How Millennials Became Spooked by Credit Cards • Hacker News Board

Re: How Millennials Became Spooked by Credit Cards

#101

Post by spdionis » Mon, Aug 15, 2016, 8:32 PM UTC

Bartweiss wrote: post #66

nostromo wrote: post #27

My sense is that Millennials have a less rosy view of their future economic situation than did generations past. I don't know if it was coming of age during a banking crisis or huge student loans or expensive housing or what. But obviously if you're unsure about your future earning potential you'll be more hesitant to rack up future obligations.

Notably, the suggestion that "it's fine if you pay off your card every month" or "loans are sensible if you get good rates" only holds for people with some kind of faith in stability. With a stable job and some savings, paid-off credit cards and zero-apr loans are great tools. If you're worried about losing the job and barely making rent (like many millennials are) then even 'safe' debt becomes troubling.

Or if you don't want to chain yourself to the job and like the financial flexibility to take time off whenever you want.

Re: How Millennials Became Spooked by Credit Cards

#102

Post by Obi_Juan_Kenobi » Mon, Aug 15, 2016, 8:57 PM UTC

blakeyrat wrote: post #57

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…

At my bank, the fraud protection for any card with a VISA logo is identical whether it be debit or credit. Due to that, I never bothered with a credit card. I don't want the ability to spend money I don't have. I did end up finally getting a credit card (in my mid-30s) not because I want one, but because I wanted a back-up card for when my debit card is out of commission for whatever reason. It's a constant struggle…

Here's the issue: you're paying for CC transactions anyway (cost gets passed on to consumer), so you might as well try to get some of it back (with reward points, etc.).

I've never understood the credit vs. debit aspect. I know my budget and can easily just not spend more than I can afford. Paying the balance is automatic, so the only difference between using one card or another is that one gives me an e.g. Amazon gift card every couple months.

Re: How Millennials Became Spooked by Credit Cards

#103

Post by Bartweiss » Mon, Aug 15, 2016, 8:57 PM UTC

logfromblammo wrote: post #95

Bartweiss wrote: post #50

Earlier quoted context omitted.

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,…

> It's just a different kind of self-control to avoid temptations in the first place.

This is exactly it. We all use both kinds of self-restraint, but it's still worth arranging external forces to support the kind of self-control you find easier.

I've used credit cards, and taken on debt, but always with a clear plan in mind (metaphorically, I drove to the donut shop intending to eat one?) It's been for large purchases (primary car) and some time-convenience things that came without interest (washing machine).

If I were seriously worried about spending into debt without a plan, I probably wouldn't keep credit cards, or would keep 1-2 low limit cards. As it happens, I don't struggle much with that issue, but we all use mitigation in places where we do struggle, and I see nothing with it.

Re: How Millennials Became Spooked by Credit Cards

#104

Post by bluGill » Mon, Aug 15, 2016, 9:29 PM UTC

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?

Just on groceries that is a free flight every couple years. Of course I also buy clothing, phone bill, car repairs, birthday presents... In short, I charge almost everything. I'm going for the 1% cash back not the points, but to me it seems normal to be getting back more than $100 every year. Note that I do not carry a balance. Everything in that list is something I do anyway, and I have the cash sitting in my back account (so I should probably add another buck to the $100 above for interest in my bank accounts)

Note that you have to be able to control yourself. If you ever carry a balance the math fails.

Re: How Millennials Became Spooked by Credit Cards

#105

Post by calvinbhai » Mon, Aug 15, 2016, 10:05 PM UTC

Surprising that the article equates less credit card debt to less usage of credit cards.

Its possible that people became more responsible and started paying off their balances while also using their credit cards?

The article would make any sense if it also mentions the total credit limit and the ratio of revolving debt to credit limits.

I for one, am glad that I'm comfortable with using credit cards, applying for new ones, and pay off statement balance all the way. That way, I'm getting good money back, while the spooked credit card avoiders are paying more for the same stuff :)

Re: How Millennials Became Spooked by Credit Cards

#106

Post by emp_zealoth » Mon, Aug 15, 2016, 11:44 PM UTC

skrause wrote: post #98

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.

EU came down like a tonne of bricks on max fees that the banks/processors are allowed to charge - those are no longer eating the profit off razor thin margins those chains had

Re: How Millennials Became Spooked by Credit Cards

#107

Post by op00to » Tue, Aug 16, 2016, 12:11 AM UTC

SeanBoocock wrote: post #91

op00to wrote: post #71

Earlier quoted context omitted.

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.

thanks! That's interesting that you took such a hit from having your loans paid off. I know that has an effect, but that totally dropped you out of prime territory. When shopping for your mortgage, you may want to see smaller mortgage brokers who would be able to give you a slightly better deal versus going to a larger bank. Good luck!

Re: How Millennials Became Spooked by Credit Cards

#108

Post by swagv » Tue, Aug 16, 2016, 12:22 AM UTC

sotojuan wrote: post #5

This is interesting and I am glad less people are using credit cards. It's really not a good idea for the majority of people in my experience. I got mine when I was 20 and I've never paid it late or gone over my limit. Most of the time I coordinate my payments with the day I get my direct deposit (I've tried automatic payments, but too paranoid that they might not work!). Discover gives me pretty good Amazon cash bac…

It's no more dangerous than spray paint is dangerous. If you're prone to be an abuser, avoiding them is probably not a bad thing. But credit cards in themselves aren't the problem: it's about self-regulation.

Re: How Millennials Became Spooked by Credit Cards

#109

Post by prostoalex » Wed, Aug 17, 2016, 4:32 AM UTC

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…

There are a few qualifiers to your mortgage question - good credit history will make it easier to take out a mortgage at the lowest possible interest rate with as little as 20% down and monthly payment constituting as much as 30% of one's monthly income.

If you take out a real estate loan at 40-60% LTV vs consumer-grade 80% LTV, banks will care less about the underlying credit score - their models will tell them they can always repossess and make most (all) of the principal back relatively quickly.

Do the LTVs, interest rates and debt-to-income ratios transfer to those other countries as well? US is known for one of the most lenient and dynamic mortgage market, so those are just some rules to play by if one is optimizing for lowest possible rate.