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Comment by tuttifrutti | Hacker News Reader

I was always puzzled how people in the US are quick to spend on credit, and not worry too much...

One of the great western habits I inherited after living in the US for 15 years, is the use of the credit card for everything, and then just paying a single bill (the credit card) every month. If you do it properly, it can really increase the quality of your life - rewards, points, etc. - and it can also be very, very dangerous for the undisciplined and income-averse ..

the income-averse; I have yet to meet those.

work-averse or income-challenged maybe. Or underpaid or poor.

By income-averse, I mean those who are averse to generating the incoming required to pay the current bills, and alas this is a subtle but simple difference between solvency and debt. I never really carried much debt, between payments. But I sure did borrow a lot, to cover my monthly budget.

For those I know, including myself and my partner, the habit to strive for is spending less, and I agree that credit can be a useful tool if used wisely, but never really know when life can throw a curve ball. For now, we use credit cards, but manage to eliminate our debt by paying everything soon after incurring debt. Call it using debt for leverage I suppose. For any big purchase (which is rare), we aim to use credit when no interest penalties are present and pay off before any are incurred. A small house, inexpensive vehicles, and thrifty habits even with the use of credit cards allowed us to save quite a bit in contrast to those heavily in debt with terrible credit, but it is still a gamble. I don't blame others for having debt. There are many reasons for this. Without any major life events this system works for us...until perhaps it doesn't.

The #1 rule is, stay cash-positive: don't spend more than you've got in the bank to cover the bills, but be willing to defer the payment and continue income in the interim, because .. after all .. nothing feels better than having all bills paid and still having a net positive every month, to save away ..

They are acclimatised to debt - most westerners can't imagine not having a credit card - when I tell folks I cut up my first and last card at 17 they assume I'm a delinquent, broke, punishing myself - for in this society we have managed to redefine debt as wealth.

Here in Sweden, people have a debit card or use a debit app. Most people here easily get through life without a credit card.

While I don't think it's true that "most westerners can't imagine not having a credit card", I don't have a sense of how much other Western countries use credit cards as compared to debit-based systems. http://news.bbc.co.uk/2/hi/business/5380718.stm from 2006 says that UK has the most credit card debt of any European country. "The average British resident owes £3,175") while "The average European owed just £1,558 in unsecured debt."

The more recent http://www.thepennyhoarder.com/how-does-our-credit-card-debt... from 2012 says:

> Most other countries tend to be more cautious with their credit, opting instead to use debit cards (like in the UK and France) or online bank transfers (like in Germany) rather than to charge up a card. And when it comes to charges calculated per year, Europe makes us look like we spend with abandon; French people charge less than $300 each on their credit cards each year, on average. And Germans seem to eschew the “buy now, pay later” mentality as well, only charging an average of $158 per person per year to their credit cards.

That makes it seem like credit card use and debt more a US issue than a more generally Western issue.

Funny thing is, as a European I never saw the point in credit cards. So when I lived in the US I didn't get one for a few years. Finally my girlfriend pushed me to get one for the free cash back, but the application was denied since I had no credit history (yet a high-paying job and $100k in the bank...). Just weird. You have to be in debt to show that you're responsible enough to handle debt.

I can't help but wonder if it's due to the US using the bank system vs. Europe using the post giro system.

Rather, that's one of the biggest differences I can think of between those two regions, with respect to personal finance.

But I can't figure out what the mechanism might be, so it's more an idle conjecture than something substantial.

You don't have to be in debt, paying your credit card in full each month is an excellent way to build credit, and you will never pay a cent in interest as long as you pay in full without fail.

I can see how it all appears to be a silly game if you never actually need credit, however there are material benefits (cash-back, rental car insurance, etc) of playing the game. In some cases the benefits you receive are nonsensical until you realize they are subsidized by irresponsible individuals paying huge sums of interest. There's a special kind of smug pleasure reserved for those who are financially responsible in America.

Can you cancel your credit card at any moment if you know you are going into a tight spot soon ? So you don't enter the vicious circle.

Sure, although the age of credit accounts is a significant factor in your credit score, so it's not advisable if you are trying to build credit.

Personally I have enough practice that I treat my credit cards no different than I would treat my checkbook—it's not that hard to avoid trouble if you just have the mentality of only spending money you already have. In other words, I personally don't think cancelling the credit card is necessary, but YMMV.

I've never had credit card debt (I just pay back once in a while, or every few hundred euros, to keep the balance out of red) but I've found good way to categorise my spending using credit cards. For example, I use one of my cards for personal expenses whereas we use a joint debit card account from the same bank for household expenses only. Then we have another joint credit card that we use on holidays etc. for shared expenses that aren't strictly household expenses or personal expenses... Very convenient. Also convenient is that instead of keeping lots of money on my day-to-day debit card account I'll just top up the c/c balance once in a while. The opposite would be to move money to my debit card account beforehand, and let it sit there even if I'm not sure I'll spend it in a week or three weeks.

If you pay all your credit card debt on time, there is really no reason to not have a credit card. Sure, you have the capacity to spend a lot of money, but I view that as a benefit and not a curse. Also, I feel a lot safer, since if there are any unauthorized purchases made with the card, the company takes care of it.

Also, credit card points. Get 1-3% back, which adds up.

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