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Comment by abritinthebay | Hacker News Reader

From a general point of view: using a credit card responsibly will improve your credit rating.

A debit card won’t.

I had to explain this to a school friend recently as he has never owned a credit card and avoids loans - preferring to save first, then spend.

When it came time to get a mortgage he couldn’t get good rates - or a large enough loan - as his credit history was so lacking.

He was infuriated but I pointed out to him that it makes sense from a lenders point of view: they gave no record of him being able to manage debt responsibly.

So that’s one reason to use a credit card, though likely not any reason Frank would suggest (he’s going with their better protection and coverage)

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> So that’s one reason to use a credit card, though likely not any reason Frank would suggest (he’s going with their better protection and coverage)

He does mention it: by giving his sons a credit card, one benefit is that when they graduate college, Frank has essentially built their credit for them.

In other words, American banks extort their customers to go into debt with them early and often.

Credit cards are more like a delayed bill than debt, if you pay off the amount in full every month (and I don't know why you wouldn't, credit cards are a poor way to borrow money).

A delayed bill is a debt, so it's impossible for something to be more like a delayed bill than debt.

They are also often the best method consumers have to borrow money for many purposes.

A debt has interest; a delayed bill doesn't. An interest-free loan is literally free money (the difference between net present value of future repayments and current value, which will be higher); I always take 0% finance if it's on offer.

(The only exception would be in a deflationary environment.)

And yet, most credit card users do NOT pay off the amount in full. Why do you think banks push these cards so hard?

Don't they? Everyone I know does, who I've talked to about it.

Seems a bit like Trump supporters.

And that means that they, in turn, could be a credit risk. Which is what was being talked about.

Although it has to be said a running balance is not actually a direct credit risk. It doesn't make financial sense, as you're racking up interest fees, but if you are safely managing your payments (no late ones) and your credit usage (a percentage of what your total available credit lines are) then it's not a bad thing for your credit score.

Not that I would recommend it of course.

To be fair, you can pay off the full amount of your credit card every month and never have to pay interest. A common misconception is the idea that you have to pay interest to build credit.

Er.. no. Credit ratings are basically a giant risk assessment.

The more you demonstrate your ability to manage debt (and you can do that by simply paying off your card every couple of weeks) the better you demonstrate your ability to do so. More data points, so to speak.

Of course if you can't manage that then that's data too.

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