out your rewards, they need to make a profit above and beyond what it takes to run the business such that they can afford to give you 2% back. This leads to higher interest rates for everyone that are approaching usurious (imo). Your circular argument about costing the evil company money therefore makes your purchases justified, doesn't make sense.
I agree that the US financial system does not currently operate in a manner that is secure for consumers. I am not naive to that reality (I'm also American and have had various amounts of credit card debt throughout my life, and also times when I paid off balances for years). However, that does not diminish the societal responsibility to advocate for a financial system that is more secure by default. The fact that I need to expose myself to more financial risk in one area to circumvent a shortcoming in another area of the market is a bad thing, in my opinion.
Again, I think if we capped interest rates at something reasonable (12% maybe?), it would force credit card companies to more seriously evaluate if their customers can afford the debt they are incurring and this entire problem would disappear overnight. Sure, there would be less rewards programs as revenue would be decreased, but we would make society better as whole by not incentivising a financial instrument that ruins millions of lives annually. We tried doing it this way for almost 50 years and it doesn't seem to be working out for society if you believe the debt/income ratios as a percentage of GDP in the United States.
As to your last point, I'm much happier living in a reality where I own the things I purchase. Nobody is ever going to repo my car if I lose my job. A sheriff/the state is never going to come to my home and take things to pay off a creditor because I hit the unlucky lottery and was injured in a freak accident or Act of God. Please try to engage my arguments in good faith and not make personal attacks about my separation from reality. The rest of the western world is proof that you do not need debt to participate fully in society.
> Your circular argument about costing the evil company money therefore makes your purchases justified, doesn't make sense.
You are saying they make money off of interest which of course is correct. But I don't pay any interest so by your own logic I'm not contributing to this evil company's profit so how is it a moral dilemma? And how is my argument circular?
> The rest of the western world is proof that you do not need debt to participate fully in society.
I'm not advocating for debt. In fact I have no debt, I even own my house outright. Don't try to argue against things that I never even said :)
The main argument that people who seem upset at my original comment keep making is about how they don't want to take on debt to buy something. Well I absolutely agree. I save and invest the majority of the money I make and I've never bought anything on bad debt in my life. But if you learn the absolute basics behind credit cards you can treat it the exact same as a debit card but you get extra benefits. Not sure what is so hard to understand about that lol
> I'm also American and have had various amounts of credit card debt throughout my life
I think this is the key here. You are probably upset about the poor mistakes that you made in the past and you want to blame other people for it. I fully realize that the majority of Americans can't use a credit card responsibly so I'm glad that you are able to see that for yourself but you shouldn't make wide sweeping arguments about why other people shouldn't use them
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> It's a subsidy of the financially illiterate to those who are.
Counterpoint, the financially literate are subsidizing the existence of the financially illiterate via taxes and social programs.