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Comment by cmurf | Hacker News Reader

It still boggles my mind how prevalent credit cards are in the U.S. and how almost non-existent they are elsewhere, in particular Europe and Japan where debit cards are used. They don't call them debit cards, but rather cashless payment or what have you. And the merchant fees for these cards are far, far lower than credit cards which makes it even more baffling to me.

ADD: "Without a substantial credit history, it is much harder to take out a home mortgage, for example." Why is this? It's not true in other countries where credit cards aren't used anywhere as much.

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I honestly don't understand why they're so popular here either. A debt card is basically the same as paying with cash, because you have the money. With credit, you're still doing the same thing, but you pay later- either way you're still paying the same amount, but with credit, you can fuck yourself pretty easily.

Also, it's because credit cards are so prolific here that it's harder to take out a mortgage, if everyone has a good credit score but you, then you're not going to be at the top of their list.

Don't most credit cards offer rewards? If so, it's not true that it's the same thing, especially if there's no discount for paying with cash/debit.

>Don't most credit cards offer rewards?

Typically cash back credit cards also have (especially) egregious interest rates for carrying a balance month to month. And some have a fee.

Cards without cash back typically have lower (but still very high) interest rates.

Yeah, but you can not carry a balance. I'm not saying it's easy for everyone, but that would explain their popularity.

Debit cards have traditionally had less fraud protection in the US, and I don't think any of them have a rewards program.

So, why should I use one over my credit cards automatic 1% (or more) in cash back?

If I want cash equivalent, I use cash...

Fraud protection is required by law. The reason why the protections differ is because of different laws, Fair Credit Billing Act applies to credit cards, and the Electronic Fund Transfer Act for debit cards. The only reason fraud protections would not be identical between credit and debit cards is because Congress doesn't care enough to make them the same, and that might have something to do with being under the boot of the finance industry.

https://www.consumer.ftc.gov/articles/0213-lost-or-stolen-cr...

> "Without a substantial credit history, it is much harder to take out a home mortgage, for example." Why is this?

In theory, it shows you can pay them back. In practice, I wonder if credit works that way.

My first job was working for a car dealership and, because the salesmen are lazy, they taught me how to read credit reports so they wouldn't have to.

They taught me to ignore the credit number and look specifically at whether somebody has paid off a large sum of money consistently. People who have paid off student loans and never missed a payment were ideal. If they were delinquent once or twice it wasn't a problem, provided it didn't happen consistently.

They didn't care at all about credit card payments unless it was a large amount of debt they had trouble paying off. In other words, credit card debt could only hurt you, it could never benefit you.

I don't know if this was common practice for car dealerships at the time (late 90s), but it certainly contradicted the information I was taught in school about the necessity of using credit cards to establish a credit rating specifically so you could buy a house and a car.

Fun fact, in France we call debit cards "Carte de Crédit" (or carte bleue)

Debit cards there come with the same amount of fraud protection as the credit cards, there's not really a reason to use Credit cards there.

In reply to your ADD: Because in the US, you get a "Credit score"[1] based on your credit history. And when taking a home mortgage, instead of simply asking for your past few years of income proof and other papers bankers in Europe would ask before deciding to give you a mortgage, in the US they rely on that Credit score. And the best way to "build" that credit score is to have a credit history, and the simplest way to have a credit history: use a credit card for a long time and pay on time.

Because obviously paying on time a $100 credit card bill every month is a good indicator on how you'll handle paying a couple hundred thousands loan for your house (/s)

[1]http://www.myfico.com/crediteducation/whatsinyourscore.aspx

> Because obviously paying on time a $100 credit card bill every month is a good indicator on how you'll handle paying a couple hundred thousands loan for your house (/s)

I think this type of behavioral scoring is actually a great benchmark for determining responsibility. If you can't handle paying off a few hundred bucks here and there, it seems pretty reasonable that you're more likely to default on a far more expensive mortgage.

If all you do is pay a $100 CC bill on time, you will have terrible credit. Credit scores themselves are proprietary but they are largely comprised of the following factors (in no order):

- Having a lot of available credit (usually based on credit score and/or income)

- Not using too much of that available credit (credit utilization, a low non-0% is ideal)

- Different types of credit (revolving credit or CCs, installment loans, etc)

- How long you have had credit (longer is better)

- How many times you have tried to get more credit recently (too many recent inquiries means higher risk)

Credit scores are a measure of how well you can hold multiple types of debt over time and still pay everything. It is not "will so-and-so pay their mortgage?"

There are a few qualifiers to your mortgage question - good credit history will make it easier to take out a mortgage at the lowest possible interest rate with as little as 20% down and monthly payment constituting as much as 30% of one's monthly income.

If you take out a real estate loan at 40-60% LTV vs consumer-grade 80% LTV, banks will care less about the underlying credit score - their models will tell them they can always repossess and make most (all) of the principal back relatively quickly.

Do the LTVs, interest rates and debt-to-income ratios transfer to those other countries as well? US is known for one of the most lenient and dynamic mortgage market, so those are just some rules to play by if one is optimizing for lowest possible rate.

At least in some EU countries, we do call them debit cards, and while the percentage is much lower than in the US, a third of all adults do have (at least one) credit card.

Definitely still called debit cards in the UK.

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