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Comment by senttoschool | Hacker News Reader

“We found that most of the people that use buy now, pay later either don’t have or don’t use a credit card,” Marco Di Maggio, an economist at Harvard, told me. He said that Gen Z was skeptical of credit cards, possibly because many of them had seen their parents sink into debt.

This is always weird to me. It makes sense why Gen Z does this. But weird. I can get 2-4% back on all my purchases using my credit card, including protections against fraud, extra warranty, free lounge access at airports, and other perks.

I'd lose money if I used BNPL unless I can automatically buy government bonds that can pay more than 2-4% within the pay back period.

I wonder how much Gen Z is losing by using BNPL.

In all my years of using credit cards, I've never paid interest. I've always paid the full amount every month. Does Gen Z lack this discipline?

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It's a hateful little piece of plastic. You carry it around in exchange for 2-4% cashback and fraud protection that should by rights apply to debit cards too, and the credit card company sits there hoping you give in to temptation and actually use the line of credit it represents, at which point they charge you usurious rates and distribute part of their loot to all the other poor schmucks they're conning.

I have one because my bank doesn't make a debit card with a spending limit over $2000, which isn't enough to cover all foreseeable emergencies. I hate it. I hate that I'm incentivised to carry it around, I hate the temptation it represents, I hate that normal debit cards don't get the "rewards" and "benefits" that function as bait on a hook.

Gen Z is an entire generation, and not one I belong to. However, I assume it's like every other generation in that it has people who are desperate, greedy, mentally incapable, or otherwise perfect victims for the bank to sink its teeth into.

>at which point they charge you usurious rates

If you pay the statement balance due instead of the minimum payment due on your statements, you will end up paying no interest.

The sky high interest rates only apply to statement balances that go past due, and having past due debt is also strongly disincentivized because they are horrible for your credit score.

If you only spend money you actually have with a credit card, you will be fine while also enjoying the many benefits of having and using a credit card.

If everyone only spent money they had with a credit card, then credit cards would not try to lure you in with free stuff and there would be no reason to use one. I pay my balance on time and "enjoy" "many benefits" derived from the human suffering of the people who weren't rich or sane enough to do so.

Credit card companies make money regardless of whether or not customers carry a balance due to interchange fees.

> and the credit card company sits there hoping you give in to temptation and actually use the line of credit it represents, at which point they charge you usurious rates and distribute part of their loot to all the other poor schmucks they're conning.

It is kind of grim when I stop to think about how the probably several thousand dollars in cash-back bonuses I've received over the years of never paying a single cent of interest on my credit cards is probably subsidized by the people who do fall into this.

I believe, by design, it's subsidized by production of incentives of spending more in general.

Most of the money made by credit card companies is from the transaction fees paid by the merchant. Credit card companies would still be immensely profitable without receiving a cent of interest.

[Edit] This was my understanding but some fact checking on Google proved the majority of income is from interest payments.

> This was my understanding but some fact checking on Google proved the majority of income is from interest payments.

Yeah, the data I have seen says that 2/3 of the income comes from interest payments, 1/3 from tx fees.

Don't forget that there is no such thing as a free lunch, though. Credit card companies aren't charities!

In general all those perks are paid for by rather significant credit card processing fees, which you pay for yourself via increased product prices. Furthermore, their goal is to normalize the use of credit cards, in the hope that you'll eventually stumble and get screwed over by the interest fees.

Also, I think you are forgetting that Gen Z are literally kids. If they have a job at all, it'll be a parttime one with a very flexible contract. Without stable income, a credit card can easily become an unacceptable risk.

In general all those perks are paid for by rather significant credit card processing fees, which you pay for yourself via increased product prices.

The price is the same whether you pay via BNPL or credit card.

I get that merchants get charged by credit card companies. I also know that I'm not going to make a difference by boycotting credit card companies. I'd just lose out.

Also, BNPL companies charge merchants the same way credit card companies do.

Yeah. Stores increase prices to account for the higher transaction fees required to support giving CC users 2-4% cashback. Frankly CC reward schemes should be banned. It's just another shitty way for the poor to subsidize the middle class.

And punish normie who don't over spend because they have the same discipline without in-system credit.

> Also, I think you are forgetting that Gen Z are literally kids.

You might want to check out your math on that one.

I think you are forgetting that Gen Z are not literally kids, they are just forced to live as such by the fact that being an adult with its own house and family has become prohibitively expensive.

Gen Z starts in 1997.

Ah, so now we've finally moved on from "Millennials are children" to "Gen Z are children". While it may still be true of some of them (I'm not sure exactly what the accepted bounds of "Gen Z" are these days), many are full-grown adults in their 20s with full-time jobs.

And many of those full-grown adults in their 20s with full-time jobs still can't afford to even rent a place without multiple roommates to share the cost with.

I'm 30 and never had a credit card. Always felt like an extra layer of complication I don't need. I have enough money, I'd prefer to directly spend it. With a credit card there'd always be a nagging feeling some payment would be missed or something would go wrong and all of a sudden I'd be hit with interest charges.

This is wild. Have you never had a fraud charge? Reversing fraud of any size takes minutes at most with a credit card.

With a debit card you might just lose the money.

This is a very US specific thing and even there I'm not sure it's true.

In Europe credit-card usage is much lower, and card security is much higher for both types of cards. We've had chip and pin protected cards for many many years, while the US only caught on in the last few years.

Is there objective data that US debit cards have more fraud impact for their users? Or is this really more a PR story from credit card companies?

> Is there objective data that US debit cards have more fraud impact for their users?

Depends how tightly someones runs their bank account. A fraudulent charge could come at a bad time and trigger your mortgage payment to fail because of insufficient funds. Though, most bank accounts offer overdraft protection, which is really just an available loan that is automatically taken.

For me, very few charges come directly out of my bank account. Everything else goes through a CC so I can review prior to paying each month.

I’m not sure about relative fraud numbers, but the fraud refund differences are real. With a credit card they will refund you basically no matter what. With a debit card it’s much more hit or miss - I recently had 3 fraudulent transactions on my debit card for about $100 each and they refunded only one of them.

That’s crazy if you think about it - you give your card around to many people and any of them can write it down and use it.

In the US the only sensible thing to do is to use your credit card for everything and keep your savings tucked in an account which doesn’t have a card at all, nor a checking account tied to it. Then maybe a small checking account at some other bank for rare times you need cash.

I've had my chip-and-pin debit card stolen and used many times, never once had a fraudulent transaction refused a refund. And it always is resolved in less than a day.

>Is there objective data that US debit cards have more fraud impact for their users?

Debit card fraud is rampant here in the USA. I cannot think of anyone I know personally who has not been a victim of debit and credit card fraud at least once (most have been hit multiple times). The difference usually is that in the case of credit card fraud, you go to charge something, and your card doesn't work. You call up only to find out your credit card has been frozen due to a pattern of suspicious purchasing behavior in some distant state. Credit card companies are very diligent about this because it is their money on the line. When it comes to debit card fraud you only find out about it when you check your account and see your balance decimated or a list of phony charges that you didn't authorize. In the case of credit cards, you aren't responsible for paying the phony charges. In the case of debit cards, you are usually just out the money. It is very common here.

I’ll say I’ve never had this issue with credit unions I belong to. Just give the fraud department a call and within maybe half an hour the money is back in my account

In some ways it's even more expensive to remain "credit invisible" because of the security deposits now needed when you set up utilities, getting a mobile number, applying for an apartment rental, etc.

Building up a strong FICO score is the easiest thing with the exact mindset of OP with effectively the same amount of friction thanks to the "miracle" of autopay.

I'm in the UK, fraud is perfectly covered for debit cards.

Several times my debit card has been defrauded.

I just contact my bank and they refund it within a few days and issue me a new card.

No problems.

You have me curious. What payment methods do you usually use? I just envision a life without credit cards having a bit of extra friction once in a while.

Do you ever run into transactions that can't be completed with alternate payment methods? For example, I used to see hotels state that they only accept credit cards (and explicitly exclude debit cards) for checking into a room.

In the UK. That doesn't exist here... nowhere would require a credit card over a debit card.

Wow. I know HN hates Amazon, but as an example, the Amazon Prime cards give 5% back on everything bought on Amazon and at WholeFoods. That's not insignificant.

Also, if you did happen to miss payment because you forgot, 1 mos. of interest really isn't very much and certainly isn't the end of the world. The problem with CCs is when people don't pay them off and continue to put more and more charges on them. That's when things really add up.

Finally, that extra layer of separation between my money and the merchant/card thief is a good thing. CC gets stolen and I never lose possession of my money. Debit card gets stolen, and no matter how fast they reverse the charges, there's still a point where I lost possession.

Same. But I also never had problem with payment (I cancelled[or returned] purchase less than 4 times in my life, I can only thinking 1 or 2). Almost all credit card benefits are even out the production of incentives it drives. It's hard to prove if you spend 5% more with 3% cash back or not.

> I've always paid the full amount every month. Does Gen Z lack this discipline?

I'm not sure it's a Gen Z thing - credit cards were always subsidised by those who "lack the discipline". If everyone paid on time all the time they wouldn't give anyone an interest-free period.

Banks primarily make money on interchange fees, rather than interest -- if everyone paid on time all the time then they'd be very happy.

And in fact the banks (to include credit card companies) do love people who pay on time every time by giving better credit scores to the people who do.

Meanwhile, people who only pay the minimum due end up carrying past due debt and get bad credit scores from the banks. A bad credit score in turn means the banks won't lend money as much or as easily to such people.

The ideal debtor is one who carries debt and proceeds to pay it off on time every time. You will have a stratospheric credit score and banks will be begging to lend you money.

Is this true? This article suggests the opposite, banks lose money overall on everything credit-card that isn't interest payments, which make up the vast majority of their income. https://www.valuepenguin.com/how-do-credit-card-companies-ma...

It really depends on the card issuer, as different card issuers have different credit profiles. American express, for example, infamously have charge cards that you must pay in full every month, and generally have a prime to super-prime profile, so they make much more money in interchange than in interest. Other banks with more sub-prime profiles (Capital One, BoA?, etc) make much more in interest than interchange.

I feel that an astonishing number of people simply don't understand how credit and credit cards work, don't put in any effort to learn (understanding credit and debt is a critical life skill), and consequently blacklist what is unknown from their lives (eg: the Gen Z example).

People falling into financial ruin isn't a fault of credit cards or carrying debt, it's either driven by fiscal irresponsibility (which can be rectified with honest effort) or just plain bad luck (which can happen to anyone, fiscally disciplined or otherwise).

You may pay more than the interest. It's hard to prove the diff of purchase rates between if you have vs haven't had the incentives.

Not only does Gen Z lack this discipline, most people with credit cards lack this discipline.

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