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Comment by Doctor_Fegg | Hacker News Reader

If I have money, why do I need a credit card?

I’m guessing you’re American: much of Europe doesn’t bother with credit cards, myself included.

Why? That's easy - credit cards (at least in America) come with a lot of benefits and consumer protections.

I always wondered why (at least in America) credit cards have more consumer protections? It's essentially the same way to use money, if someone steals from your credit card you're protected, but if it's debit card, it's not? Why?

Credit card fees in America are >2%, debit (and CC) is limited to <0.3% in Europe. So it makes sense for credit card companies in America to take the occasional loss and give out all those gimmicks as long as it keeps people paying mini-VAT on every purchase.

That's before you get into the whole "you gotta build credit" perversion that has Americans go into debt en masse and pay horrid fees on that.

If you are in a relatively healthy financial situation, you can also profit off of the system with many of the rewards card benefits in the last several years. One example of this is: https://reddit.com/r/churning

Actually some banks (if not all, I only really know about my own case with BofA) have protections with debit as well. I left my debit card in an ATM in Peru and someone took it and tried to buy jewelry. They succeeded in two purchases before being declined in the third (I assume for invalid PIN). They alerted me that there were some weird transactions and I was able to recover all $1200 that they spent on my card.

> It's essentially the same way to use money, if someone steals from your credit card you're protected, but if it's debit card, it's not?

Debit cards have some protections; the basic difference is that a credit card is spending someone else's money, which you have to pay back to them if it was actually authorized by you; a debit card is spending your money, which you can recover from the bank in certain circumstances if it is accepted to be unauthorized.

Sadly, the United States operates more on a credit system than relying on having cash or funds upfront. Society regresses towards that when people want things that cost more than what they can afford (e.g. homes, cars, college education). Side effect is that you will have people taking out unnecessary loans just to build up a credit.

It’s not difficult to build credit in the U.S. without resorting to maintaining debt, nor accepting unnecessary loans. The credit scoring models in place strongly favor many open, revolving accounts, but also favor the continual paying off of those accounts and maintaining zero balances on the majority of one’s revolving accounts. The scoring models favor low utilization of large amounts of available credit — that the credit in question needs to be in the form of a loan or a fixed line is false.

It’s accurate to say that the U.S. operates on credit moreso than it does on cash, but the rating methods genuinely favor those who have the means to manage credit wisely and pay off revolving balances in full, which is antithetical to the notion of societal “regressions”.

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