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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

#91

Post by SeanBoocock »

op00to wrote: post #71
SeanBoocock wrote: post #63

I can identify with this. As a 30 year old, I have never and don't ever see myself owning or using a credit card. The experience of my parents struggling with debt for most of my childhood remains emotionally powerful, even against the opportunity cost of not using credit cards. I am willing to to take extra precautions against fraud and lose the cashback I otherwise would earn, if it means never inviting potential c…

I'm curious what the credit score would be of a fiscally-responsible 30 year old with no credit cards. Care to share a ballpark, if you know?

The closest I have is the approximation supplied by my credit union (Alliant). Currently it sits at ~660, having fallen from ~740 when I finished paying of my student loans. At the moment I am counting on saving more than the standard 20% for a future home purchase, in order to minimize the impact of my lower credit score on a worse mortgage interest rate.

Re: How Millennials Became Spooked by Credit Cards

#92

Post by antisthenes »

mark_edward wrote: post #83
jasonmp85 wrote: post #23

Earlier quoted context omitted.

> this silly rigmarole of purchasing and then paying off to prove to future agencies that I'm responsible That actually sounds like a fantastic method for a lending agency to determine who is responsible and who is not.

How is such a person more responsible than someone who never uses debt to make similar purchases?

They may be equally responsible in actuality, but the company still needs to see a verifiable source that the credits are being paid back.

It's a form of signaling.

Re: How Millennials Became Spooked by Credit Cards

#93

Post by johnward »

slavik81 wrote: post #87
johnward wrote: post #17

Earlier quoted context omitted.

Maybe I lack self control but it was really easy to go from paying off $30k in credit card bills every month, to not having that income anymore, to being $30k+ in CC debt.

Surely if you were spending $360,000/year on your credit card, you'd have enough home equity and other assets to refinance that debt. It really shouldn't be on the credit card for long, because CC interest rates are atrocious.

negative. I was living in my parents basement at that time (yes seriously).

Re: How Millennials Became Spooked by Credit Cards

#94

Post by antisthenes »

SeanBoocock wrote: post #63

I can identify with this. As a 30 year old, I have never and don't ever see myself owning or using a credit card. The experience of my parents struggling with debt for most of my childhood remains emotionally powerful, even against the opportunity cost of not using credit cards. I am willing to to take extra precautions against fraud and lose the cashback I otherwise would earn, if it means never inviting potential c…

This post is a great example of complete misunderstanding of CC basics and as a result - an irrational fear of "all things financial"

If you're so afraid you might lack self control that you will spend more than your monthly income, get a card with a limit that's 1/2 of your income. Simple as that.

This country is structured around using debt as your leverage, as both business and consumer. Not to utilize that and tout it as somehow virtuous or prudent is, in fact, just ignorant at best.

Re: How Millennials Became Spooked by Credit Cards

#95

Post by logfromblammo »

Bartweiss wrote: post #50
johnward wrote: post #14

Earlier quoted context omitted.

> 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…

I used to do that. Then I married someone who absolutely will not stop stocking the house with junk food, no matter how often I ask, beg, or demand that they stop. We have at least managed to compromise on always hiding it from me and never explicitly telling me that it's there.

(But even so, I'd prefer not to be forced to buy garbage out of the household funds against my will.)

So from that metaphorical perspective, using credit cards for "the benefits" is a lot like buying a dozen glazed doughnuts, just for their smell. So you occasionally open up the box, take a whiff, and close it again, throwing them out and replacing them as necessary to replenish the odor. But sooner or later, you're going to take a bite.

Credit is best used for durable goods that produce value, or at least depreciate more slowly than the interest rate of the loan--an American household's primary car, for example. Instant consumer gratification is just not a wise use of credit, no matter how many sugary sprinkles it has on top. And that's exactly what credit cards are mainly used for--as financial junk food. Most people buy the credit doughnuts, actually eat them, and get fat.

So good job to those that can go their entire lives whiffing free doughnut smells, but some people have to arrange their lives such that they don't even drive past the doughnut shop in the morning. It's just a different kind of self-control to avoid temptations in the first place.

Re: How Millennials Became Spooked by Credit Cards

#96

Post by johnward »

antisthenes wrote: post #88
johnward wrote: post #17

Earlier quoted context omitted.

Maybe I lack self control but it was really easy to go from paying off $30k in credit card bills every month, to not having that income anymore, to being $30k+ in CC debt.

I'm almost afraid to ask, what does one spend $30k a month on? That just sounds like an exorbitant amount of money to me, maybe because I'm not in a developer salary bubble. You would almost have to be partying/shopping full time in order to rack up a $1000 daily bill.

It was basically advertising costs for different pay per click/impression ads. I was basically just doing arbitrage from lead generation to PPC. Though I did get a little frivolous and do some remodeling and got married and put a lot of that on CC. There's probably a vacation in there somewhere too.

I used some of the money to pay off my car and put a downpayment on my house but I still have a negative worth. I didn't really plan this to spam my blog but I wrote about it on the site in my "about me".

Re: How Millennials Became Spooked by Credit Cards

#97

Post by slavik81 »

johnward wrote: post #93
slavik81 wrote: post #87

Earlier quoted context omitted.

Surely if you were spending $360,000/year on your credit card, you'd have enough home equity and other assets to refinance that debt. It really shouldn't be on the credit card for long, because CC interest rates are atrocious.

negative. I was living in my parents basement at that time (yes seriously).

You sound quite adventurous. I don't think I'd have the stomach to try something like that.

Re: How Millennials Became Spooked by Credit Cards

#98

Post by skrause »

biztos wrote: post #20

While I realize it may lead to less (reckless) spending, this is probably a good thing. Certainly my generation overused credit cards, and many of us learned painful lessons from it. I sure did, though even now I have a somewhat cavalier attitude towards the plastic. Sure, there are lots of benefits to credit cards if you have the discipline to use them to your advantage. But most people don't have that discipline, a…

The credit card acceptance in Germany is changing quickly right now, even the discounter chains like Aldi and Lidl who were cash-only just 15 years ago have been accepting contact-less VISA and MasterCard payments for around a year now.

Re: How Millennials Became Spooked by Credit Cards

#99

Post by tenaciousjames »

Bartweiss wrote: post #52
ljoshua wrote: post #2

Huh, that's weird. I fall into the age bracket mentioned in the article, but use a credit card for nearly every single purchase for 1) the fraud protection benefits and 2) points. With the anecdotal group of people I know most people are fine using CCs. On the other hand, I pay off the statement in full every month, and therefore never have revolving debt that extends beyond 30 days. The article wasn't clear whether…

I've known both types of people in that age bracket. Some feel underconfident with credit cards, and avoid them either for self-control or fear of fees and hidden surprises. Many more have them and use them liberally, but won't carry a balance. It's like a debit card with fraud protection and cash back, which seems pretty popular at all ages.

This. The golden rule is to pay off your "Statement Balance" in full each month, thus accruing no interest month-to-month, but getting the added benefits of a credit card.

When I was young I racked up credit card debt and it was an expensive lesson. Now I use credit cards for everything but never carry an interest-bearing balance. The upside: never at risk with disputes, additional insurance/warranty coverage, free flights/hotels/etc using points, and up to 30-day deferred payment on all purchases.

Personally, I felt the article a bit silly. Especially when I reached the part quoting the PE-firm employee. I can't say that I know a single person who manages their money well that doesn't use credit cards.

IMO, strong financial acumen equates to using any available tools to maximize your output and utility. As long as you spend within your means and do not accrue any interest, credit cards literally give you free [insert rewards program here] for doing what you're already doing day to day.

That is the power & utility of a credit card.

Re: How Millennials Became Spooked by Credit Cards

#100

Post by skrause »

bbctol wrote: post #8

The use of credit history and score to determine worthiness in all sorts of purchases is a horrible construction that must be destroyed. I got a credit card for no reason other than to build score; I've never spent money I didn't have in my life (which seems responsible to me!) but I still have to go through this silly rigmarole of purchasing and then paying off to prove to future agencies that I'm responsible.

The whitelist-type system of building a credit score in the USA just seems weird and invasive to me. Here in Germany you have something more like a blacklist: You pretty much have a good credit score by default and only get a bad score by not paying bills or not paying back debt on time. I have a perfect credit score in Germany despite never taken any debt in my life.
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