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Comment by kayoone | Hacker News Reader

In Germany (and most of europe) credit cards arent used very much. I can wire transfer money inside the country for free, i can pay in alot of Online Shops by direct debit who get the money directly from my bank account. In stores i use a card associated with my bank account (not a credit card) to pay which also lets the merchant get the money directly from my bank account. I am suprised that the US doesnt have a similar system, no wonder everyone uses credit cards there. Thats also why i think Square wouldnt be very successfull over here.

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I use my credit card for almost everything. Before I explain why, it's important to state that I pay my balances in full every month. Anyone who has a hard time doing so should not be using credit cards.

There are three reasons why I use my credit card so much (in order of importance to me):

1: It makes my finances much, much easier to manage. If I were using a debit card, I would have to track every transaction to the penny throughout the month in order to avoid overdrafts. Instead, I just keep a rough mental tally of my expenditures to make sure that I'm not living beyond my means. If my spending happens to get front-loaded on any particular month, no big deal: I've got another paycheck coming before the bill is due at the end of the month. With a debit card, I would have to manage my spending by pay period (twice a month) rather than billing cycle (once a month). Also, if I did happen to spend a little bit too much by accident, I'm looking at a few dollars (possibly even just a few cents) in finance charges, as opposed to a $20+ overdraft fee on every subsequent transaction.

2: I have a rewards credit card, so everything I buy gets me points. If you aren't using a rewards credit card, you're helping to pay for my rewards: the credit card companies generally charge the merchants higher transaction fees for purchases made with rewards cards (otherwise they would lose money on people like me who don't carry a balance). Merchants pass those costs on to customers by raising prices slightly. If you're not using a rewards card, you're paying those higher prices without reaping the benefits. Some merchants charge lower prices for cash, in which case I will usually pay cash because the savings are worth more than the points.

3: Because I pay my balance in full each month, I'm getting an interest-free loan from my bank each month. That money sits in my bank account accruing interest for anywhere from 1 to 30 days (depending on when I make the purchase). With interest rates as low as they currently are, I'm only making a few cents each month this way, but that's still money I wouldn't otherwise have.

How many of these reasons would also apply in Europe? I know that #1 does, but what about #2 and #3? There are plenty of reasons for not using credit cards, which I didn't really get into, but are there reasons that apply in Europe which don't apply in the US?

All that and #4: Consumer Protection.

A few years back, I had plane international tickets booked on Zoom. They went out of business between the buying and the flying. With a credit card, that was Visa's problem. If it had been a debit card, it would have been my $3000 problem, as customers were unsecured creditors.

1: Well in my bankaccount I can overdraft with no problemes (I think there is a system how often and how much you can overdraft but I never hit that limit). I just have more then one account (there nicly bundeld in the ebanking system) on for everyday the other for safings. So keeping track of all this is nice because you always know what you have. With Credit Card I never know how much I will get at the end of the month.

2. I think there is something like that yes but I have the same thing for the normal bankaccount the send you some kind of points and you get cheaper entery to all kinds off stuff but I never really read that stuff, In some shops you can use these points as money and I use the points for that.

3. I don't know about that but good for you if you can get some free money. A Irish guy told me once every cent is a cent closer to the next Guinness.

You've highlighted an important cultural difference between USA and European banking. At least in the UK, I know that it's common to overdraw one's checking account as a form of short-term loan. In the US, overdrawing your checking account is a cardinal sin, and it will win you a fee of $20 to $30 PER TRANSACTION presented for payment while overdrawn.

Woot? Intressting. Thanks for the info.

Not with all banks. Many banks allow you to connect a line of credit, or even a credit card account, to your checking account to cover overdrafts.

1. What the hell man, you dont make enough to spend within your means and not have to worry if you run out of cash by the end of the month!? I only use a debit card, because I know that if I even have to consider by the end of the month how much I have on the bank account, I am then doing something seriously wrong, either spending too much or my job is not bringing in the cash. And in Europe, among my friends, it seems this works out very well. Make enough cash so you dont have to worry, not make enough cash AND risk collecting debt (even for a few days) just because what, you want to feel you always can buy everything? I dont understand american mentality.

2. I have a rewards debit card, everything I buy at certain places gives me points and discounts at said places. Never going into debt.

3. interest-free loan? Thats a funny concept, coming from a bank especially. Are you serious?

Simply put, in Europe you make enough cash so at the end of the month you dont ever have to consider you will be in debt unless you want to buy a ferrari on your way back from work. You collect points using your debit card. Debt is only used for fancy house/apartement, brand new car to show off, or starting a business. Never for spending.

Money in the bank is lazy money that's not earning it's keep. In the US many checking accounts don't even earn interest, at all. Extra money at the end of the month should go into a savings account. Once that grows to a certain size, excess money should go into investments.

Money in a bank account is a costly asset.

Exactly. My checking account earns interest, but right now it's paltry because rates are so low. I have automatic transactions in place to move part of each paycheck into various savings and investment vehicles. I have calibrated it so that the only money left in my checking account is money that is budgeted to be spent that month. In my mind, that is what a checking account is for. In order to maximize the amount of money that's working for me instead of just sitting there, I have shaved it pretty close on the amount of money I leave in my checking account.

All of my regular bills (utilities, insurance, internet, cell phone, etc.) go on my credit card, and they are mostly clustered in the first part of the month. By using my credit card, I don't have to take that money out of my bank account until the end of the month, leaving me free to put money into savings and investment earlier in the month. If I were paying those bills directly out of my checking account, I would have to postpone my savings and investment transfers until later in the month to avoid going negative in my checking account.

> * Simply put, in Europe you make enough cash so at the end of the month you dont ever have to consider you will be in debt unless you want to buy a ferrari on your way back from work.*

I am from Europe and this is a completely ludicrous and false statement. If anything I would expect my USA counterparts to get way more salary after tax each month simply for the ridiculous taxes I am paying here (48%) plus we are paying some more taxes on ANYTHING we buy including food and water.

There is, however, a big difference between spending mentality - most Europeans shy away from going deep into debt and will typically only take loans on housing and cars but not to spend on luxury and entertainment; we by and large don't have that culture of ver-spending is ok and then keep shifting the debt from credit card to credit card. Matter of fact, I don't even know if VISA here would let me do that more than once...

Credit cards act as a buffer between steady salary income and patchy spending. Many people both in the US and Europe live within their means across the whole year, but take a big holiday or trip in the summer and spend more in one month than their usual disposable income. Having a credit card makes it easier to accommodate lumpy spending like that.

Food and water is cheaper in all the European countries I've been to -- all staple foods like milk, eggs, butter, vegetables, most meat, and most groceries, including bottled water (local!) which is $1.20 for a liter. Good bottled mineral water in the US costs $3-5 per liter, for example. I lived in Austria, spent lots of time in Germany, and have gone grocery shopping also in Italy and Portugal. (The UK is not "really" Europe in its laws, so I don't count it.)

As complex as this might be to actually measure, here is a stab at it - the Big Mac index seems to disagree: http://en.wikipedia.org/wiki/Big_Mac_Index#Figures

Big Macs barely qualify as food and are not a staple, or even remotely desirable to have your people eating.

Fast food and restaurant food is relatively expensive in Austria. Good, healthy, whole food ingredients are subsidized.

I am Austrian (born and raised) and am working in Germany now and have been around Europe and the world - what are those subsidies for food you are talking about? You probably mean the Austrian government and the EU are subsidizing local farmers?

Buying local farmer products will vary in cost and when you go to the supermarkets (Lidl, Aldi and Hofer EXcluded, their "food" is absolutely horrible) and buy organic food it definitely is expensive; a bit less in Austria than in Germany though really good and very delicious food is scarce in Germany in comparison. I found the food you can buy in the US cheaper when you go by price per unit since packages are way bigger there and you have a ton more to choose from.

#1 does not apply. If your balance goes below zero, you start paying interest. It's a pretty high rate (12-18% or so), but nothing that will get you into trouble as long as you top it up within a week or even a month. There are no other overdraft fees. #2: I don't know, I've never encountered a reward card. They're certainly not common here, probably don't exist at all. #3: You have a point there, but interest on simple current accounts (as opposed to savings accounts) is often zero percent here, certainly not much higher than 1% or so. (I live in the Netherlands.)

A little clarification, based on Danish conditions but I assume it’s similar in other countries: You can’t just overdraw indefinitely, you have an authorized overdraft limit. For some people the limit may be zero so they’re not allowed to overdraw.

If you overdraw beyond this limit, you will pay a higher penalty rate and possibly also other fees. People with good credit can often negotiate a much lower rate than 12%.

The US has debit cards. These act exactly like the card you describe. The problem with debit cards is that the money leaves your account immediately. I prefer having the CC buffer for when (notice not IF) the card number is stolen.

We can use debit cards here as well, the reason we generally don't are usually because of the security and benefits (mileage) you get from using a credit card.

We don't have to use any kind of cards in Finland, and I think the situation is the same in Germany. I can directly pay a merchant and the money is transferred from my bank account without having a card at all.

I can use a credit card as well, or a debit card, but there really is no point to use them here.

It's surprising how far behind the U.S. is in this matter.

Why do you say "far behind"? I can go into pretty much any store in the world and bust out a piece of plastic to pay for the purchase. And I get frequent flyer miles.

Presumably because this article presents Dwolla as something new and fantastic, when it's something that's available in most European countries in one form or another right now.

(and of course the experience from Europe is that while it competes with debit and credit cards, it kills neither)

Have you traveled much? In lots of other countries, few stores take credit. Examples I've been to: Austria, Germany, Portugal, New Zealand… strangely enough the hot "latin" countries of Europe love credit cards, so it's easy peasy in Italy or Portugal. Also Finland, thankfully, because the amount of money you'd have to carry there'd be ridiculous.

So can my debit card because it says VISA on it.

Yes true. I always wonderd why americans used these stupid credit cards all the time.

We a better System atm but we should not relatx. They need to start making paying on the internet easier, Credit Cards and Paypal get alot of money by offering shitty servises. The Banks should get into this field and make it easy, safe and free.

A lot of us are actually using "virtual credit cards". They are like debit cards tied to a secondary account. You transfer money to said secondary account through the bank's webpage and then the credit-but-it's-actually-debit card is used to draw directly from it. This way, when you give your "credit" card online, even if it gets stolen, your main account is left unaffected.

Depends. In Ireland, credit cards are popular due to the main debit card not being accepted a lot abroad, since it's a small country, with a large economy next door that speaks the same language, it's common to buy things online from the UK, and so you'll need a credit card.

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