Hacker News Reader

Comment by kubb | Hacker News Reader

You hate it but companies love it because people having easier access to spending makes them better consumers I guess?

CC debt is a net negative spending by consumers. The difference between outstanding credit card debt each year is far less than the money spent servicing credit car debt. Even if you adjust for defaults, it’s a huge drain on people’s spending.

Very specific industries like amusement parks see some gain, but overall the economy would be far better off with significantly smaller credit card limits.

Maybe assuming that you would spend as much with and without the credit, but I think removing the barrier to consumption, and buying on impulse and thinking later is the key. If you’re forced to save up for an expense, you have much more time to reconsider it.

At the beginning sure, the average 21 year old spends more because of CC’s. But most people don’t die or default young. If someone doesn’t pay off that debt by ~28 they’ll spend more in interest than whatever the item was and still need to keep paying down debt / keep paying interest.

Take that same person and remove the impulse buying at 21 and by 28 they will have saved that money to make those same purchases and not have to service debt after that point or try to dig themselves out of a hole.

Even if they end up saving the money for years, it’s likelihood to end up as a down payment on a house or something. Because the economy isn’t just individual purchases it’s the average activity across generations at each individual moment.

If you’re analyzing it that broadly then the interest on the CC debt will also be a profit for the bank which will distribute it across its workers and shareholders, and those people will also use it for consumption. It’s just a wealth transfer from the poor, and impulsive to the rich and clever.

Some shareholders in public companies are guaranteed to be outside the US. Similarly wealthy people are more likely to spend money on goods and services outside the US.

I'd argue credit card debt actually makes people better laborers, by forcing them to work more. If someone is spending 20% of their income servicing their debt, they aren't spending more, they're working more for the same amount of goods and services.

Exploitation is the backbone of the strong American economy.

I guess that's one way to have the poor make less than minimum wage.

Reply on news.ycombinator.com