Uhm This should be required learning. Why Credit Cards Are A Scam - Honest Ads

Kill3r7 · Apr 18, 2021

anexanhume said:
Credit cards are regressive in nature. With rewards and exchange fees, they transfer wealth to financially savvy owners and raise prices.

I say this as someone who takes full advantage of what they offer. I'd happily give that up if it meant more equity for those with less advantages than me. The only thing I'd hate giving up is fraud protection.

There is no proof that credit cards raise prices even though economists would tell us otherwise. See Australia or several EU countries that implemented strict interchange fee regulations. Prices for goods didn't go down. Merchants just pocketed the difference.

LakeEarth · Apr 18, 2021

Shake Appeal said:
Credit cards everywhere are viciously stupid. Credit cards in the U.S. are especially viciously stupid.

If you're wealthy and can pay off your cards every month, they often offer free money! That's fun!

If you cannot afford to pay them off every month, you should not own one. Ever. Stop. Don't do it.

Cashback is basically the credit card companies letting you in on the scam.

anexanhume · Apr 18, 2021

Kill3r7 said:
There is no proof that credit cards raise prices even though economists would tell us otherwise. See Australia or several EU countries that implemented strict interchange fee regulations. Prices for goods didn't go down. Merchants just pocketed the difference.

And had the fees not been so in the first place, there wouldn't have been the environment for them to do so, since obviously they were existing on the smaller margin beforehand. You don't just throw your hands up at that point and say "Well, guess we can't help consumers after all!"

Lishi · Apr 18, 2021

Walter White Walker said:
.
Nobody is too poor to afford a credit card. There are plenty of ones with no annual fee. They cost nothing to own and use.
If someone can't use them right that is their problem, not mine.

Those have almost no benefict.

So they still subsidize your reward

mhayes86 · Apr 18, 2021

That was pretty good for making credit cards terrifying, and included several reasons as to why I was so hesitant to get one when I did. I did a lot of research before I could get myself to finally sign up for one just to start raising my credit.

We need better financial education in general.

Kill3r7 · Apr 18, 2021

nofriendo said:
absolutely and they should only be for people who can afford them. That is just not the case anymore. Not disagreeing with you that there were societal and political pressures but the core benefactors here are the financial institutions. They have a vested interest in you not making payments...that being interest on debt.

Yes in part. The issue for the banks is that banks haven't been able to repackage credit card debt into securities instruments to get the debt off their books. Credit Card debt is arguably some of the worst kind of unsecuritized debt to hold.

Kill3r7 · Apr 18, 2021

anexanhume said:
And had the fees not been so in the first place, there wouldn't have been the environment for them to do so, since obviously they were existing on the smaller margin beforehand. You don't just throw your hands up at that point and say "Well, guess we can't help consumers after all!"

But merchants aren't against consumers using credit cards (they like it as it increases purchase power) and they are ambivalent at us being taken advantage off by issuers. They just don't want to pay high interchange fees.

Wari Oman · Apr 18, 2021

Fuck, I thought for a second that Roger was back with a new video.

Now I'm sad :(

bremon · Apr 18, 2021

All of my spending is on credit for cash back purposes. 3% back on gas, groceries and all me pre-auth bills, 1% back on everything else. Pay in full every Friday. A credit card is like any other tool; useful but dangerous if used improperly.

skeptem · Apr 18, 2021

Eatin' Olives said:
1. Get a card without an annual fee
2. Pay in full every month
3. Set up rewards to deposit as cash directly into your account
4. ???
5. Literally profit

The only change i would make is pay small vendors or local places with cash to unburden them from unnecessary credit card fees.

anexanhume · Apr 18, 2021

Kill3r7 said:
But merchants aren't against consumers using credit cards (they like it as it increases purchase power) and they are ambivalent at us being taken advantage off by issuers. They just don't want to pay high interchange fees.

I don't disagree with any of that. I'm simply saying that the current dynamic is not favorable to lower income buyers, and can harm those who choose not to or are unable to use cards themselves.

yongeandcollege · Apr 18, 2021

I use a credit card to make almost every single purchase. Pay off at the end of the month, get the rewards. All good.

Hollywood Duo · Apr 18, 2021

Credit is not a scam. It can be advantageous to both parties if used properly.

Vapelord · Apr 18, 2021

There's really no good cards here in Canada to churn like you can find in the USA. So I have the most basic, bare bones card since its not worth any time or investment from what I've seen.

PeakPointMatrix · Apr 18, 2021

I normally fly 4-5 times a year and have rarely had to pay for a flight in almost a decade. All purchases go through credit cards that get paid off immediately. Other cards I let accumulate points over the years saving up for big purchases. My CX-77 was almost free thanks to this.

Transistor · Apr 18, 2021

Cipherr said:
Ehh, video is a bit much. There's some good bits.

But credit cards are a utility, that either you use properly, or it will use your ass.

The realities of the world make me cringe at videos like this, because stuff like this made me avoid credit card for like the first 8 years of my adult life, and end up stuck trying to build good credit later. When all I really needed was someone to explain how the system of obtaining a mortgage, managing credit and credit scores worked concisely and clearly instead of fear mongering about the worst case scenarios that would occur if I didn't do everything properly.

That action would have allowed me to use the utility to my benefit, reap those benefits and successfully side step the pitfalls.

This. I keep thinking for a comparison; but I cannot find one. I wanted to say this video like teaching abstinence instead safe sex. But that's a really lazy and inappropriate comparison. But truly Credit and Credit Cards don't need to be made into boogeymen. Just explain them to young people and erase the mystery. It'll be like pulling the mask off the ghost in scooby doo cartoons. It isn't that scary once you know how it all works and how to use it to your benefit.

Very well put

Psittacus · Apr 18, 2021

Walter White Walker said:
Nobody is too poor to afford a credit card. There are plenty of ones with no annual fee. They cost nothing to own and use.
If someone can't use them right that is their problem, not mine.

I think this is probably the most "fuck you, got mine" post I've seen here in some time

404Ender · Apr 18, 2021

I promise this question comes from a place of seeking to understand: When people talk about credit cards being complicated, confusing or hard to understand, what are they referring to?

Spending using a credit is the same as taking out a loan. You have to pay it back or you start paying interest...that's it. What am I missing?

No_Style · Apr 18, 2021

Firestorm said:
I'm using Brim. Rogers at least at the time I needed it (so after Amazon shuttered the card lol) was only offering cash back towards your Rogers Bill

Thanks! Will look into it!

Joni · Apr 18, 2021

404Ender said:
Spending using a credit is the same as taking out a loan. You have to pay it back or you start paying interest...that's it. What am I missing?

People in general don't know how compound interest works. There is nobody that teaches you that stuff in school.

404Ender · Apr 18, 2021

Joni said:
People in general don't know how compound interest works. There is nobody that teaches you that stuff in school.

This doesn't really help all that much. Math is taught in the majority of schools, and all loans fall under compound interest so why are credit cards singled out?

Joni · Apr 18, 2021

404Ender said:
This doesn't really help all that much. Math is taught in the majority of schools, and all loans fall under compound interest so why are credit cards singled out?

Because people will get a credit card a lot sooner than they will get a mortgage loan. It is the gateway for most people to compound interest. And no, just teaching people math isn't good enough for this.

DryCreek · Apr 18, 2021

VariantX · Apr 18, 2021

I honestly barely use mine. I'm too hardwired to not buy anything I can't already afford in the first place and using a credit card is just an extra step I gotta go through to build credit history. I literally wouldn't touch it but In the US you're forced to. Its a shitty game thats rigged against you and you don't even get to opt out of it.

Yunyo · Apr 18, 2021

The clickbaity title is bad as it will scare off people from taking advantage of credit bonuses.

404Ender said:
This doesn't really help all that much. Math is taught in the majority of schools, and all loans fall under compound interest so why are credit cards singled out?

A huge chunk of the population sees credit cards as just free extra money. They don't take time to process the consequences of spending money they don't have. Classes would need to focus less on math and more on just the overall dangers of abusing credit for vanity.

skies_ · Apr 18, 2021

ruggiex said:
Research also show credit card makes you spend more than you would without one, so even if you are paying off every month that's something else to keep in mind. It's convenient but use it responsively.

I feel this. It's a lot easier for me to make an impulse purchase with credit than in the cash days. I'm sure those random purchases add up to much more than the rewards points I get back.

Dreams-Visions · Apr 18, 2021

It's definitely a trap for many people. Particularly college-age students who are unlikely to have been properly educated on how to manage credit cards.

Unsurprisingly, you see credit card companies well represented on campuses around the country for the whole first month of a new school year.

Unlike many, I'm in a good position to manage my credit debt. I owe nobody anything and like some here I functionally use my credit cards like debit cards. I rarely buy anything that I can't pay back at the end of the month. I have about $80k in available credit and usage below $1,000. I'll start selling things before I allow myself to build up debt. And the benefit is all of these rewards points and cash back. I've earned thousands in cash back and points. Money that simply would have gone into the ether if I was using a debit card all the time.

If you can manage a credit card, get a few. You're throwing your wealth away by NOT taking advantage of those signup bonuses, points, discounts, and cashback. If you know you aren't anally retentive about watching your money going in and out, pass on credit cards until you are ready to become as such.

nofriendo · Apr 18, 2021

Hodgy said:
Itt: people that are financially literate defend a predatory practice because it benefits them 🤔

Where do you think the cash that pays for all those rewards you enjoy come from?

The inherently altruistic nature of financial institutions ? Oh wait...

404Ender · Apr 18, 2021

Joni said:
Because people will get a credit card a lot sooner than they will get a mortgage loan. It is the gateway for most people to compound interest.

A mortgage is only one other type of loan, and even still, it doesn't explain why the same issues don't crop up later whenever someone finally is ready to buy a home. Why do people take other types of loans more seriously? Are you saying they learn their lesson after getting burned by a credit card?

Joni said:
And no, just teaching people math isn't good enough for this.

At its core it is, though. Give people a calculator to plug in how much they're borrowing and when they plan to pay it off, and it will output how much extra it will cost them. It's multiplication, not calculus. People don't complain about being surprised by their mortgage payments.

Yunyo said:
A huge chunk of the population sees credit cards as just free extra money. They don't take time to process the consequences of spending money they don't have. Classes would need to focus less on math and more on just the overall dangers of abusing credit for vanity.

I think this is maybe starting to get to the root of it, but I still don't really get why they're seen as different from other loans and where the idea of "free extra money" originally comes from.

Sydle · Apr 18, 2021

I wouldn't recommend that video to anyone. Credit cards are great ways to build credit and earn free stuff when used properly plus get extra services like extended warranties.

A better video would lead with the benefits, talk about the dangers, and then tell people how to manage their CC. Basically treat it like you would a debit card and you're golden.

I pay everything I can on my CC and pay it off every month, earning travel points. I have enough right now to fully cover a couple of international trips.

Deleted member 50498 · Apr 18, 2021

Hodgy said:
Itt: people that are financially literate defend a predatory practice because it benefits them 🤔

Where do you think the cash that pays for all those rewards you enjoy come from?

.

LuigiMario · Apr 18, 2021

I have 2 credit cards with a combined limit of $2500 and the only thing I plan on ever getting another one for is when I get a new furnace+air conditioning to help pay for that.

Joni · Apr 18, 2021

404Ender said:
A mortgage is only one other type of loan, and even still, it doesn't explain why the same issues don't crop up later whenever someone finally is ready to buy a home. Why do people take other types of loans more seriously? Are you saying they learn their lesson after getting burned by a credit card?

At its core it is, though. Give people a calculator to plug in how much they're borrowing and when they plan to pay it off, and it will output how much extra it will cost them. It's multiplication, not calculus. People don't complain about being surprised by their mortgage payments.

Because people tend to be more careful for a $10.000, a $100.000 purchase than they are for something that is sold to them as quick $10. People that don't manage credit cards well also won't be able to reach the stage where they can do such a major purchase. It is working to keep certain people outside of the loan market the way it is set up in the American market.

The below is the formula for compound interest. It is not multiplication... The biggest mistake people make is thinking that it is just multiplication. And even if you can calculate this, the formula and its impact is not something ever taught to you. if you are financially literate enough to know this upfront it is fine. It won't hurt you to have this explained better to people.

DryCreek · Apr 18, 2021

BasilZero · Apr 18, 2021

turbobrick said:
Using a credit card for things you need right away makes sense but only if its actually important. A TV is probably a bad example as its a non-essential item, same with a PC for most people. You shouldn't use a credit card for those things if you don't have the cash

I'm sure it would help some people if you learned it in school. Though thinking back when I was a student, I'm sure there's a sizable amount of kids that will just ignore it. I remember when I was in school they taught us how to use checks, and I didn't pay attention and learned nothing, lol.

I mean I'm not gonna pay/carry around $3,000 for a TV when I can simply buy it via a card that gives me time to pay it off with accruing interest which is what I did and paid it off already before the end of no interest date runs out.

Obviously you shouldnt pay for something you cant eventually pay off but its a great way to get something quick without breaking what you already have in bank on the same day and still build credit on it in the end of the day.

Haha, I dont remember getting taught how to use checks at school but I know for a fact my parents taught me, I had my bank account made and got my first credit card when I was like 16 or around that.

Syriel said:
This. Credit cards are a tool. Nothing more.

No. Credit cards shouldn't be used "when you don't have the cash". And if you're doing the balance transfer dance that's a sign that you're already doing things wrong.

So do you tell people who dont have cold hard cash on hand or in the bank to not buy groceries to not use a credit card? If I took your advice years ago, I probably wouldnt be alive right now.

Credit Cards are a tool and can be used for different reasons.

Balance transfer dance? lol - its a smart way to consolidate debt and then pay it off in amounts you can or like to without worrying about increasing your debt.

Obviously if you suck at managing money and do impulse purchases on trends and non-essential items, you are doing it wrong but if you know how to manage money/budget and plan ahead on how to pay off what you buy for whatever reason, it can be a very useful tool that helps you in the long run.

404Ender · Apr 18, 2021

Joni said:
Because people tend to be more careful for a $10.000, a $100.000 purchase than they are for something that is sold to them as quick $10.

But people don't get into bad credit card debt for $10. So maybe the core issue is people don't budget their CC spending the way they do normal spending (but again, why is this?) and realize that they've racked up hundreds of $s over a month until it's too late?

Joni said:
The below is the formula for compound interest. It is not multiplication... The biggest mistake people make is thinking that it is just multiplication.

Exponents are literally multiplication repeated. We're still well in the realm of arithmetic; nothing advanced. "n" is usually fixed in that equation too to either monthly or annually.

Joni said:
And even if you can calculate this, the formula and its impact is not something ever taught to you.

I totally agree we could use some "Adulting 101" in schools for taxes, retirement, finances, etc. But knowing that when you take out a loan, you're going to have to pay it back with interest, and realizing it might be a good idea to figure out what that will be upfront doesn't seem like a tall order to me, schooling or not.

I think people being tricked into not realizing it's a loan (like the other poster suggested) seems to be a more likely factor.

BasilZero said:
Obviously if you suck at managing money and do impulse purchases on trends and non-essential items, you are doing it wrong but if you know how to manage money/budget and plan ahead on how to pay off what you buy for whatever reason, it can be a very useful tool that helps you in the long run.

All of the planning and management in the world won't stop an unexpected emergency (medical bills, car accident, important appliance breaks down, etc) from ruining everything. Suddenly the money that you thought you had to pay off that TV is no longer available to you. Better to only use a CC for purchases that you can completely cover with cash you already have in the bank and can pay off immediately.

Kill3r7 · Apr 18, 2021

anexanhume said:
I don't disagree with any of that. I'm simply saying that the current dynamic is not favorable to lower income buyers, and can harm those who choose not to or are unable to use cards themselves.

Banks provide an alternative to credit cards for people who don't want to or cannot afford to use them.

Maxim726x · Apr 18, 2021

GYODX said:
Nah I'll keep using credit cards.

Seriously.

I have over a million reward points across AMEX and Chase. And over 800 cash back ready to go for my Discover cards.

Combined, these will pay for a 2 week vacation in Greece without having to pay a dime.

big_z · Apr 18, 2021

"we're even putting chips in some of them" wtf is America still that far behind with their card tech? Chipped cards have been standard for 10-15+ years pretty much everywhere else.

Kill3r7 · Apr 18, 2021

big_z said:
"we're even putting chips in some of them" wtf is America still that far behind with their card tech? Chipped cards have been standard for 10-15+ years pretty much everywhere else.

Merchants didn't want to pay to upgrade the equipment (POS readers) considering that many already did so with general tech updates and also didn't want to deal with the liability shift. Furthermore it is worth noting that chip cards limit routing (but I might be wrong on this). Like anything else in our country, it is all about your lobbying power and while banks and networks are powerful. So are the merchants.

SteveWinwood · Apr 18, 2021

Joni said:
Because people tend to be more careful for a $10.000, a $100.000 purchase than they are for something that is sold to them as quick $10. People that don't manage credit cards well also won't be able to reach the stage where they can do such a major purchase. It is working to keep certain people outside of the loan market the way it is set up in the American market.

The below is the formula for compound interest. It is not multiplication... The biggest mistake people make is thinking that it is just multiplication. And even if you can calculate this, the formula and its impact is not something ever taught to you. if you are financially literate enough to know this upfront it is fine. It won't hurt you to have this explained better to people.

in what world is this not multiplication

Y2Kev · Apr 18, 2021

Hodgy said:
Itt: people that are financially literate defend a predatory practice because it benefits them 🤔

Where do you think the cash that pays for all those rewards you enjoy come from?

A big chunk comes from the fee the issuing bank gets. All the card issuers want people to use cards because of that. Obviously the acquiring banks like that as well. I'm not sure what percentage of late fees / interest funds the rewards but it's not obvious to me that it does.

I think a bigger problem is predatory cash withdrawal rates. I will always use a card when it costs money to access cash and the network is smaller and more limited.

I think it's hard to make the case that credit cards are a "scam."

Voyager · Apr 18, 2021

I definitely don't think they are a scam. I use rewards to my advantage all the time. Use a Capital One Venture card for all my purchases, it's been well worth the $100 annual fee as well. Used it to pay for TSA pre-check (I travel for work in a non Covid environment) and they covered the cost for me!

I also applied for a cash back credit card when I bought my TV. Not only did I get a year interest free but it knocked over $200 off the price of the TV with the activation cash back bonus.

Did the same thing when I bought my MacBook, a year interest free and $200 in bonuses.

Hollywood Duo · Apr 18, 2021

big_z said:
"we're even putting chips in some of them" wtf is America still that far behind with their card tech? Chipped cards have been standard for 10-15+ years pretty much everywhere else.

I've had a chip for about 8 years in the US but it is just in the last couple years that it seems like every bank has them.

Tater · Apr 18, 2021

I replaced my HVAC system last fall and aerosealed my ducts. Both companies allowed me to pay them via credit card (they actually preferred it, which surprised me). Putting $25k of charges on my card and getting 2% cash back took the sting out a bit. Basically gave me a "free" PS5.

As folks have said, it's no different than any other tool. That knife in your kitchen can prepare a meal, but it can also cut your finger off if you're not careful with it.

RedMercury · Apr 18, 2021

It sucks having to have a credit card. I've never had any debt, I had to get a credit card in my mid-30's because I couldn't get a car loan without credit even though I have 20 years of paying all my bills on time, that doesn't count, I had no credit score at all. Just seems fucked up that they know you have to have one for major life purchases and they know not everyone is going to know hoe to use them. That being said within like 16 months my credit score is at 680 and I've already gotten an increase on my card, started with a secured $500 card and now I have a regular $1000 limit. I pay it off every month and keep utilization at around 10 percent, so I'm proud of that I guess.

Vilam · Apr 18, 2021

skeptem said:
The only change i would make is pay small vendors or local places with cash to unburden them from unnecessary credit card fees.

Sorry, but no. I expressly avoid shopping at places that don't take credit. Cash... dirty and inconvenient.

BasilZero · Apr 18, 2021

404Ender said:
All of the planning and management in the world won't stop an unexpected emergency (medical bills, car accident, important appliance breaks down, etc) from ruining everything. Suddenly the money that you thought you had to pay off that TV is no longer available to you. Better to only use a CC for purchases that you can completely cover with cash you already have in the bank and can pay off immediately.

I've experienced all three examples (and etc) you mentioned in the last 5 years and thanks to careful planning and management was able to get through all of it.

My dad has serious health issues and medical bills tallied up, my car got reared and the damage cost a lot but was able to fix it promptly and I've had aging appliances/electronics (like my 10 year old PC) that died out that got replaced promptly as well. All of which happened while I was paying off the TV I bought while being the only person working in a household of 4.

It was tough (and I know not everyone can do it) but its not impossible.

crimzonflame · Apr 18, 2021

skeptem said:
The only change i would make is pay small vendors or local places with cash to unburden them from unnecessary credit card fees.

A lot of the times their prices have the cc fees built in. And if they dont then they have a minimum purchase amount if you want to pay with credit.

I will not shop at a store that does not offer cc as a payment. They are losing potential business by being cash only.

Muu · Apr 18, 2021

Joni said:
Because people tend to be more careful for a $10.000, a $100.000 purchase than they are for something that is sold to them as quick $10. People that don't manage credit cards well also won't be able to reach the stage where they can do such a major purchase. It is working to keep certain people outside of the loan market the way it is set up in the American market.

I'd say this is why budgeting apps like mint are so useful. It's much easier to see death by a thousand cuts when tracking, and automating the tracking makes it easier for people to use.

Uhm This should be required learning. Why Credit Cards Are A Scam - Honest Ads

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