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How Millennials Became Spooked by Credit Cards

nytimes.com

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Re: How Millennials Became Spooked by Credit Cards

#41

Post by sickrumbear »

Blackthorn wrote: post #25
h4waii wrote: post #6

What's really scary is the fact that many of these individuals don't consider the benefits and rewards of using a credit card -- free flights, cash-back, insurance and extended protection, and best of all it's not your money. You get to hold on to your cash for a month's worth of interest and you get fraud protection. Credit cards are tool and, just like most tools, should be used with proper awareness and thought-pr…

For a free $200 flight (on the low end), you'd need to spend (on the bottom end, with an exceptionally good 3% rewards number) 200 / 0.03 = $6667, on whatever stupid categories your credit card has for the 3%. Just how much money do you think most millenials have?

I'd think of it in the sense that if you're going to spend that money over whatever length of time anyways, might as well get the $200 flight out of it as well.

Re: How Millennials Became Spooked by Credit Cards

#43

Post by Bartweiss »

h4waii wrote: post #6

What's really scary is the fact that many of these individuals don't consider the benefits and rewards of using a credit card -- free flights, cash-back, insurance and extended protection, and best of all it's not your money. You get to hold on to your cash for a month's worth of interest and you get fraud protection. Credit cards are tool and, just like most tools, should be used with proper awareness and thought-pr…

The monetary benefits of credit cards aren't very convincing unless you spend a fair bit. For most millennials, cash back is a few hundred dollars a year and monthly interest is approximately zero.

I'll grant, though, that the ability to contest transactions is huge. Most people I know have used it, many to the tune of hundreds or thousands of dollars. Just knowing that in the case of fraud or bad business practices you aren't trying to reclaim already-transferred cash is value enough for me.

Re: How Millennials Became Spooked by Credit Cards

#44

Post by icebraining »

infinite8s wrote: post #33
jawns wrote: post #19

Earlier quoted context omitted.

One thing that even people who consider themselves financially savvy (e.g. those who pay off the credit cards in full each month rather than carrying a balance) often fail to realize is that credit card companies are middlemen; the fees they charge the merchant -- typically around 3% of each transaction -- ultimately get paid for by someone, and that someone is you. If we all were less beholden to our credit cards, a…

Most credit card merchant agreements prohibit merchants from offering a discount or lower price for paying in cash.

Those clauses were struck down in a settlement in 2012 following a lawsuit by merchants against Visa and Mastercard: http://www.nytimes.com/2012/07/14/business/mastercard-and-vi...

Re: How Millennials Became Spooked by Credit Cards

#45

Post by sim0n »

cmurf wrote: post #3

It still boggles my mind how prevalent credit cards are in the U.S. and how almost non-existent they are elsewhere, in particular Europe and Japan where debit cards are used. They don't call them debit cards, but rather cashless payment or what have you. And the merchant fees for these cards are far, far lower than credit cards which makes it even more baffling to me. ADD: "Without a substantial credit history, it is…

Definitely still called debit cards in the UK.

Re: How Millennials Became Spooked by Credit Cards

#46

Post by cmurf »

wyager wrote: post #26
ourmandave wrote: post #16

Earlier quoted context omitted.

I always thought the free flights, etc. was like the casino comp'ing you free drinks.

The way it works is that credit cards charge merchants ~3% per transaction. They don't allow merchants to charge proportionately more for CC transactions over cash transactions. Since it's business suicide not to take cards, everyone just charges a few percent more across the board. So basically everyone without a good card is getting fucked over, but if your card has a rewards program you can at least get some of th…

The way it REALLY works is that the merchant charge % varies per card. The higher paying cards have higher merchant fees. What this does is incentivize the card holder to get a card with even better payouts, which results in even higher merchant fees. Card holders with high perks are freeloading off those who use cards with fewer perks, or none like cash or debit card users.

It's a huge externality. If it were the law that merchants had to make the card holder pay their own fees, this whole perverted system would go away. The only way it works the way it does is because EMV contractually requires merchants to obfuscate the true cost from the consumer.

Re: How Millennials Became Spooked by Credit Cards

#47

Post by infinite8s »

Theodores wrote: post #37
h4waii wrote: post #6

What's really scary is the fact that many of these individuals don't consider the benefits and rewards of using a credit card -- free flights, cash-back, insurance and extended protection, and best of all it's not your money. You get to hold on to your cash for a month's worth of interest and you get fraud protection. Credit cards are tool and, just like most tools, should be used with proper awareness and thought-pr…

In the USA there is no chip and pin, the whole system is based on trust. Therefore, having credit cards exposes you to fraud. Some people may prefer to not have that attack vector to live within their means on a debit only account. Also some people may prefer to just look after their stuff and not bother with insurance and other financial products. With this mentality the benefits of a credit card are about as much u…

That doesn't protect you from fraud, given how little personal information you need to open a credit card account. In fact without checking your credit reports you might not even realize you have an account fraudulently opened in your name.

Re: How Millennials Became Spooked by Credit Cards

#48

Post by tantalor »

typetypetype wrote: post #18

> Credit cards are frequently necessary for the bigger purchases - like washing machines and computers... Saving up enough to buy items like without going into extremely high interest credit card debt is responsible consumerism.

Also, layaway (https://en.wikipedia.org/wiki/Layaway) if you have bad credit and no bank account.

Re: How Millennials Became Spooked by Credit Cards

#49

Post by [deleted] »

wyager wrote: post #26
ourmandave wrote: post #16

Earlier quoted context omitted.

I always thought the free flights, etc. was like the casino comp'ing you free drinks.

The way it works is that credit cards charge merchants ~3% per transaction. They don't allow merchants to charge proportionately more for CC transactions over cash transactions. Since it's business suicide not to take cards, everyone just charges a few percent more across the board. So basically everyone without a good card is getting fucked over, but if your card has a rewards program you can at least get some of th…

[deleted]

Re: How Millennials Became Spooked by Credit Cards

#50

Post by Bartweiss »

johnward wrote: post #14
h4waii wrote: post #6

What's really scary is the fact that many of these individuals don't consider the benefits and rewards of using a credit card -- free flights, cash-back, insurance and extended protection, and best of all it's not your money. You get to hold on to your cash for a month's worth of interest and you get fraud protection. Credit cards are tool and, just like most tools, should be used with proper awareness and thought-pr…

> This article really just emphasizes the fact that we are living in an age of complete lack of personal responsibility and self-control, where you can blame an institution for your inability to spend. Not having credit cards is one way to control yourself.

The whole "it's a lack of self control" claim is really weird to me.

I don't stock my house with junk food, because I'd rather use willpower once at the store than constantly in my living room. Am I supposed to feel weak-willed for making the simpler choice?

I guess you can argue that people are giving up a lot and ought to find the willpower to get those benefits, but for that you need to argue that they're actually giving up a lot.

Otherwise, it's just as you say: these are people who are controlling their spending and not blaming institutions.

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