This is a strong US vs the rest of the world difference. In the UK for example most people will do their day to day spending on debit because the rewards we get aren’t worth the faff of paying for things a month later, when you are less “flush” (Americans just seem to have a lot more money sloshing around compared to even well paid Brits and Europeans) it’s much harder to manage that monthly offset from salary payment to credit card falling due and when the rewards are so paltry it’s just nit worth the faff. Only one of my friends does any regular spending on a credit card and he says “it’s Amex so it’s worth the extra faff but only just”

> most people will do their day to day spending on debit because the rewards we get aren’t worth the faff of paying for things a month later, when you are less “flush”

This sort of thinking misses the point that even with credit cards you don’t spend what you don’t have. You (ideally) treat it like a debit card. If I spend $100, then I’ve $100 less in my checking. If you do that, then “flush” never enters the equation.

Poor choice of word on my part I think. I don’t mean flush in that the following month you have more money but that in general Americans have more money and so are less susceptible to the ramifications of miscalculating. I’ve had a couple of long conversations with Americans about this topic of credit vs debit and the cultural difference is so strong that we inevitably can’t reconcile each others point of view. My debit card will bounce any payment that will take me over drawn, my credit card doesn’t care if I can’t pay it off next month and that’s what the banks hope you forget.

The possibility of spending more money than you have means you are more likely to spend more than you have

A much more succinct summary than I gave that hits at the heart of the CC issue - the banks want you to spend more than you have.

Correct. I use YNAB as a system to ensure that every dollar of spending on my credit cards are backed by liquid cash. I'm not going to argue the merits or downsides of something like YNAB; use whatever suits you.

But when that card statement balance comes due every month, it should make no difference because the cash was already deducted from my books when I made the charge.

This is what I do as well. Monthly bills are all direct debit, but almost all other spending goes on my credit card, and, without exception, I paying it off completely at the end of the month. I've done this for decades, and never paid a penny in interest - the key is to not spend money you don't have.

I get some small amount of Amazon vouchers every month for doing this (£10/m or something like that), but really I do this for the fraud and chargeback protection.

I feel like this works well for us, but you have to be able to budget - if you're not capable of budgeting or find credit too alluring, then you're better off using a debit card.

Glad it works for you, we are very good at budgeting but i find u less you put 100% of the “cash” like spending on the credit card it falls apart as you can double spend without realising and when we tried it for a few months I hated paying for August’s groceries in mid October - it just felt weird to me, far easier just to have a set XX amount in a current account each month and spend it down to 0 through the month on the cash transactions etc.

You can (and probably should) reconcile your credit card purchases more than monthly - I used to do it weekly (every Friday) now it's semimonthly.

With online account availability I've moved to paying my credit card weekly. I pay for everything with it.

You miss out so much paying debit for things in the US. Most transactions net me 2-3% discount, I get baked in additional travel insurance on all travel I book with it, extra warranty on everything I buy, charge backs are easy when things go wrong, and if there's fraud I'm not out cash while things get investigated.

A friend did all her banking in a single checking account. Her card was duplicated and completely wiped out. She filed with the bank for fraud charges. It took almost a week before most charges were wiped out. All the while she had literally no money to eat, buy gas, etc. If that was a credit card, it wouldn't matter. She would still have all her money. She could easily just use a different line of credit, use cash, or use her debit card.

So paying a debit card gets you far less benefits and depending on viewpoint carries higher risks. But the benefit is you (sometimes) can't spend cash you do not have.

Australian here. Don’t use credit card, setup a separate account for bills, direct debit everything from there, don’t keep anything big on your debit card and use it with Apple Pay everywhere. No fraud, no fees, no complex things and rules to remember.

Also Australian here. Use a credit card which is set to direct debit (auto pay) the full outstanding balance from a high interest savings account. Credit card is added to and only used through Google Pay.

* Never pay anything in the way of fees or interest, including international fees.

* Never have a positive balance sitting in a transaction account earning zero interest (or as Americans would say, checking account).

* Never worry about overdrawing my transaction account.

* Card authorisations don't deprive me of my own money (eg hotel security bond).

* Importantly, in the event of fraudulent use of the card, the bank wears the damage while an investigation is underway.

A debit card might tick the first item on this list, but not the rest.

Amex pays me over a thousand dollars a year to use my credit card (which it takes from the merchants as fees.) I kinda feel bad about that, but I know those fees are built into the price and if I used cash or debit I’d still be paying the same price, just not get the reward.

But if they accepted lightning payments, I would pay them in BTC.

I used to ask "can you give me a discount if I pay in cash?" and most of the times the merchant would say no. Then I stopped asking and started using only credit cards for at least earning some "rewards" back.

("rewards" purposely in quotes since it's not really a reward, but amex/visa/mastercard want us to think it is - there's no free lunch)

The proper term for these "rewards" is kickback.

In my country you pay extra (2.5%) at the checkout counter for using a credit card.

In my country that would be illegal. Here, the price is fixed first, and the customer has the right to choose any supported method of payment.

Merchants are free to offer more reward points or discount coupons for cash payments, though.

They advertise it as 'paid by merchant fees' but somewhere in a ledge or spreadsheet everyone makes a profit except the individual consumer. Maybe the prices are higher in general, maybe there are some consumers where more value is extracted than from others, but money doesn't appear out of thin air (except when you get into the whole derivatives gamble). Someone, somewhere, gets screwed over when a bank or credit company "gives" you money.

Why would you ever not want to put something on a cc? It's quite literally free money (rewards/points + you can delay payments for a month and pay no interest)

Australian here - Points systems are only really worth it in Aus if you're collecting frequent flyer related ones. There are not as many cash-back rewards as the US. We have had a universal fee free bill payment system called Bpay for 20+ years, and paying via cc usually incurs a minor fee. So most households will direct Bpay household bills rather than via credit card.

I don't fly much, so I dont feel the need to harvest points. I dont want my purchasing data picked up by any more companies than necessary (my bank & the vendor), and all the various chargeback and refund facilities offered by credit card companies are a bit less critical as Australia already has stronger consumer protection law around goods fit for purpose & refunds. Credit scores are not really a thing in Australia either, you are assessed on your current ability to service a loan rather your history. Defaults still show up & count against you, but 'building good credit' is again an American concept.

Credit cards are a product designed largely for the American market.

Australia put a cap on interchange fees in 2017 that caused a drop in card rewards. Merchants argued that the lower interchange costs would be passed on to consumers. However, it appears to only significantly affected the consumer rewards.

I can't speak for Australia specifically, but most EU countries sharply cap the interchange fees that credit card companies can charge so they don't really have rewards to speak of

In Poland I get rewards for using debit cards too, credit cards do not offer anything more in that regard. The rewards offered by bank are the same regardless of which type of card I use. They are in fact based on referral programs (bank gets a small percentage of a transaction if we use their link and they share that earning with us). Debit cards are free and the cheapest CC I can get from my bank is $10/year. And every month I would need to make sure that the CC is paid. There's nothing CC can offer me besides maybe building a credit score.

In my country, merchants add a 2.5% fee to every credit card transaction. Cash is king.

Rewards/points are not free. You're paying more upfront to get something "free" later on.

Only if it actually costs you more to use the credit card. If not, it's the cash buyers that are paying for your rewards.

What do you mean? I'm not paying anything upfront for using a cc afaik. There are cards with yearly payments of course, but they tend to be marginal.

Why spend money you don't have?

If you do have money, why do you need to borrow money you already have?

> Why spend money you don't have?

Classic mistake, using credit or specifically a credit card does not always mean you dont have the money.

> If you do have money, why do you need to borrow money you already have?

Do you have a mortgage? Do you also have any money in a bank account / savings / cash in your wallet? If so "why do you need to borrow money you already have"?

Indeed the mortgage example is even worse, because typically a morgage has interest paid whereas a credit card paid off within the month does not.

Because I get 2-5% of it back if I put it on a credit card and pay it off and the end of the month.

As a matter of principle, I don't accept "gifts" from a bank or financial institution, because there's no such thing.

As a matter of principle I do +EV trades

Free money?

There is no free money, and delaying is essentially spending money you don't actually have. If you want to buy something that comes out of your short-term savings account here. Or you can choose to not do that and have all your money in one single account and everything you do goes in and out of that. And you can configure it in a way that disables going negative so you don't get this weird overdraft fee system unless you choose to.

Same here in Western EU. And if you can't or won't use Apple Pay, any NFC EMV or Pin + Chip EMV will do. Don't combine automation with manual transactions (the direct debit thing), don't put a bunch of value on a thing if you don't have to (both the direct debit thing and the cards) and don't use a credit card or 'overdraft' (or whatever the local equivalent is) features.

Are there American banks that don't cover debit transactions with the same guarantees as credit card transactions?

I've had two debit cards from two different large banks skimmed in the last five years, and both times the banks took care of it instantly.

I think the whole "no coverage if you use debit" notion is many years out of date.

With a debit card you’re relying on the bank’s good will. With a credit card it’s the law.

Also with credit you can dispute it before you pay it. With debit you’re trying to fix it up after your paid it.

> With a debit card you’re relying on the bank’s good will. With a credit card it’s the law.

Can't emphasize this enough!

It is true that many banks do offer fraud protections on their debit cards. But those are just a choice by the bank. They can at any moment stop or withdraw those protections and then you're out of luck.

With a credit card, the protections are written into regulation, so every bank must follow them and can't change the terms.

It's almost as if the law is setup to let people make bad choices with money they don't actually have so that some value can be extracted from them later.

Like it or not protecting people costs money, with credit cards banks have an opportunity to potentially recoup that, otherwise they don't do that at all or only do it when they can afford it.

Really the primary disadvantage these days is that you won't be able to access that part of your bank balance (often lower than most credit limits) for a bit of time until the bank either issues you a temporary credit or the dispute is resolved. This happened to me once in the earlier half of the 2010s and it was frustrating to have to wait for my balance to get restored.

There are enough banks in the US nowadays that cover debit fraud that any bank that doesn't do it will really stick out like a sore thumb and eventually lose their customers.

Even if things are taken care of in the end, with debit fraud the money leaves your bank account immediately and then it is up to you to make sure you get it back.

With credit card fraud it won't get to the point -- you dispute the charges before paying them back.

Exactly. $10k skimmed out of my bank account is a huge problem for me while it gets resolved. $10k skimmed off a credit card, eh, I'm never that close to my limits anyway

One of the biggest wins from credit cards (imo, of course) is reward programs. Getting a 1-3% discount on purchases is pretty nice (plus, obviously, fraud protection, etc.). However, some issuers are using crypto to claw back at this perk; for example, the Coinbase debit card can give you 4% back.

I find it hilarious that Americans will tell you about the great discount/cashback they get, then in the next post crypto advocates will tell you that crypto currency can avoid the insane credit card fees.

It's almost like the two things are related, but few people seem to link them...

In Europe and Australia, caps have largely fixed the latter, at the expense of the former. Seems better all around.

Insane credit card fees? What? Most cards do not have a fee.

And for those that do, it’s very easy to recoup much more than the fee in rewards. For example, Chase Sapphire is one of (or actually the) the most expensive cards at $550/year. But even then it’s very easy to recoup much more in rewards.

They’re talking about interchange fees you pay on every transaction. Which is where the money to fund rewards comes from.

In the US you’ll be paying something like 1% on interchanges fees for every transaction, in the EU it’s something like 0.05%. Orders of magnitude less, thus orders of magnitude less rewards, and also fraud, because banks can’t use the interchange to write off fraud and thus implement proper controls.

Unless the merchant is offering discounts for cash payment, it's the customers who are not using credit cards that are paying/subsidizing the fees. Sadly, not using a credit card is just throwing money away in North America

In reality it’s people with poor or non-existent credit that pay. They can’t access cards that offer rewards, so they end up eating the costs. It’s a remarkably good way of transferring wealth from the poor (who are usually deemed not worthy of credit) to the rich (who are worthy of credit). Pile on the other costs like fees for using cheques rather than direct deposit (also common for poor people who aren’t salaried), crazy overdraft fees etc, and becomes pretty clear that the US banking system is paid for by the poorest in society, and only benefits the richest.

Your reward is basically money paid by the poor routed via the merchant and bank.

The Coinbase card ties up your assets (you have to hold USD or crypto on their platform). Whereas the credit card is an interest free loan for the statement period. I'd take the latter any day of the week.

Bank account savings interest rates are like 0.40% annual, 0.03% monthly. I'd take an extra 1% cash back over a loan that accrued me only 0.03%.

Absolutely, but there are so many people in the USA that are excluded from the ability to obtain a credit card - even a secured one - that debit cards are a god send to us.

Both Cash App and Venmo sent me debit cards without requiring any ID.

Even though you didn’t provide ID, I assume you provided a name, address, and other info they could use to perform KYC (Know your customer), no?

Name and address, yes. Kinda needed to send a card anyway.

Good advice, but only if you pay off your balance in full every month to avoid the huge interest charges.

Why in the world wouldn't you want to do it.

Can <> want.

With or without a credit card it's still spending what you don't have. The credit card just makes it easier to ignore the fact that you're in dire financial straights.

Should <> need.

I don’t understand this one (in a context), can you explain?

My credit score goes down unless I carry some revolving balance.

For maximum FICO score you ideally want every card except one to report a $0 balance and one card to report a $1 balance (some issuers will forgive a balance of $1 so you might have to use $2). You do this by paying down the cards before the statement generates. Once the statement for the $1/$2 card generates you can then pay it off.There is no need to revolve a balance. In fact if you pull your credit reports it does not even show if you are revolving a balance. If you would like to see what data is in a credit report you can obtain a copy for free.

https://www.ftc.gov/faq/consumer-protection/get-my-free-cred...

If you are interested in how FICO scoring works there is a lot of information available on various forums. The best resource I have found is on https://creditboards.com/. The FICO algorithm is proprietary and they do not disclose it, but through experimentation people have managed to reverse engineer quite a bit of it.

No, that’s not how it works.

It's a little complicated. My credit score has been consistently higher than my wife's score, and but she has never carried a credit card balance in her life. You get high credit score marks for making banks money, but not borrowing so much that they get nervous.

Not really, it’s all about payment history. Use your card for gas, etc is more than enough to demonstrate a pattern of on time payments.

People who don’t use credit often get penalized from a scoring perspective because they don’t have a large credit line and have a higher utilization.

The bank wants you to make payments, period. More credit lines means you have more resilience.

It's more than payment history. I avoided credit until I bought a car, and I made a point to pay my car loan off early. Seemed like a way to demonstrate that I was responsible with my money.

The month I paid off that loan, my credit score dropped precipitously.

In 2006, my wife and I bought a home, and had to get two separate loans to make it work, because our credit scores weren't great at age 26, since I generally avoided credit.

As soon as we opened those two loans, our credit scores jumped to the highest they've ever been.

That and other patterns I've watched over two decades are why I believe credit scores are entirely about how well you pay the banks' game.

You made my point — they care about payment history, not paid off. You’d be better served taking a $500 personal loan from a credit union and paying the payments every month.

Using a very, very low, or no percentage of your available credit for ages makes you just as bad of an investment for these companies as customers who run off on the bill.

In both cases, higher risk of default, less chance of profiting from interest, lower creditworthiness score!

I have never once carried a credit card balance or paid a cent in interest. My credit score is over 800 which is pretty much maxed out. The only things on my credit history are a few credit cards that I got to establish credit history, and my mortgage, which is why I needed a credit history.

So I got 3 credit cards and used them each during each month so that I would established on-time payments on all three and boom, I had perfect credit after a couple years and qualified for a mortgage. I didn't use any credit before I decided to buy a house in my 30s so I had a completely empty credit history prior to that, apart from a library that reported a lost book. So it just took a little while to get my average account age up and my number of on-time payments above some threshold.

Now if you don't use the card at all, it is less effective at establishing credit because you don't get the on-time payment history or balance. The credit bureaus just get reports of on-time or late payments, balances, and delinquencies/defaults, etc.

You will be given the best rating at a small non-zero percentage of your total available credit being used each month, but it doesn't have to be carried.

All you have to do is make sure you don't pay it off too early. Just wait until the due date, and pay off the statement balance, not the full balance. If you pay it off mid-month, before the end of the statement, or paid the full balance instead of what is due, you may get a zero balance reported which is a slight temporary hit to your score, but not that significant. I found that it was best to have a few cards with a total available credit at least 5 times my monthly spending. That way the reported balance ends up being <20% of my total available credit which is near the sweet spot. If I am going to do a refi on my house i might try to micromanage it to somewhere close to 5% for a few months ahead of time and get a few points added to my score, but once you get your score up around 800 it doesn't really matter if it is up or down 10pts or so. I found that as my average account age increased, the swings from slight differences in balance were smaller.

Maybe, but it’s good for your credit score.

Sounds like you've never had a car break down.

Or a relative get hurt on the other side of the country.

Or been seriously ill.

Or unemployed.

Or had a major appliance break.

Or a million other things that happen to people every single day.

How does this change with a debit card?

Pretty much all of that is handled by the social safety that the government is there for or by your own savings that you build up because you are an adult and look ahead to make sure you can deal with such events. One of those things is planning and specifically financial planning.

A full quarter of adults in the US have no savings at all. It can be hard to build up your reserves when more than half the money you make from your two jobs goes to rent. Did I mention those jobs are both "part time" so no benefits either.

The discussion was about debit card vs credit card, not about the credit.

You can earn higher interest than the APR on your cc by yield farming stablecoin pools

That... is a terrible idea for literally every reason.

Please don't do this; it's really dangerous.

I would but tax implications scare me.

To be fair, debit card offers a few advantages over credit card:

* Debit card allows to set granular spending limit (e.g. $100 per day). So you can protect the potential amount that a fraudster can spend with your card.

* You can set it up to send transaction details via email on every purchase. This is a lot more convenient than, say, checking the credit card statement at the end of every month.

I actually prefer using debit cards for daily expenses. For me, credit card is almost exclusively for online purchases.

Neither my debit nor credit card allows the first, as far as I know, and both allow the second.

Perhaps these are advantages of the particular debit card you have over the particular credit card you have. I don't think they are general.

You can set up email alerts on every transaction for credits cards in many banks. Probably not all.

On the fraudsters, with credit cards the limit you'll be liable is generally $0 ($50 in rare cases), by law (regulation).

My credit cards (multiple issuers) all send me emails for every transaction.

you can get email alerts on cc transactions

i have alerts sent to me for anything higher than a cent

Credit history isn't a thing in many countries and credit card rewards are often minimal.

Do what makes sense in your country.

What? That seems totally backwards. Don't spend money you don't have, which mean using debit. Credit is useful for the single use case of buying a house.

Why spend your own money when someone is willing to loan you money for free, will give you some of your money back, and will also protect you against consumer issues?

You’re leaving money and protection on the table by not using them.

Because when you spend someone else's money you still have to pay it back... sometimes more.

A bank is a lot smarter than me. It wouldn't want me to use credit cards if it were in my advantage.

You have to pay it back… one month later. You can keep your own money safe and invested until then. And you don’t have to pay any more if you pay it on time.

The bank wants you to use credit because they get paid by the merchant every time you do.

> You have to pay it back… one month later. You can keep your own money safe and invested until then.

But if you're doing this every month then the advantage is what? ~$3k invested somewhere? It's not worth the extra effort for me.

Not the original poster, but I don't want to spend my limited time on earth trying to minimize the money I'm leaving on the table -- thinking about credit cards, points, money systems and wheeling and dealing in order to eke out a little extra scratch is thinking I would personally rather put toward nearly anything else.

That's why I would rather spend my own money when someone is willing to lend it to me for free.

Because I don't want a loan, even if it's for free.

Well up to you but that’s irrational - it’s leaving money on the table and what’s more you’re actually paying for my free loan and my cash back and my protection and my free flights and not getting anything yourself, as I’m paying the same price for products as you.

It's not irrational, there's a whole bunch of other things you're not considering. For example, a debt creates a financial obligation and as such it diminishes one's personal autonomy. People who value their personal autonomy will take that into consideration before going into debt.

Its incredibly irrational.

You're shipping a ton of personal baggage under "personal autonomy".

Why even take part in economic transactions at that point. If your definition of autonomy is that extreme, the concept that someone might have something you want but don't have must be a alien concept

My definition of personal autonomy is extreme? What definition? Why do you think it's irrational to assess how getting into debt affects my personal autonomy?

Arent you in debt to your stomach?

You need to eat.

Only when you skip lunch.

> Credit is useful for the single use case of buying a house.

I haven't paid a cent in interest on a credit card since I was in my early 20s. Thanks to credit card points/miles, I've flown all over the world (often in business class), enjoyed stays at hotels, had access to airport lounge access, received various upgrades on hotel accommodations, car rentals, etc. -- all for next to nothing.

Credit cards are an excellent tool if you are willing and able to use them properly.

> What? That seems totally backwards. Don't spend money you don't have, which mean using debit. Credit is useful for the single use case of buying a house.

Using credit in this sense means using a credit card, not necessarily running up a debt in anything other than a nominal sense. Using a credit card and paying off your balance in full every month (so that no fees are assessed) is way better for later loanworthiness and similar credit-based evaluations than using a debit card.

> Credit is useful for the single use case of buying a house.

If you can exercise self-control with spending, you can use a credit card for almost everything. I think Dave Ramsey advises you're less likely to spend money if you use real cash, but for some people, this is not an issue at all.

I've always noticed that cash has a way of disappearing from my wallet with me wondering "what did I spend it on?" With a credit card I have to think: will I punch myself in the face when I see that on my statement?

I took a loan on a new car. It is 0.9% APR. It's easy to have your money grow faster than that, so leaving my wealth invested and paying the payment nets me more money in the end than if I paid it up front. I could take money out of my investments to pay off the car tomorrow, but with the markets being as they are that would be insane. Even the bonds I own have higher returns than 0.9%.

I have money and I will take as much debt as I possibly can get.