Comment by yurishimo
10 hours ago
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
> I don't pay interest so I'm not contributing to [their profits]...
That's true, but by accruing rewards, you are indirectly incentivising the CC company to increase interest rates to subsidize your usage. If every single CC user didn't carry a balance, there would be no rewards (see Europe).
I think we ended up at a better place here at the end so I will end with the last point.
When I was 17-19 year old, I had a small credit card with a $3k limit. I never hit this limit and it was never a problem on my path to financial freedom and I largely paid off the balance in full every month. My spouse and I were debt free by 26yo after paying off $75k in student loans. My aversion to consumer debt has little to do with my own experience and more to do with how I see it affecting my friends and family and American society more broadly. We put speed limits on roads to protect people from themselves. I'm only advocating for similar guardrails as it pertains to credit cards and other high interest consumer debt.
Especially after moving abroad, I just don't see the point in a system that is built on top of so much debt. It only hurts the most vulnerable people in society while funnelling money back to people who probably don't need it, imo.
> If every single CC user didn't carry a balance, there would be no rewards (see Europe).
This is not really true. Europe has much lower merchant fees which is why the rewards are lower.