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Comment by pessimizer | Hacker News Reader

People should only be borrowing money to spend on productive capital. If you're not investing borrowed money into something more profitable than the interest, what you're actually doing is falling into a hole. We should be helping people who are falling into holes, not exploiting them.

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I have never used a credit card to borrow money. I've always just used one as a basically a more secure and convenient debit card.

Credit cards to me are just convenient payment facilitators for money I already have. If they aren't being used that way, they probably shouldn't be used at all.

Do you pay off the card the second you spend the money? Or wait until your billing statemen? Most people borrow with credit cards and in fact I pay as late as possible for the statement to arbitrage the interest difference between the 0% of the card for the first 30 days and the interest I can draw in the bank. I try to delay big purchases to the very beginning of the billing cycle as that's an extra month to earn interest before paying it.

Just put it on autopay. Once a month the whole balance gets paid off.

Does your arbitrage strategy really make enough money to make it worth it? Personally, I am not going to stress about a few extra bucks by leaving the money in a 3% HYSA for an extra week. That kind of micro-optimization is fun for some people but I just can't be bothered.

I mean it doesn't take me any more or less time to pay it one day vs the other. Why not make basically an extra free $60/yr if you're carrying aroudn $2k in balances? For the median worker that's basically an extra couple hours of wages for no difference in workload.

Yeah, that makes total sense. For me, the extra mental of thinking about when to charge something and when to pay it off just isn't worth $60/yr.

Counter-factually: If autopay didn't exist, I would gladly pay $5/mo to have all my bills paid automatically.

I’m in the same boat.

I’d love to care about $60/year, but I waste more money on under-utilized subscriptions. Not saying it’s an either-or, but if I can work to earn $60 more, I’d probably rather do that than save $60. :-)

> in fact I pay as late as possible for the statement to arbitrage the interest difference between the 0% of the card for the first 30 days and the interest I can draw in the bank. I try to delay big purchases to the very beginning of the billing cycle as that's an extra month to earn interest before paying it.

No where near enough payoff for the mental gymnastics. I just pay the bill when I first get it and it is completely off my todo list.

So are you against giving people of limited means a way to shift part of the purchase cost of a necessary replacement item into the future? As a concrete example, it seems entirely reasonable to me for someone of limited means to spend something like $2,000 on a credit card to repair a broken car so that they are able to get to their job. If you don't give people a legal means to access money like that (even if the rates are borderline usurious), I would expect them to seek out illegal methods -- and that seems worse all around for society.

Not at 24% APR.

Not American, but giving one of your country's credit cards to someone too poor to pay for vital car repairs is just throwing them into the street with extra steps. What that person needs is public aid that gets them out of the hole.

Politician A: I will increase aid to poorer people to get them out of the hole. I will need to increase taxes.

Politician B: I will increase access to credit to poorer people to get them out of the hole. I will not need to increase taxes.

Voters will go for B every time. See taxpayer subsidized loans for home purchases, education, small business, etc.

Are you agreeing with me? State-subsidised loans are the first example of state aid I was thinking of.

Taxpayer funded loans inevitably lack the requisite underwriting, and hence turn into subsidies to the businesses that the loans are eligible to pay, hence allowing them to increase price.

See higher education and home prices in the US.

Having most people be leveraged to the max, using their own children’s future tax payments, is great for employers who want workforces with less negotiating power.

Proper state aid would be cash, or giving people houses and education. Not chaining them with debt to pay for houses and education.

What about borrowing money to pay for transport to a new job? Not ‘productive capital’, but probably worth it. There are lots of cases that don’t fit into your narrow category, where credit makes sense.

That is productive capital. A car or your payment of rent for someone else's offer of transport to you is akin to say paying for a milling machine that creates widgets.

I said 'transport', not 'buying a car'. Many people take the bus or other transport to work, especially when coming off a period of joblessness.

Yeah that's why I also said transport.

But that portion of your reply didn't address the fact that a bus ticket isn't 'productive capital'.

It is.

>"Capital is a broad term that can describe anything that confers value or benefit to its owners, such as a factory and its machinery, intellectual property like patents, or the financial assets of a business or an individual."

https://www.investopedia.com/terms/c/capital.asp

A bus ticket is something "that confers value or benefit to its owners".

That's not what capital means. The bus ticket is an everyday expense that doesn't bring you anything by itself long term, you stop owning it as soon as you use it. Otherwise food would be capital too and the word would become useless.

Thought experiment: why is a one month software license to operate a conveyor belt to move product stock considered productive capital, but not a one month license for the employee to ride to the product stock. Indeed in at least one city I lived in, the taxes were deducted from my transit pass as the state counted it as a capital expense for my employment (technically the pass was not supposed to be used for anything else, but no one is checking).

In the grim thought slavery still existed, I would say food would be considered productive capital. In modern day (from the view of the company) that value is just captured in the wage so it would be inappropriate to double account it into capital expenses (a business lunch I think would count though).

Software licenses are not considered capital; they’re expenses. This is why they’re preferred for tax reasons, as expenses are fully written off in the first year, but capital purchases are gradually depreciated.

In that situation, food would still be an expense. The capital would be the slaves. Weird example though.

There's a huge gap between regular consumer items and what you call productive capital.

For example, a land with a house is productive capital, because it insures you against rent hikes. A reliable car is productive capital, because it lets you commute to the job and insures you against switching to jobs with a worse commute.

But those things both cost so much more than you can (or should) put on a credit card, generally.

We always have a surplus of officious busybodies who love to tell others how to spend their money. I mean you're not wrong, but most people don't want to listen to personal finance advice and only learn as a consequence of making their own mistakes.

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