Amazon.com Credit Builder: Build credit with no annual fee(amazon.com)
amazon.com
Amazon.com Credit Builder: Build credit with no annual fee
https://www.amazon.com/iss/credit/creditbuilder?pr=conplcc
299 comments
> The APR is required to be prominently displayed so consumers can do their due diligence on deciding on a card.
On applications or solicitations (the latter being restricted to firm, no-application offers, not advertising for applications.)
On applications or solicitations (the latter being restricted to firm, no-application offers, not advertising for applications.)
Yeah, I don't think burying it in the ninth paragraph of the Terms could be reasonably called 'prominent'.
For that matter, the landing page for the Apple Card shoves it into a footnote.
Seems like a case of "tech company trying to act like bank has no idea how to comply with banking regulations".
For that matter, the landing page for the Apple Card shoves it into a footnote.
Seems like a case of "tech company trying to act like bank has no idea how to comply with banking regulations".
The landing page is neither an application nor a solicitation under the applicable federal regulations, so isn't covered by the prominent disclosure requirements.
It's highly unlikely that Amazon or Apple "had no idea how to comply with banking regulations".
Both Amazon and Apple have law departments larger than most large startups. It was intentional. They know nobody will do anything. So really, it's a case of "tech company pretends to be incompetent at pretending to be a bank."
Sign up X customers and make Y dollars.
Get fined Z dollars for breaking a regulation.
If Y > Z, congratulate those responsible.
Get fined Z dollars for breaking a regulation.
If Y > Z, congratulate those responsible.
[deleted]
+/- TOO_BIG_TO_FAIL
We should also factor in.
Legally Signup n customers and make W dollars.
It should meet Y-W > Z
Legally Signup n customers and make W dollars.
It should meet Y-W > Z
The tech company scarcely ever "acts like a bank" -- they typically partner with a bank, drive users to it, and split the profits.
In this case the bank is Synchrony Bank, which is behind many many 'store cards' (Go over to www.synchrony.com and hover over 'Find Account'. Look at all those partners!)
In this case the bank is Synchrony Bank, which is behind many many 'store cards' (Go over to www.synchrony.com and hover over 'Find Account'. Look at all those partners!)
Sure it's required and they should have to comply, but this is a secured LoC, so there's no interest to gather in the first place. Unless I'm grossly misunderstanding this? That's a stupid high APR, but you should effectively have a bill of $0.
Secured cards work exactly like non-secured cards, the only difference is the bank holds onto collateral, usually equal to your credit line. You still have a bill to pay, minimum payment, due date, you can pay the minimum and carry a balance, rack up late fees, etc.
The collateral is only returned to you when you close your account or upgrade it to a non-secured card. You don't use the collateral for the monthly bills, just like if you rent an apartment you don't use the security deposit to pay the monthly rent.
The collateral is only returned to you when you close your account or upgrade it to a non-secured card. You don't use the collateral for the monthly bills, just like if you rent an apartment you don't use the security deposit to pay the monthly rent.
Does the bank pay interest on the collateral? I'm assuming not
Depends on the issuer. In this case they do not - see
https://www.synchronybankterms.com/gecrbterms/pdf/Amazon.com..., section V
It really is the greatest business plan ever though. They figured out how to loan money at 28% APR without actually having to loan out any money.
Very impressive.
Very impressive.
They also make the credit card fee from the merchant!
This has to be the moment capitalism finally jumped the shark:
1. You give a business some of your money.
2. Business gives you some of it back.
3. Business charges you insanely high interest on the amount they gave you back, until you return your money back to them.
4. Profit. So much profit.
1. You give a business some of your money.
2. Business gives you some of it back.
3. Business charges you insanely high interest on the amount they gave you back, until you return your money back to them.
4. Profit. So much profit.
Secured credit cards have been around for quite a bit, but they're far from profit centers, which is why they're hard to get from major large banks and rarely advertised.
The only reason someone would apply for one is to build credit, and missing the grace period while subjecting oneself to high APR is pretty much the worst thing one can do at that point. It's worse than not getting the card at all.
The only reason someone would apply for one is to build credit, and missing the grace period while subjecting oneself to high APR is pretty much the worst thing one can do at that point. It's worse than not getting the card at all.
Can you show me where in the text of the CARD Act it must be displayed on the landing page? From my reading:
> [the APR must] be placed in a conspicuous and prominent location on the billing statement
https://www.ftc.gov/sites/default/files/documents/statutes/c...
> [the APR must] be placed in a conspicuous and prominent location on the billing statement
https://www.ftc.gov/sites/default/files/documents/statutes/c...
> But whatever, obviously Amazon is getting into the slave credit business. Like they care, and like anyone would bother holding them accountable.
I hear this kind of argument from the same people who say the government shouldn’t be telling people they can’t do recreational drugs, or who to marry, or what to do with their bodies etc etc — that they can decide for themselves.
... but the same people can’t be trusted with a high interest credit-building card??
I hear this kind of argument from the same people who say the government shouldn’t be telling people they can’t do recreational drugs, or who to marry, or what to do with their bodies etc etc — that they can decide for themselves.
... but the same people can’t be trusted with a high interest credit-building card??
The comment to which you replied was complaining about the lack of disclosure. one can be in favor of allowing consumer choice and still be in favor of mandating disclosure of relevant information -- in fact, it's a pretty logical combination. the recreational drug analogue would be requiring your dealer to tell you if they laced your weed with fentanyl. Something your life depends on knowing, in fact.
The comment he replied to had two separate complaints. One about disclosure and one about high interest.
He is commenting on the high interest issue. So your criticism is misplaced and unfair.
As has been covered elsewhere in the thread, the disclosure complaint is based on an apparent misreading of the law.
He is commenting on the high interest issue. So your criticism is misplaced and unfair.
As has been covered elsewhere in the thread, the disclosure complaint is based on an apparent misreading of the law.
Are you really failing to make a distinction between individuals and corporations? Or is there something in your argument that I missed?
Why should there be a distinction? People shouldn't magically lose rights because they ban together as a corporation instead of acting as individuals.
No, I actually misread the comment in question. I thought @dev_dull was saying that people who don't want the government to limit individual freedoms were the same people who want the government to regulate corporations. After re-reading the comment, I can see that this wasn't the message.
However, there's still the fact that @dev_dull is not distinguishing between people arguing about government restricting individual freedoms and government regulating corporations. It's not about whether people can be trusted with high interest cards, it's about whether corporations should be allowed to set any interest rate they want.
However, there's still the fact that @dev_dull is not distinguishing between people arguing about government restricting individual freedoms and government regulating corporations. It's not about whether people can be trusted with high interest cards, it's about whether corporations should be allowed to set any interest rate they want.
People gain some rights and protections when they ban together as a corporation. It is not unreasonable to expect them to give up others in exchange for the ones they gain.
I don't think that people should gain rights when they ban together into a corporation. So perhaps some adjustment is necessary.
In some cases, this adjustment would necessitate increasing the rights of individuals.
In some cases, this adjustment would necessitate increasing the rights of individuals.
They should display the APR but this is still better than the alternatives. I tried out SelfLender to build a credit score with a $500 secured loan because I had a thin file. I paid about $550 for this loan and I didn’t receive back my principal afterwards. (They illegally kept all $550 and kept claiming they sent me a $500 check.)
I agree... why is this a top story on HN? Am I missing anything or is this just:
"Amazon offers a credit card w/ no annual fee... like almost every other company"
That's not a credit card. The credit limit is equal to the deposit you make.
They're called secured cards, and they're very common. My first card was secured, it's a way to get access to a functional credit card (purchase protection, credit reporting, etc) with bad or non-existing credit.
What is the benefit of a secured card when the interest rate is 28 percent? Why would anyone ever sign up for such a terrible situation?
I didn't downvote you but fyi:
https://en.wikipedia.org/wiki/Credit_card#Secured_credit_car...
The 2nd to last paragraph in that section starts with: "Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available."
My first credit card was a secured VISA card and it had a high interest APR of 21%. The high interest rate was irrelevant to me. What was most important was that I had a credit card at all. When I got the card, I remembered the first thing I did was order music CDs from the web. This level of convenience wasn't possible by mailing in money orders. Since I paid off the full balance every month, whatever high interest rate the card had didn't affect me.
The 2nd to last paragraph in that section starts with: "Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available."
My first credit card was a secured VISA card and it had a high interest APR of 21%. The high interest rate was irrelevant to me. What was most important was that I had a credit card at all. When I got the card, I remembered the first thing I did was order music CDs from the web. This level of convenience wasn't possible by mailing in money orders. Since I paid off the full balance every month, whatever high interest rate the card had didn't affect me.
I don't know the answer, but I'm going to guess that it's because they want to build or rebuild their credit, and would not be eligible for credit cards otherwise, even at a rate of 28% with unsecured credit. For example, maybe they have recently become bankrupt, or their credit score is really bad, or they have no credit history, so the only way they can get a credit card is with a secured card. This would allow them to build positive credit history in a way that paying with cash or a debit card would not.
Thanks, I did miss that it was a "Secured Credit Card"... but again, banks have offered those forever...
It feels more like an ad than news.
It feels more like an ad than news.
Then why is there an APR. Does it eventually go from pre-paid to credit? Nothing about this makes sense.
It's not prepaid, its secured.
It's exactly like requiring a security deposit on an apartment. You still have to pay rent every month, but the landlord holds onto some money in case you stop paying rent. In this case the lender holds onto some money in case you stop making payments.
You still have bills, you still must make payments on time, you still have the option of only making minimum payments and carrying a balance. The collateral you deposit is only returned when you close the account or the account is upgraded to a non-secured card.
It's exactly like requiring a security deposit on an apartment. You still have to pay rent every month, but the landlord holds onto some money in case you stop paying rent. In this case the lender holds onto some money in case you stop making payments.
You still have bills, you still must make payments on time, you still have the option of only making minimum payments and carrying a balance. The collateral you deposit is only returned when you close the account or the account is upgraded to a non-secured card.
It's not prepaid, it's a deposit. It usually gets refunded after you've gone some amount of time without missing a payment.
Can someone explain to me why America has this strange system of “building credit” while other countries don’t really seem to?
In my country there are agencies that track, for example, the fact that you had a debt collector called on you, but you don’t have to have ever used credit card to get a loan, which seems totally bizarre to me.
When I got a home loan the primary checks were about making sure my income was as I said it was, that I had a stable job, and then they wanted bank statements to see what my expenses were. My existing bank didn’t require statements of course and just automatically worked out my weekly budget from my account.
Why would banks want to trust some arbitrary gameable score when the basics are barely more complicated to check when getting a loan?
In my country there are agencies that track, for example, the fact that you had a debt collector called on you, but you don’t have to have ever used credit card to get a loan, which seems totally bizarre to me.
When I got a home loan the primary checks were about making sure my income was as I said it was, that I had a stable job, and then they wanted bank statements to see what my expenses were. My existing bank didn’t require statements of course and just automatically worked out my weekly budget from my account.
Why would banks want to trust some arbitrary gameable score when the basics are barely more complicated to check when getting a loan?
A record of successfully repaying debt is highly relevant to whether you're likely to repay your debt in future. Credit risk is only partly about affordability; many people who can afford to reliably repay their debts still fail to do so, for a variety of reasons.
It doesn't really matter to lenders whether you "game" the system; if you're sufficiently organised, responsible and financially stable to take out and repay debts solely for the purpose of improving your credit history, then you're probably a good person to lend to. Americans tend to use a lot of consumer credit, so not having a credit card, a cellphone contract or a car loan makes you anomalous.
I don't know what country you're in, but here in the UK "building credit" is very much a thing; I'd be very surprised if it had no impact whatsoever on your creditworthiness in your country.
https://www.moneysavingexpert.com/loans/credit-rating-credit...
It doesn't really matter to lenders whether you "game" the system; if you're sufficiently organised, responsible and financially stable to take out and repay debts solely for the purpose of improving your credit history, then you're probably a good person to lend to. Americans tend to use a lot of consumer credit, so not having a credit card, a cellphone contract or a car loan makes you anomalous.
I don't know what country you're in, but here in the UK "building credit" is very much a thing; I'd be very surprised if it had no impact whatsoever on your creditworthiness in your country.
https://www.moneysavingexpert.com/loans/credit-rating-credit...
> I don't know what country you're in, but here in the UK "building credit" is very much a thing; I'd be very surprised if it had no impact whatsoever on your creditworthiness in your country.
In Finland Luottotietolaki ("Credit Data Act", https://www.finlex.fi/fi/laki/ajantasa/2007/20070527 - no translation) limits the allowed data in credit data registries to specific types of negative entries, such as debt adjustment, failure to pay within 60 days, attachments, etc.
So you can't really build credit as such. 90%+ of people have zero entries in credit data registers.
In Finland Luottotietolaki ("Credit Data Act", https://www.finlex.fi/fi/laki/ajantasa/2007/20070527 - no translation) limits the allowed data in credit data registries to specific types of negative entries, such as debt adjustment, failure to pay within 60 days, attachments, etc.
So you can't really build credit as such. 90%+ of people have zero entries in credit data registers.
Don’t you think it’s bad for a society to have a system that encourages people to get loans?
I know for the businesses, it makes perfect sense to have a credit system, it’s just that I appreciate it’s not a thing over here: people should incur as little debt as possible.
I know for the businesses, it makes perfect sense to have a credit system, it’s just that I appreciate it’s not a thing over here: people should incur as little debt as possible.
There is bad debt and good debt.
Getting a credit card and spending up to the limit while only making the minimum payments is bad debt. Buying a luxury car that's more expensive than you can really afford because the car dealer talked you into it is bad debt.
On the other hand, if you need a car to get to work, getting a car loan for a practical car is probably good debt. If you're married and about to have your second child and need a house, a mortgage is probably good debt because you're building equity, the house might appreciate, and anyway the alternative is throwing away a similar amount on rent.
Point being, it is probably not best to always seek to minimize debt. There are trade-offs to consider. Often, avoiding debt is better, but sometimes the negatives of debt are more than outweighed by some opportunity it unlocks.
So is it bad for society? It depends on how much bad debt it encourages and how much good debt it encourages.
Getting a credit card and spending up to the limit while only making the minimum payments is bad debt. Buying a luxury car that's more expensive than you can really afford because the car dealer talked you into it is bad debt.
On the other hand, if you need a car to get to work, getting a car loan for a practical car is probably good debt. If you're married and about to have your second child and need a house, a mortgage is probably good debt because you're building equity, the house might appreciate, and anyway the alternative is throwing away a similar amount on rent.
Point being, it is probably not best to always seek to minimize debt. There are trade-offs to consider. Often, avoiding debt is better, but sometimes the negatives of debt are more than outweighed by some opportunity it unlocks.
So is it bad for society? It depends on how much bad debt it encourages and how much good debt it encourages.
Where this becomes "bad for society" is when the customer _has to_ take on debt for the sole purpose of building a credit score. Some of us would prefer not to utilize debt at all, but if we want to (for example) rent an apartment we may be _required_ to have a credit score. Even if we offer to pay the full term's rent up front. Source: Experience.
You're assuming that "take on debt" means literally taking on debt that you don't pay back quickly. Building credit doesn't require actually going into debt; you just need to have a credit limit available to you, that you don't abuse. Absolutely nobody "_has to_ take on debt for the sole purpose of building a credit score", as you put it. Someone building credit should only use credit that they can pay off immediately. You don't "go into debt"; rather, you funnel/proxy money you already have through a creditor.
Building credit means you could put yourself thousands of dollars in debt... but you don't. 90% of building credit is demonstrating restraint NOT to use credit dangled in front of you. In the rare instance where you take advantage of the ability to use more credit than usual, you pay it off within a reasonable amount of time. The credit industry is predatory, to be sure. But that's only for the idiots who believe they're "able to" or "expected to" use all the credit afforded to them. It's about seeing all that possible "green" in front of you and NOT using it, or using it sparingly and responsibly.
>> Some of us would prefer not to utilize debt at all
So don't. Build your credit by buying groceries on a credit card, and paying it off every month. You're not really going into debt; you're just postponing paying your groceries by a week or two. You can build a near-perfect credit score without ever paying a single cent of interest.
Building credit means you could put yourself thousands of dollars in debt... but you don't. 90% of building credit is demonstrating restraint NOT to use credit dangled in front of you. In the rare instance where you take advantage of the ability to use more credit than usual, you pay it off within a reasonable amount of time. The credit industry is predatory, to be sure. But that's only for the idiots who believe they're "able to" or "expected to" use all the credit afforded to them. It's about seeing all that possible "green" in front of you and NOT using it, or using it sparingly and responsibly.
>> Some of us would prefer not to utilize debt at all
So don't. Build your credit by buying groceries on a credit card, and paying it off every month. You're not really going into debt; you're just postponing paying your groceries by a week or two. You can build a near-perfect credit score without ever paying a single cent of interest.
> You're assuming that "take on debt" means literally taking on debt that you don't pay back quickly.
No, I'm saying I don't want to have anything to "pay back" to anyone. _You_ are free to live differently, I just want the option to complete my transaction at the time and move on. Yes, paying back debts on time prevents bad outcomes, but so does not taking on the debt in the first place. And objectively it's a much more rock solid way of making sure your finances don't get out of whack. I've never met anyone who says "I'm bad with debt," but yet many American's have suffered bad consequences from debt.
> you funnel/proxy money you already have through a creditor
A service I don't want, get no value from, and increases the cost of the goods I consume because they aren't offering it for free.
> Building credit means you could put yourself thousands of dollars in debt... but you don't.
Not quite, you could actually be carrying debt you aren't able to pay back, but are able to make payments on. In fact - it's in the credit industry's best interest for you take out lots of loans that you _can't pay back_ but _can_ make payments on because the (often massive) interest is the money maker. Soon you'll have paid more in payments than you were actually lent. This has gotten so bad the government has had to get involved multiple times. I'm worried that credit scores are tools to create that situation, because of this alignment (think it about like this - are you the customer/priority? or is it the lenders?). Sort of like casinos wanting you to think you're "up" or close to a big score when in reality you're in the red. (And don't get me started on the opaqueness of the systems, lack of recourse for errors, and oh yeah - the security negligence that leads to large scale losses of sensitive data...)
> "You're not _really_ going into debt;"
Aw come on, if you have to put "really" in italics you already know I'm not gonna buy it. :-)
I get that I can have a good credit score, I get that lots of people don't mind having one. To each their own. I'm just annoyed that I can't opt out. That "not having a credit score" is increasingly not a choice I can make, nor can my children.
No, I'm saying I don't want to have anything to "pay back" to anyone. _You_ are free to live differently, I just want the option to complete my transaction at the time and move on. Yes, paying back debts on time prevents bad outcomes, but so does not taking on the debt in the first place. And objectively it's a much more rock solid way of making sure your finances don't get out of whack. I've never met anyone who says "I'm bad with debt," but yet many American's have suffered bad consequences from debt.
> you funnel/proxy money you already have through a creditor
A service I don't want, get no value from, and increases the cost of the goods I consume because they aren't offering it for free.
> Building credit means you could put yourself thousands of dollars in debt... but you don't.
Not quite, you could actually be carrying debt you aren't able to pay back, but are able to make payments on. In fact - it's in the credit industry's best interest for you take out lots of loans that you _can't pay back_ but _can_ make payments on because the (often massive) interest is the money maker. Soon you'll have paid more in payments than you were actually lent. This has gotten so bad the government has had to get involved multiple times. I'm worried that credit scores are tools to create that situation, because of this alignment (think it about like this - are you the customer/priority? or is it the lenders?). Sort of like casinos wanting you to think you're "up" or close to a big score when in reality you're in the red. (And don't get me started on the opaqueness of the systems, lack of recourse for errors, and oh yeah - the security negligence that leads to large scale losses of sensitive data...)
> "You're not _really_ going into debt;"
Aw come on, if you have to put "really" in italics you already know I'm not gonna buy it. :-)
I get that I can have a good credit score, I get that lots of people don't mind having one. To each their own. I'm just annoyed that I can't opt out. That "not having a credit score" is increasingly not a choice I can make, nor can my children.
There are certain transactions that don’t begin and end with the payment of the cost of the service. When renting an apartment, you are able to cause far more damage to the apartment than the rent you pay, hence the apartment owner has an incentive to also consider what kind of person they are renting an apartment to.
A credit check serves as a proxy for someone who cares about their future reputation and hence is less likely to cause damage to an apartment, and if they do, then they will pay for it. Similar reasoning applies to other rental businesses such as hotels, cars, tools, equipment, etc.
A credit check serves as a proxy for someone who cares about their future reputation and hence is less likely to cause damage to an apartment, and if they do, then they will pay for it. Similar reasoning applies to other rental businesses such as hotels, cars, tools, equipment, etc.
To be clear - I 100% understand why people who want to do credit checks like credit scores. It's not that they have no value, it's that they have too many down sides and it bothers me that it's increasingly difficult to "opt out."
> rent an apartment we may be _required_ to have a credit score. Even if we offer to pay the full term's rent up front.
Well to be fair, offering the full term rent up front to avoid a credit check seems sketchy as hell. Did you still let him do a credit check? He could have use this to verify your identity. I know a virtual bank in Canada that use them for that (if you refuse, they simply ask you to go do an identity check in a Canada Post).
Well to be fair, offering the full term rent up front to avoid a credit check seems sketchy as hell. Did you still let him do a credit check? He could have use this to verify your identity. I know a virtual bank in Canada that use them for that (if you refuse, they simply ask you to go do an identity check in a Canada Post).
Well, what are you supposed to do if you would fail the credit check (but pass the identity check)?
Live nowhere?
Because if you won't pass the credit check for one property agency, you won't pass for any of them.
I've been in that situation. I had to pay 14 months rent up front. Crazy thing is I had the money and could pay it fine, but I couldn't pass a credit check to pay exactly the same amount monthly.
Actually the crazier thing is they required 12 months rent up front again, for the second year. You'd think by then I'd have a track record of paying rent.
All because paying rent for many years does not count towards credit rating, even though it's highly regular and the single largest outgoing for most people. (Paying mortgage does count. Annoying.)
Live nowhere?
Because if you won't pass the credit check for one property agency, you won't pass for any of them.
I've been in that situation. I had to pay 14 months rent up front. Crazy thing is I had the money and could pay it fine, but I couldn't pass a credit check to pay exactly the same amount monthly.
Actually the crazier thing is they required 12 months rent up front again, for the second year. You'd think by then I'd have a track record of paying rent.
All because paying rent for many years does not count towards credit rating, even though it's highly regular and the single largest outgoing for most people. (Paying mortgage does count. Annoying.)
I have an hard time understanding your point.
Sure I agree that paying rent should count towards credit rating, but that's not an argument against credit rating.
A bad credit rating means that it's a bad idea giving you a unsecured loan... that's all. An apartment is sadly pretty close to a loan, even more so with all the renter protection you get out of it.
Paying the full rent in theses cases make sense then.
My point is that in the lostphilosopher case, it was maybe simply used as an identity check, making sure it wasn't from a criminal. The resulting credit score wouldn't matter because of the full rent.
> You'd think by then I'd have a track record of paying rent.
Well, if they feel safer that way, again make sense. Why won't you personally give me a loan? The same apply to that case.
Sure I agree that paying rent should count towards credit rating, but that's not an argument against credit rating.
A bad credit rating means that it's a bad idea giving you a unsecured loan... that's all. An apartment is sadly pretty close to a loan, even more so with all the renter protection you get out of it.
Paying the full rent in theses cases make sense then.
My point is that in the lostphilosopher case, it was maybe simply used as an identity check, making sure it wasn't from a criminal. The resulting credit score wouldn't matter because of the full rent.
> You'd think by then I'd have a track record of paying rent.
Well, if they feel safer that way, again make sense. Why won't you personally give me a loan? The same apply to that case.
> An apartment is sadly pretty close to a loan, even more so with all the renter protection you get out of it.
A place to live is also a basic life necessity.
Something is very wrong in a society where a "bad credit rating", which can arise from many things (some of them having nothing to do with credit - agency malpractice comes to mind), threatens homelessness _even when you can afford to rent_.
A place to live is also a basic life necessity.
Something is very wrong in a society where a "bad credit rating", which can arise from many things (some of them having nothing to do with credit - agency malpractice comes to mind), threatens homelessness _even when you can afford to rent_.
I am very surprised that they allowed you to pay rent up front. This creates a huge liability for them because at least in the United States it becomes almost impossible to evict you.
I did the credit check - I didn't have a credit score, because I didn't want one. I had existing rental history, a drivers license, and W2s (all also required for the application). I don't think my identity was in question, but maybe it was? Regardless I rented at another place that didn't require a score, it all worked out.
Seems like most rental properties don’t report payments to the credit bureaus. The service my current landlord uses for online payments has an option to report payments to TransUnion. As far as failure to pay rent, I guess one’s judgements in housing court would come up in the background check.
Then I agree completely, it was pretty shitty of them and I don't understands at all their reasoning.
"good debt" credit used to buy productive goods (ie stuff that brings money in) that you could not afford otherwise, these are extremely rare if you are not a company, hence you can't really "build a credit" on "good debt".
>Don’t you think it’s bad for a society to have a system that encourages people to get loans?
Not really. Credit fosters growth. It's creating money out of thin air. It allows me to exchange rapid growth right now for interest payments later. If I'm young and want to buy a house, the time advantage of buying now versus buying when I have $100,000 saved in the bank far outweighs the fees and interest payments over time. Same goes for the utility value of a car or the ability to spend on a credit card for expenses incurred to go after a new career opportunity. So long as you have things planned out, credit is a very very good thing.
Not really. Credit fosters growth. It's creating money out of thin air. It allows me to exchange rapid growth right now for interest payments later. If I'm young and want to buy a house, the time advantage of buying now versus buying when I have $100,000 saved in the bank far outweighs the fees and interest payments over time. Same goes for the utility value of a car or the ability to spend on a credit card for expenses incurred to go after a new career opportunity. So long as you have things planned out, credit is a very very good thing.
The types of expenditures you give as examples are not what make the American credit system strange and questionable.
Yes, it makes sense to take on debt if you want to buy a house and you have a steady paycheck.
However, it's not obvious that it makes sense to take on debt to pay for things you already have money in the bank to afford. Why do I borrow $100 to buy groceries every week? I have more than $100 in my bank account at any given moment. Why do I borrow $3.50 to buy a coffee at Starbucks? I'm constantly borrowing money that I don't need, and then paying it back within a few weeks, just so that I can prove that I'm a responsible debtor.
This really becomes a problem when people use credit to pay for things they can't afford, of course. Still, the whole system of taking on debt for every minor purchase, just to prove that you'll pay it back, is sort of absurd.
Yes, it makes sense to take on debt if you want to buy a house and you have a steady paycheck.
However, it's not obvious that it makes sense to take on debt to pay for things you already have money in the bank to afford. Why do I borrow $100 to buy groceries every week? I have more than $100 in my bank account at any given moment. Why do I borrow $3.50 to buy a coffee at Starbucks? I'm constantly borrowing money that I don't need, and then paying it back within a few weeks, just so that I can prove that I'm a responsible debtor.
This really becomes a problem when people use credit to pay for things they can't afford, of course. Still, the whole system of taking on debt for every minor purchase, just to prove that you'll pay it back, is sort of absurd.
> Why do I borrow $100 to buy groceries every week? I have more than $100 in my bank account at any given moment. Why do I borrow $3.50 to buy a coffee at Starbucks? I'm constantly borrowing money that I don't need, and then paying it back within a few weeks, just so that I can prove that I'm a responsible debtor.
I do it because I get a 1-3% rebate on all my purchases. That's free money for me.
Before I had a credit card that gave me a rebate, I bought everything with a debit card. I still had a credit card, but it was only for emergencies.
> Still, the whole system of taking on debt for every minor purchase, just to prove that you'll pay it back, is sort of absurd.
You don't really need to use the credit card to establish credit history. Simply having one is enough. A lot of people believe that to maximize the boost to your credit score, you shouldn't completely pay off the card, and instead carry a small balance every month, but that's a myth.
I do it because I get a 1-3% rebate on all my purchases. That's free money for me.
Before I had a credit card that gave me a rebate, I bought everything with a debit card. I still had a credit card, but it was only for emergencies.
> Still, the whole system of taking on debt for every minor purchase, just to prove that you'll pay it back, is sort of absurd.
You don't really need to use the credit card to establish credit history. Simply having one is enough. A lot of people believe that to maximize the boost to your credit score, you shouldn't completely pay off the card, and instead carry a small balance every month, but that's a myth.
> I do it because I get a 1-3% rebate on all my purchases. That's free money for me.
In your mind it's a 1-3% rebate, but in actuality you're paying for it anyway due to merchant fees, etc.
If we're going to question the overall system, then not having credit cards would likely mean savings for pretty much everything you would buy today that uses a credit card as a facilitation of payment.
In your mind it's a 1-3% rebate, but in actuality you're paying for it anyway due to merchant fees, etc.
If we're going to question the overall system, then not having credit cards would likely mean savings for pretty much everything you would buy today that uses a credit card as a facilitation of payment.
> In your mind it's a 1-3% rebate, but in actuality you're paying for it anyway due to merchant fees, etc.
Most US businesses don't bother with offering discounts for cash/debit payments, so it's not like cash-only lifestyle will generate dramatic savings.
Most US businesses don't bother with offering discounts for cash/debit payments, so it's not like cash-only lifestyle will generate dramatic savings.
You're missing the point.
If (a) everyone who owned a credit card actually had the means to pay for the good/service with available cash (even if not literally in their pocket) then (b) credit cards wouldn't be necessary and thus (c) good/services that typically use credit cards would be ~1-3% cheaper. In other words, the people who are getting rebates are artificially getting them b/c if credit cards didn't exist, all goods/services would be cheaper.
If (a) everyone who owned a credit card actually had the means to pay for the good/service with available cash (even if not literally in their pocket) then (b) credit cards wouldn't be necessary and thus (c) good/services that typically use credit cards would be ~1-3% cheaper. In other words, the people who are getting rebates are artificially getting them b/c if credit cards didn't exist, all goods/services would be cheaper.
Cash has its own costs:
* someone needs to drive to the bank to ensure the register has enough pennies, quarters, and dollar bills to make proper change in the morning
* a system needs to be developed to prevent employees from stealing cash
* to avoid being a crime target, there needs to be a way to safely store larger amounts of cash
* there's a cost of an occasional fake bill being accepted by an employee
* someone needs to drive to the bank to deposit the day's earnings into the bank account
It's not like the US has zero businesses that deal exclusively in cash, so there should be success stories of disruptive startups going against the establishment by foregoing merchant fees and passing the savings on to consumers.
But outside of Arco am/pm gas station, I struggle to find a good example where a cash-only business, or chain, or a sector would offer consistently lower prices than their credit-card-accepting counterparts.
* someone needs to drive to the bank to ensure the register has enough pennies, quarters, and dollar bills to make proper change in the morning
* a system needs to be developed to prevent employees from stealing cash
* to avoid being a crime target, there needs to be a way to safely store larger amounts of cash
* there's a cost of an occasional fake bill being accepted by an employee
* someone needs to drive to the bank to deposit the day's earnings into the bank account
It's not like the US has zero businesses that deal exclusively in cash, so there should be success stories of disruptive startups going against the establishment by foregoing merchant fees and passing the savings on to consumers.
But outside of Arco am/pm gas station, I struggle to find a good example where a cash-only business, or chain, or a sector would offer consistently lower prices than their credit-card-accepting counterparts.
Which is exactly why it's not "free money" as the GP suggested.
But credit cards _do_ exist. Who cares about hypotheticals where they don't?
But credit cards do exist. And the person is getting a rebate over paying cash.
You're not really getting a rebate, the extremely high merchant fees in the US are paid by the customers.
While it makes sense for the individual, high fees should be regulated.
While it makes sense for the individual, high fees should be regulated.
> You're not really getting a rebate, the extremely high merchant fees in the US are paid by the customers.
I don't know if it's the same in the US, but in Canada, the price can't be affected by the way you pay for it. That push some places to refuse cards.
That means that customers who doesn't use credit cards, pay for my rewards too.
I don't know if it's the same in the US, but in Canada, the price can't be affected by the way you pay for it. That push some places to refuse cards.
That means that customers who doesn't use credit cards, pay for my rewards too.
Well, if you never put any transactions on the card, it's liable to get closed by the bank without notice - I had that happen with my oldest credit card after a few years of not using it, which hurt my credit score because you want your credit lines to be as old as possible.
> Why do I borrow $100 to buy groceries every week? I have more than $100 in my bank account at any given moment.
Having just disputed a merchant transaction last week, I have one reason - to introduce an additional layer of consumer protection at no additional cost to the consumer. If I had transacted in cash, I would've been screwed. And this was a major nationwide retail chain, not a dude in the alley peddling stuff that "fell off the truck".
Having just disputed a merchant transaction last week, I have one reason - to introduce an additional layer of consumer protection at no additional cost to the consumer. If I had transacted in cash, I would've been screwed. And this was a major nationwide retail chain, not a dude in the alley peddling stuff that "fell off the truck".
> no additional cost to the consumer
Merchant fees are very high.
> If I had transacted in cash
The only difference with a debit card is a function of regulation and the network rather than actually being a credit or debit card.
Merchant fees are very high.
> If I had transacted in cash
The only difference with a debit card is a function of regulation and the network rather than actually being a credit or debit card.
> Merchant fees are very high.
But there were no discounts offered for paying cash.
But there were no discounts offered for paying cash.
The parent comments are discussing benefits the American credit system as a whole not the benefit of an individual using a credit card in America. Other countries have much lower merchant fees due to surcharges on credit transactions and/or regulation restricting merchant fees.
[deleted]
>This really becomes a problem when people use credit to pay for things they can't afford, of course.
This is exactly it. People who use credit to pay for things they can't afford are a risk, but how do you identify those people efficiently? Seems logical to test for that by starting with low credit limits rather than immediately offering loans for items of high value like a car or house.
The consumer gets a free 30-day loan and the issuing banks (via credit agencies) get valuable data.
This is exactly it. People who use credit to pay for things they can't afford are a risk, but how do you identify those people efficiently? Seems logical to test for that by starting with low credit limits rather than immediately offering loans for items of high value like a car or house.
The consumer gets a free 30-day loan and the issuing banks (via credit agencies) get valuable data.
The credit card companies compensate you for "borrowing" $100 to buy groceries, which makes it, de facto, a good idea, assuming you can actually pay for those groceries anyway.
I think that, in general, it's bad when people take out loans for things that they don't need and can't really afford. I'm mostly not a fan of, say, buying a big screen TV on credit.
However, although some will overspend, it's mostly a positive that home ownership isn't limited to the wealthy (and even the moderately wealthy may not have sufficient cash on hand in high CoL areas). Furthermore, even those young people with great jobs probably need to borrow for purchases like cars.
So I don't think people should overextend themselves but I don't have a problem with people using debt sensibly as a tool.
However, although some will overspend, it's mostly a positive that home ownership isn't limited to the wealthy (and even the moderately wealthy may not have sufficient cash on hand in high CoL areas). Furthermore, even those young people with great jobs probably need to borrow for purchases like cars.
So I don't think people should overextend themselves but I don't have a problem with people using debt sensibly as a tool.
> buying a big screen TV on credit.
I think it's fine as long as it's always kept within reason.
If I have a disposable income of $500/month, and I want a $1,500 TV, I might just put that on the credit card. If I have a 20% APR on my card and pay it off in three months, I only pay a little over $50 in interest (Note for someone else that decides to check the math: Remember that many cards have a 30-day grace period on purchases before they start collecting interest). I might think it's worth it to pay an extra $50 to get that $1,500 TV now rather than 3 months from now. Maybe it's actually a $2,500 TV and it's on sale for this week only. Better yet, maybe the store is offering 0% financing for 12/18/x months, which is far longer than it'll take me to pay it off anyways.
Of course, the "within reason" part is what kills people. If my disposable income is under $100/month, then purchasing a $1,500 TV on credit is probably a bad idea. Heck, even saving for a $1,500 TV is probably a bad idea.
I think it's fine as long as it's always kept within reason.
If I have a disposable income of $500/month, and I want a $1,500 TV, I might just put that on the credit card. If I have a 20% APR on my card and pay it off in three months, I only pay a little over $50 in interest (Note for someone else that decides to check the math: Remember that many cards have a 30-day grace period on purchases before they start collecting interest). I might think it's worth it to pay an extra $50 to get that $1,500 TV now rather than 3 months from now. Maybe it's actually a $2,500 TV and it's on sale for this week only. Better yet, maybe the store is offering 0% financing for 12/18/x months, which is far longer than it'll take me to pay it off anyways.
Of course, the "within reason" part is what kills people. If my disposable income is under $100/month, then purchasing a $1,500 TV on credit is probably a bad idea. Heck, even saving for a $1,500 TV is probably a bad idea.
> If I have a disposable income of $500/month, and I want a $1,500 TV, I might just put that on the credit card. If I have a 20% APR on my card and pay it off in three months, I only pay a little over $50 in interest
Why don't you take it from the pile of money you are sitting on? And if you don't sit on a pile of money, should a new TV really be what you are worrying about?
Why don't you take it from the pile of money you are sitting on? And if you don't sit on a pile of money, should a new TV really be what you are worrying about?
[deleted]
> And if you don't sit on a pile of money, should a new TV really be what you are worrying about?
Absolutely, if the person wants to direct their resources toward a new TV. Generally speaking, people should spend their money on whatever they want to. The inherently subjective matter of what to do with one's life and time is properly entirely up to the person in question.
Absolutely, if the person wants to direct their resources toward a new TV. Generally speaking, people should spend their money on whatever they want to. The inherently subjective matter of what to do with one's life and time is properly entirely up to the person in question.
I bought my first big screen TV on Amazon store credit back when I was in college with a typical college student income. 18mo/0% APR is awesome when your credit limit and bank balance is $700.
> Don’t you think it’s bad for a society to have a system that encourages people to get loans?
It's more nuanced than that. It encourages people to get a line of credit and demonstrate that they can be responsible with it. There's no need to actually be in debt, and this doesn't help your credit score.
In the UK, I can build an excellent credit history by having credit cards, but paying them off within the month, incurring no interest whatsoever.
It's more nuanced than that. It encourages people to get a line of credit and demonstrate that they can be responsible with it. There's no need to actually be in debt, and this doesn't help your credit score.
In the UK, I can build an excellent credit history by having credit cards, but paying them off within the month, incurring no interest whatsoever.
I would agree with the complaint, but I'm surprised, and somewhat can't believe you don't have something similar "over there". (I don't know where over there is, of course.)
The problem is that the credit system was not designed for society, it came out of a business need. In reality, you don't need a good (or any) credit score if you don't need a loan... but if you do need a loan, the person giving a loan wants to know if you're likely to pay them back.
The credit agencies decided they were scummy enough to collect as much personal info as they could, and sell it to those companies so they could asses that risk... When you get a full credit report, its actually data about you and your accounts, the score is just the distilled version of that data to make it "easier".
Finally, credit score is not always the last straw, depending on what kind of business you're working with. Many smaller companies might be willing to work with you regardless of your credit score, however, they might adjust the terms of the deal...
The problem is that the credit system was not designed for society, it came out of a business need. In reality, you don't need a good (or any) credit score if you don't need a loan... but if you do need a loan, the person giving a loan wants to know if you're likely to pay them back.
The credit agencies decided they were scummy enough to collect as much personal info as they could, and sell it to those companies so they could asses that risk... When you get a full credit report, its actually data about you and your accounts, the score is just the distilled version of that data to make it "easier".
Finally, credit score is not always the last straw, depending on what kind of business you're working with. Many smaller companies might be willing to work with you regardless of your credit score, however, they might adjust the terms of the deal...
I’m from The Netherlands, so actually fairly close. I also know France doesn’t have a credit system as described, and wouldnt be surprised if that’s the case for a large part of the EU.
I think in general it’s a matter of philosophy: so you think that loans are there to serve society (mortgage is a good example of a “necessary” loan), just like banks have a function to society.
I personally can see both sides of the argument, but am I really not feeling like I’m missing out on something without it. Just checking your current financial status rather than historical seems sufficient to me.
I think in general it’s a matter of philosophy: so you think that loans are there to serve society (mortgage is a good example of a “necessary” loan), just like banks have a function to society.
I personally can see both sides of the argument, but am I really not feeling like I’m missing out on something without it. Just checking your current financial status rather than historical seems sufficient to me.
I see both sides also, I think its probably not good for society to be able to amass huge amounts of debt, I think the ability to get large mortgages is part of why housing prices are so astronomical.
People are buying and selling at huge values, and maybe winning a little here and there on upswings in the market, but the banks win either way with their steady monthly payments.
People are buying and selling at huge values, and maybe winning a little here and there on upswings in the market, but the banks win either way with their steady monthly payments.
> I’m from The Netherlands, so actually fairly close. I also know France doesn’t have a credit system as described, and wouldnt be surprised if that’s the case for a large part of the EU.
The Netherlands has the Bureau Krediet Registratie, which is pretty similar to the credit ratings in the US. (Arguably, the credit rating system in the US is slightly more forgiving than the BKR, but that's a separate matter - the Netherlands definitely does have this system).
France is actually the outlier for not having one - Germany and Spain both do, for example, as does the UK. And of course Canada, the US, and Australia have similar systems as well.
The Netherlands has the Bureau Krediet Registratie, which is pretty similar to the credit ratings in the US. (Arguably, the credit rating system in the US is slightly more forgiving than the BKR, but that's a separate matter - the Netherlands definitely does have this system).
France is actually the outlier for not having one - Germany and Spain both do, for example, as does the UK. And of course Canada, the US, and Australia have similar systems as well.
The difference is that the BKR acts more like a blacklist: if you never have taken any loans you will never have a bad rating, whereas in the US you need to actively obtain and manage your credit to get a good rating.
> The difference is that the BKR acts more like a blacklist: if you never have taken any loans you will never have a bad rating
This is how credit ratings in the US work as well.
This is how credit ratings in the US work as well.
This is not true. For example, when I first moved to the US, I was unable to get a "real" credit card, much less a car or home loan.
I was effectively required to get a secured credit card to demonstrate my "ability" to repay "debt". After doing this for some time, I was able to get a normal credit card, with a far higher limit and no security.
It's a little farcical really, that my ability to pay back a few hundred dollars monthly granted me access to a credit line far in excess of my monthly income.
I was effectively required to get a secured credit card to demonstrate my "ability" to repay "debt". After doing this for some time, I was able to get a normal credit card, with a far higher limit and no security.
It's a little farcical really, that my ability to pay back a few hundred dollars monthly granted me access to a credit line far in excess of my monthly income.
> This is not true. For example, when I first moved to the US, I was unable to get a "real" credit card, much less a car or home loan.
Yes, that's not because you had a bad credit score, but because lenders in the US are more conservative and are generally unwilling to lend money to a person who doesn't have a good credit score. This applies especially to people who aren't citizens, even if they have legal residence and work authorization. You didn't have a good credit score - or any score at all. That doesn't mean you had a bad rating. If you'd had a bad score, it would have been much worse that what you describe.
The original statement was that "if you have never taken any loans, you will never have a bad rating". This is true in both the Netherlands and the US (barring cases of fraud and identity theft, which occur in both countries).
Yes, that's not because you had a bad credit score, but because lenders in the US are more conservative and are generally unwilling to lend money to a person who doesn't have a good credit score. This applies especially to people who aren't citizens, even if they have legal residence and work authorization. You didn't have a good credit score - or any score at all. That doesn't mean you had a bad rating. If you'd had a bad score, it would have been much worse that what you describe.
The original statement was that "if you have never taken any loans, you will never have a bad rating". This is true in both the Netherlands and the US (barring cases of fraud and identity theft, which occur in both countries).
I think it is. I only spend what I can afford to, and I have never carried forward a credit card balance. The only reason I use credit cards is because of the consumer protections, benefits, and cash back I get from them. Assuming spending behaviors are fixed, one can make more money buying things with a credit card than buying things with any other payment method. That said, none of those aspects _should_ in any way be inherent to holding debt, but so it goes.
I don't object to _all_ debt. Yes, I took out a loan to buy a home and pay for my education. But the former made more financial sense for me than renting, and the latter is paid off and a big reason why I have the income to afford a home in the first place.
It's problematic how normalized holding credit card debt is in the US (at least, it is more so normalized than elsewhere in the world).
I don't object to _all_ debt. Yes, I took out a loan to buy a home and pay for my education. But the former made more financial sense for me than renting, and the latter is paid off and a big reason why I have the income to afford a home in the first place.
It's problematic how normalized holding credit card debt is in the US (at least, it is more so normalized than elsewhere in the world).
> It doesn't really matter to lenders whether you "game" the system;
In this case "gaming the system" means taking on debt and paying it off. So pretty much if you can "game the system" they have good reason to believe that you can pay off future debt. So I'm not sure really why someone would calling "gaming the system." One thing I find nice about the system is that you can not have much capital but still get a good credit score, which tells a bank that you may not be rich but you prioritize paying back debts so you're low risk. Enabling you to get loans you normally wouldn't or ones at a lower rate.
In this case "gaming the system" means taking on debt and paying it off. So pretty much if you can "game the system" they have good reason to believe that you can pay off future debt. So I'm not sure really why someone would calling "gaming the system." One thing I find nice about the system is that you can not have much capital but still get a good credit score, which tells a bank that you may not be rich but you prioritize paying back debts so you're low risk. Enabling you to get loans you normally wouldn't or ones at a lower rate.
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I suspect it's because Americans live far more leveraged lives? We finance everything: our phones, our cars, our lawn mowers, our education. The average student loan debt is about $35k. The average household has over $20k in non-mortgage debt. The average credit card has a balance of over $6k; the average retail card over $1800. The average car payment is $400 (used) and $550 (new). You typically walk into a car dealership and drive away in a few hours with a car worth tens of thousands of dollars. And these numbers are increasing every year. With so much hunger for debt, manually underwriting isn't practical for the smallest debts. (at least not based on most businesses like car dealerships who depend on volume and spontaneity)
https://www.fool.com/the-ascent/credit-cards/articles/the-av...
https://www.usatoday.com/story/money/cars/2019/03/01/care-pa...
https://www.fool.com/the-ascent/credit-cards/articles/the-av...
https://www.usatoday.com/story/money/cars/2019/03/01/care-pa...
> I suspect it's because Americans live far more leveraged lives
That's simply not correct among developed nations. It's an old myth that refuses to die.
The US is in fact on the lower side for the OECD:
https://data.oecd.org/hha/household-debt.htm
Countries in the OECD with households in worse shape than the US:
Spain, Belgium, France, New Zealand, Portugal, Finland, Britain, Ireland, Canada, South Korea, Sweden, Switzerland, Australia, Norway, Netherlands, Denmark.
Scandinavian countries for example have household debt to income ratios that are among the worst. Australian and Canadian households are also in worse shape than the US, despite being generally quite affluent (Australia's household debt to disposable income ratio is 2x worse than the US).
The US is comparable to Japan, and just slightly above Germany on household leverage.
More broadly, wealthy nations tend to have households with more leverage than poorer nations. They tend to have highly functional financial systems that facilitate that, combined with consistent, dependable economies.
That's simply not correct among developed nations. It's an old myth that refuses to die.
The US is in fact on the lower side for the OECD:
https://data.oecd.org/hha/household-debt.htm
Countries in the OECD with households in worse shape than the US:
Spain, Belgium, France, New Zealand, Portugal, Finland, Britain, Ireland, Canada, South Korea, Sweden, Switzerland, Australia, Norway, Netherlands, Denmark.
Scandinavian countries for example have household debt to income ratios that are among the worst. Australian and Canadian households are also in worse shape than the US, despite being generally quite affluent (Australia's household debt to disposable income ratio is 2x worse than the US).
The US is comparable to Japan, and just slightly above Germany on household leverage.
More broadly, wealthy nations tend to have households with more leverage than poorer nations. They tend to have highly functional financial systems that facilitate that, combined with consistent, dependable economies.
I suspect that the high household debt has to do with the fact that those countries all have a high number of home owners that have a loan out for their house.
In Belgium for example all houses bought/built are financed via a loan, which in turn is promoted by the government in the form of a tax deduction. Not getting a loan for a house (even when you have the money available) is simple a bad choice here.
In Belgium for example all houses bought/built are financed via a loan, which in turn is promoted by the government in the form of a tax deduction. Not getting a loan for a house (even when you have the money available) is simple a bad choice here.
Of all the countries in OECE listed, I think ONLY US has crazy expensive medical cost problem.
Just wanted to throw that out there...
Just wanted to throw that out there...
America's not unique in that respect; Canada has the highest consumer debt load out of the G7:
https://www.bloomberg.com/news/articles/2019-03-26/canadians...
https://www.bloomberg.com/news/articles/2019-03-26/canadians...
>The average credit card has a balance of over $6k;
Wow. That’s insane for an average.
Wow. That’s insane for an average.
It’s a meaningless metric, as described. I have balances in the tens of thousands on many credit cards, but they’re always paid before interest applies. It’s just an interest free loan for me that offers cash back, ability to dispute payments, and other perks.
What would be interesting is median and mean average of interest accruing credit card debt.
What would be interesting is median and mean average of interest accruing credit card debt.
I think your use of credit cards is atypical. How long until your cards accrue interest? If it's greater than 30 days, that's probably the result of more disciplined debt management.
There's some attempt to compare those who carry a balance vs those who pay in full:
https://www.creditcards.com/credit-card-news/average-credit-...
Takeaway is that those who carry a balance and presumably accrue interest tend to have a higher balance.
There's some attempt to compare those who carry a balance vs those who pay in full:
https://www.creditcards.com/credit-card-news/average-credit-...
Takeaway is that those who carry a balance and presumably accrue interest tend to have a higher balance.
All cards are pretty much the same in my experience, they have monthly billing cycles, and after the end of the cycle you have roughly 20 to 25 days to pay before it starts accruing interest.
Your last sentence is what I suspect, that many people don’t pay interest, but those who do might be outliers and have a decent debt burden. The type of person that is okay paying credit card interest rates is probably not going to stop at a few dollars of spending and say it’s enough.
But I can’t say anything for sure without data.
Your last sentence is what I suspect, that many people don’t pay interest, but those who do might be outliers and have a decent debt burden. The type of person that is okay paying credit card interest rates is probably not going to stop at a few dollars of spending and say it’s enough.
But I can’t say anything for sure without data.
> many people don’t pay interest, but those who do might be outliers and have a decent debt burden
About 38% of US households carry a credit card balance [1], as about 75% of consumers own 1 or more credit cards [2], that puts the number who carry a balance at around 50%.
[1] https://www.creditcards.com/credit-card-news/credit-card-deb...
[2] https://www.creditcards.com/credit-card-news/ownership-stati...
About 38% of US households carry a credit card balance [1], as about 75% of consumers own 1 or more credit cards [2], that puts the number who carry a balance at around 50%.
[1] https://www.creditcards.com/credit-card-news/credit-card-deb...
[2] https://www.creditcards.com/credit-card-news/ownership-stati...
Thanks for citing the relevant facts. Still, though, you were calling lotsofpulp's CC usage (never carrying a balance) "atypical", but that seems like a non-standard application of the term, i.e. for something half of the relevant population does, you know?
That $6K is the average balance carried forward from one month to the next month (AKA revolving balance), not the balance paid in full [1], so actually its as insane as the parent thought, especially of the median is much higher.
1. https://www.nerdwallet.com/blog/average-credit-card-debt-hou...
1. https://www.nerdwallet.com/blog/average-credit-card-debt-hou...
They clarify in paragraph below that the data is from the credit bureaus which incorrectly factor in balances that will get paid off. You have up to 60 days to pay off your credit card debt before it starts accruing interest. It is a debt and counted towards the consumers debt levels even though the consumer could be paying off the debt every cycle. If you use credit card and pay off the card every cycle, you’ll have a revolving debt and you can easily see with credit karma or similar service.
That is average debt for those who have revolving credit card debt. I assume this means if 10 people have credit cards, 9 pay them monthly and don’t accrue interest, but 1 person doesn’t pay and owes $6k, then the average balance carried forward is $6k.
I guess I should add to my original comment that not only are median and mean of interest accruing debt relevant, but what portion of credit card users even have an interest accruing balance.
I guess I should add to my original comment that not only are median and mean of interest accruing debt relevant, but what portion of credit card users even have an interest accruing balance.
38% of US households carry an interest accruing balance month to month. The $6k figure refers to them. That is still huge. More detailed stats:
https://www.creditcards.com/credit-card-news/credit-card-deb...
https://www.creditcards.com/credit-card-news/credit-card-deb...
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Wow, that is a lot more than I expected!
Credit activity is a way to see how conscientious someone is. By knowing who is paying back their loans and not running up their credit cards, they know who is conscientious, therefore its useful.
Good landlords want to rent to conscientious people so they pay their rent on time and don't trash the place. Insurance companies want to give discounts to conscientious people because they are less likely to make a claim. Cable companies are lending you hundreds of dollars in equipment and give you a service before you're billed, so they want you to be conscientious enough to take care of their equipment and pay you bill. So they all want to see your credit score and if you have bad credit, then you are denied or you have to pay extra or pay a large deposit.
Because lenders have a quick reliable way to tell who is likely to pay them back and who isn't then they can offer very low interest rates to the good borrowers.
Credit scores are not "arbitrary," they didn't materialize out of nowhere, actuaries spent lots of time making sure that they measure what they are designed to measure, which is a probability that you're going to miss a payment in the next 24 months. The fact its "gameable" is completely irrelevant if it still measures what the lender wants it to measure.
The system prevails simply because it works on a large scale, even though a few individuals are left behind. People who have no credit at all can usually get a mortgage with manual underwriting (according to Dave Ramsey at least).
If they only knew when someone didn't pay their debts rather than knowing when someone both did and didn't pay their debts, then we wouldn't have access to the same sorts of financial products at the same rates.
Good landlords want to rent to conscientious people so they pay their rent on time and don't trash the place. Insurance companies want to give discounts to conscientious people because they are less likely to make a claim. Cable companies are lending you hundreds of dollars in equipment and give you a service before you're billed, so they want you to be conscientious enough to take care of their equipment and pay you bill. So they all want to see your credit score and if you have bad credit, then you are denied or you have to pay extra or pay a large deposit.
Because lenders have a quick reliable way to tell who is likely to pay them back and who isn't then they can offer very low interest rates to the good borrowers.
Credit scores are not "arbitrary," they didn't materialize out of nowhere, actuaries spent lots of time making sure that they measure what they are designed to measure, which is a probability that you're going to miss a payment in the next 24 months. The fact its "gameable" is completely irrelevant if it still measures what the lender wants it to measure.
The system prevails simply because it works on a large scale, even though a few individuals are left behind. People who have no credit at all can usually get a mortgage with manual underwriting (according to Dave Ramsey at least).
If they only knew when someone didn't pay their debts rather than knowing when someone both did and didn't pay their debts, then we wouldn't have access to the same sorts of financial products at the same rates.
That's all true, but it's not addressing the parent's question of why Americans have to artificially "build credit" while Europeans don't. Presumably all that applies in Europe and yet they don't have to jump through the same hoops.
I'm in the UK, which is part of Europe, and we do have to build credit here.
Permission to rent, in the nicer places, is contingent on credit ratings, and so is the interest rate you will be charged for a mortgage, as well as getting access to one at all.
So it affects access to housing, and is quite important.
(Unfortunately the credit reference agencies maintain files with a lot of credit-harming errors in them. Sometimes even fictitious, unpaid/overdue transactions will appear, in fictitious credit accounts. Even obtaining a new phone contract can harm your credit rating temporarily - it affected mine a lot when I took out 3 new data SIM contracts. I think most people don't check their files, but they should, and then correct the harmful errors.)
I think the housing dependency on credit rating in the UK has become considerably more onerous in recent years, since the "credit crunch".
According to a bank I spoke with, it also affects whether you can be a director of a company, because banks want to know the directors of any company that holds a business account with them, and they can decline to provide account services if a director has a sufficiently poor credit record.
Permission to rent, in the nicer places, is contingent on credit ratings, and so is the interest rate you will be charged for a mortgage, as well as getting access to one at all.
So it affects access to housing, and is quite important.
(Unfortunately the credit reference agencies maintain files with a lot of credit-harming errors in them. Sometimes even fictitious, unpaid/overdue transactions will appear, in fictitious credit accounts. Even obtaining a new phone contract can harm your credit rating temporarily - it affected mine a lot when I took out 3 new data SIM contracts. I think most people don't check their files, but they should, and then correct the harmful errors.)
I think the housing dependency on credit rating in the UK has become considerably more onerous in recent years, since the "credit crunch".
According to a bank I spoke with, it also affects whether you can be a director of a company, because banks want to know the directors of any company that holds a business account with them, and they can decline to provide account services if a director has a sufficiently poor credit record.
Sorry it wasn't clear...
Because in some countries your "credit" is only the bad things (unpaid debt) whereas in America (and other places) your "credit" includes both the bad things and the good things too. So its in your best interest to add good things.
In other words, you're able to prove you're conscientious to entities who will give you some benefit for being conscientious.
Because in some countries your "credit" is only the bad things (unpaid debt) whereas in America (and other places) your "credit" includes both the bad things and the good things too. So its in your best interest to add good things.
In other words, you're able to prove you're conscientious to entities who will give you some benefit for being conscientious.
That's just passing the buck: why does the US need that positive history first, when other countries can get by without needing that first?
I think the major difference between the US and european countries in this regard is due to role of the goverment in society.
A good example is "financiele curatele"[0]. This is a system where people (usually after either massive debt isssues or other issues which result in "mentorschap"[0]) lose their right to make their own financial decisions, and a curator handles the finances for said person until either the debt is repayed or indefinitely (the latter usually happens with untreatable mental illness).
I highly doubt suchs a system exists in the US.
[0] https://www.rijksoverheid.nl/onderwerpen/curatele-bewind-en-...
A good example is "financiele curatele"[0]. This is a system where people (usually after either massive debt isssues or other issues which result in "mentorschap"[0]) lose their right to make their own financial decisions, and a curator handles the finances for said person until either the debt is repayed or indefinitely (the latter usually happens with untreatable mental illness).
I highly doubt suchs a system exists in the US.
[0] https://www.rijksoverheid.nl/onderwerpen/curatele-bewind-en-...
It does, for the untreatable mental illness situation, it's called Conservatorship: https://en.wikipedia.org/wiki/Conservatorship
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For mortgages what you stated is still the process.
It gets expensive to do through investigation and review all documents, pay slips and bank account for something as trivial as say 'buying a phone' or 'getting internet service'. Credit score has its place there
When I lived in Australia for a short period I couldn't get a credit card without a small credit limit due to not having any credit history in Australia (my US credit didn't matter). So it's definitely not just the US.
The answer is probably that it is a service that banks and everyone else who uses the scores has decided is worth paying for. If finance institutions wanted to do all the legwork or just decided the credit score was useless they would probably just not request scores from them.
Just my thoughts though, no source to back it up. I'm not aware of any mechanism that requires organizations to use the credit scoring companies.
Just my thoughts though, no source to back it up. I'm not aware of any mechanism that requires organizations to use the credit scoring companies.
I believe it has to do with how much Americans tend to borrow, but I'm not sure which is cause and which is effect.
Do Americans borrow so much money that they need additional proof that they can pay it back (via credit ratings), OR, do Americans get the ability to borrow more because there are credit ratings systems to help lenders feel safer loaning money?
Probably somewhere in the middle.
Do Americans borrow so much money that they need additional proof that they can pay it back (via credit ratings), OR, do Americans get the ability to borrow more because there are credit ratings systems to help lenders feel safer loaning money?
Probably somewhere in the middle.
> In my country there are agencies that track, for example, the fact that you had a debt collector called on you
That's pretty much how US credit agencies work.
How does your system differentiate between someone who pays their debts on time and someone who has never had a debt?
In the US, the credit reporting agencies fulfill that role by receiving record of debt repayment from financial institutions.
That's pretty much how US credit agencies work.
How does your system differentiate between someone who pays their debts on time and someone who has never had a debt?
In the US, the credit reporting agencies fulfill that role by receiving record of debt repayment from financial institutions.
There's more to it than that though. Balances carried, utilization ratios, etc., all manner of metrics that are about how good a credit _consumer_ you are (i.e. profitability), not just credit risk.
Because the score correlates highly to payment/non-payment. If you never borrowed anything before, a lender doesn't know if you are capable of getting and responding to mail, writing a check, arranging electronic payment, etc.
A surprisingly high number of people are unable of handing these basic tasks.
A surprisingly high number of people are unable of handing these basic tasks.
All the sibling answers are pretty much spot on except for one thing: you're building your credit score; you're setting a track record for your ability to repay debt. Certainly, something similar exists in your neighborhood/region/country. Otherwise, how would anyone know that they'll ever get their money back from you?
The major thing to note here in the US is there are three 'big' companies that track this information about individuals. And (now) there's a fairly standardized method for calculating your score, and that score affects A) whether you can borrow and B) the interest rate on the borrowed money.
The major thing to note here in the US is there are three 'big' companies that track this information about individuals. And (now) there's a fairly standardized method for calculating your score, and that score affects A) whether you can borrow and B) the interest rate on the borrowed money.
There is no such system that I'm aware of here in Sweden, at least.
If you defaulted on a loan payment before, and it was sent to a collection agency, that's tracked. But that's it.
If you defaulted on a loan payment before, and it was sent to a collection agency, that's tracked. But that's it.
Tracked by whom? Sounds to me what you have is a system that assumes you'll be reliable and reports negatively when you're not. That's fine. But it's still a system that tracks that your ability to handle debt.
That's still a credit tracking system, it just tracks negative activities instead of both negative and positive activities.
Sweden also has something that the US doesn't have - open tax records. A creditor can look up exactly how much money a potential debtor made last year (according to their filed taxes)
edit: also, at one point my credit report in Sweden actually DID show my credit card utilization. Never seen it since so maybe the regulations around it got tighter? Example: https://i.imgur.com/NGi86DJ.png
edit: also, at one point my credit report in Sweden actually DID show my credit card utilization. Never seen it since so maybe the regulations around it got tighter? Example: https://i.imgur.com/NGi86DJ.png
And that's why credit is much harder to obtain in Sweden than in USA's more efficient system.
https://en.m.wikipedia.org/wiki/Credit_score#Sweden
mind you that, from my experience, Americans think a lot more casually about debt then most Europeans. They seem to want to avoid debt at all costs.
It's likely just a system (credit score) invented to get as many people using credit as possible. But there is a credit score and that is a result of making payments on time to many different sources of loan and paying them on time over a long period of time. But you don't actually have to keep a balance you can simply pay them off all the time. I use it to avoid paying for using my debit card transactions (which are limited for the free account that I hold). As a result probably all of my purchase history is sold to other companies all the time.
Agreed. The simplest answer is that it's intended to maximize the number of financially irresponsible debtors to maximize interest paid in.
To make it worse, no credit history equals a score of zero, so it can be worse than just having bad credit.
Even worse: paying off all your loans and having no credit cards is zero. It made getting a credit card more difficult. The lady at the credit union couldn't get the system to auto-approve me for any credit limit because of it.
> Around here, we like to say a credit score is just an “I love debt score.” Think about it. A credit score doesn’t reflect your salary increases, the amount of money in your savings account, or how well you budget each month.
> If someone in your family was to pass away and leave you a million dollars, your credit score wouldn’t change one single point. Your net worth would skyrocket, but your credit score wouldn’t budge. Seems fishy, doesn’t it?
> In other words, a credit score has nothing to do with how well you handle your money. But it does show how well you play around with debt. Your credit score is solely built on how much debt you have, what kind of debt you have, how long you’ve had it, and how you’ve paid on it.
https://www.daveramsey.com/blog/what-is-a-fico-score
> Around here, we like to say a credit score is just an “I love debt score.” Think about it. A credit score doesn’t reflect your salary increases, the amount of money in your savings account, or how well you budget each month.
> If someone in your family was to pass away and leave you a million dollars, your credit score wouldn’t change one single point. Your net worth would skyrocket, but your credit score wouldn’t budge. Seems fishy, doesn’t it?
> In other words, a credit score has nothing to do with how well you handle your money. But it does show how well you play around with debt. Your credit score is solely built on how much debt you have, what kind of debt you have, how long you’ve had it, and how you’ve paid on it.
https://www.daveramsey.com/blog/what-is-a-fico-score
> > Your net worth would skyrocket, but your credit score wouldn’t budge. Seems fishy, doesn’t it?
Not at all.
1) no one knows I inherited that money unless I tell them (ok, the bank and the IRS do - the bank can't announce it, the IRS doesn't announce it...)
2) my instant change in net worth does not affect my ability to handle my finances month-to-month
Not at all.
1) no one knows I inherited that money unless I tell them (ok, the bank and the IRS do - the bank can't announce it, the IRS doesn't announce it...)
2) my instant change in net worth does not affect my ability to handle my finances month-to-month
>2) my instant change in net worth does not affect my ability to handle my finances month-to-month
idk man, if I inherited 1M USD, it would definitely affect my ability to handle my 3K USD monthly expense.
idk man, if I inherited 1M USD, it would definitely affect my ability to handle my 3K USD monthly expense.
Sure, you have the money to cover those expenses. But will you? Simply inheriting the money doesn't answer that question. Receiving the money speaks nothing about your ability to manage it correctly.
plenty of lottery winners get bigger piles of cash, and would be very poor folks to loan money to.
If you just treat your credit cards like debit cards, you can easily build a better credit score without really being 'in debt' or paying any interest. And in the US at least, there are also some other benefits, like better fraud protection and purchase/sign-ups bonuses.
I have an amex gold card for the similar purpose of it being a "charge" card and not a credit card. I can't carry a balance month to month, and that's how I want it.
Not if you can't get credit cards at all (because of zero credit rating).
You just have to get a shitty secured card for a few months. This Amazon card is an example of a secured card.
Those require some cash that might not be so easy to free up for some people. When I was building my credit I had to put up $300 for my bank's secured card, and couldn't get that back until I fully closed that account which was reflected on my credit score of course (my bank did not transition secured cards to 'real' cards like some do).
Most middle class and up people don't have to do this song and dance. Parents can add you as an authorized user on one of their cards, and you could build up a great score and a fat credit limit just in time for you to max it out during spring break in college.
Most middle class and up people don't have to do this song and dance. Parents can add you as an authorized user on one of their cards, and you could build up a great score and a fat credit limit just in time for you to max it out during spring break in college.
If you don't have the free cash to place a deposit on a secured credit card, you probably shouldn't be getting a credit card in the first place.
Why not? A credit card with a small limit is potentially a 60 day interest free emergency loan. For example, your car breaks down and you need $500 to repair it, but you don't have $500 in cash. Assuming you can't borrow from friends/fsnily/work, your options are lines of credit, and I don't know of anywhere other than a payday loan that I can get that sort of amount of money. Meanwhile $500 would fit on most credit limits, you get between 30 and 60 days of interest free payments depending on timing, and the interest rate is substantially lower than a short term loan if you do ever so slightly overrun,_and_ your credit isn't tanked if you can't afford the large end payments.
Seems like a win win to ne.
Seems like a win win to ne.
> For example, your car breaks down and you need $500 to repair it, but you don't have $500 in cash.
But you need to pay $300 for this line of credit! What's the point then?
But you need to pay $300 for this line of credit! What's the point then?
Something like 4 in 10 americans can't come up with $400 without selling something or going into debt, and a credit card is something everyone should have as it's more secure than debit and interest free if you don't spend more than you have and pay it off right away.
The credit score that an agency sells to you won't change, but that's just a tool for them to sell you things like Amazon are selling here, and doesn't reflect the way a lender will look at the credit history, your salary, and the value of anything the loan is secured against to decide whether or not to lend to you.
I think its easier to build a credit score from "no credit history" than recovering from a bad credit.. so :" no credit history" > "bad credit" in long term
Depends on the use-case. All foreigners that migrate for a job to the us have no credit history, and no significant problems finding apartments and opening bank accounts.
> and no significant problems finding apartments and opening bank accounts
Firstly, opening a bank account almost never requires a credit check. Think about it: what risk is the bank taking on by giving you an account with nothing in it?
Secondly, renting an apartment typically involves a credit check in my experience. I had my father co-sign my first lease to avoid the security deposit (~$1000, 1 month of rent). There is also a separate renter's score (?) that evaluates how "good" of a renter you are in general.
Firstly, opening a bank account almost never requires a credit check. Think about it: what risk is the bank taking on by giving you an account with nothing in it?
Secondly, renting an apartment typically involves a credit check in my experience. I had my father co-sign my first lease to avoid the security deposit (~$1000, 1 month of rent). There is also a separate renter's score (?) that evaluates how "good" of a renter you are in general.
Bounced checks, or overstrung debit cards.
I think no history you are fine to open a bank. But I think if you have bad credit history (like previously bounced checks), you won't get approval for a checking account - or get a very limited account.
I think no history you are fine to open a bank. But I think if you have bad credit history (like previously bounced checks), you won't get approval for a checking account - or get a very limited account.
And has to pay hefty security deposits, each time when they switch (without a proper credit score)
Might depend on where but I've had no different treatment from my no-score days to my now healthy score.
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WHo would you rather give a $250k loan to?
a) Person who makes $100k salary and never had a loan taken out in their name.
b) Person who makes $100k and has 10 year history of paying off over $50k in accumulated loans.
a) Person who makes $100k salary and never had a loan taken out in their name.
b) Person who makes $100k and has 10 year history of paying off over $50k in accumulated loans.
You're presenting that as a rhetorical question with an "obvious" answer, but it's not obvious to me at all that the latter person is clearly a lower credit risk. Being financially stable enough that you never need to borrow any money seems like as much a positive indicator of creditworthiness as a history of paying off loans in time.
I think you're bringing very US-centric prejudices to the table. In many countries there is no such thing as a credit score and having no credit history is considered equivalent to having a history of on-time payments. As long as you don't have any delinquent payments you're good. So clearly the financial institutions in these countries agree with my assessment.
I think you're bringing very US-centric prejudices to the table. In many countries there is no such thing as a credit score and having no credit history is considered equivalent to having a history of on-time payments. As long as you don't have any delinquent payments you're good. So clearly the financial institutions in these countries agree with my assessment.
Personally I would think that person a) generally thinks more about money management but in the end both are probably equal. I would probably only look at defaults.
> Why would banks want to trust ...
It might be that the 3-way monopoly lobbied (bribed lawmakers) into legislating their business model as what is required. I'm American and it's very much reviled, and very inadequate. I believe Intuit has been looking at alternative credit scoring though don't recall where I read that.
It might be that the 3-way monopoly lobbied (bribed lawmakers) into legislating their business model as what is required. I'm American and it's very much reviled, and very inadequate. I believe Intuit has been looking at alternative credit scoring though don't recall where I read that.
Credit score system the Americans apparently have to "build" isn't used elsewhere, as far as I know. But may countries have so sort of tracking and rating system to evaluate applicants for bank loans and credit cards.
In my country, all negative activities are recorded, and can hinder your ability to obtain a loan or a credit card in the future. Banks and lenders can access this data, but not the landlords and the rest as you'd see in America.
In my country, all negative activities are recorded, and can hinder your ability to obtain a loan or a credit card in the future. Banks and lenders can access this data, but not the landlords and the rest as you'd see in America.
It's very much a thing in the UK. One of the (unofficial) minor selling points for young people getting a phone contract is being able to start building a little credit.
Essentially, the credit score agencies came up with a reason they are needed. In the past, it was at the discretion of the bank manager on whether or not to approve a loan. The bank manager's job was to know people who banked there, and what type of person they were, upstanding, shady, etc.
Credit scores removed that risk from the bank manager's job, so large banks loved the idea. Now, loans get approved because of some score, and it's the same across all loans for a bank. You don't have the possibility of some employee just approving loans, and making huge mistakes about who to lend to. They also don't need bank managers like they did before, so they can also cut back their responsibilities...and pay.
The whole credit score is actually a really oppressive tool against the poor, and that's why everyone is concerned about it. It affects almost everything you do. Need a car, credit card, etc. Yep, it determines if you get a loan, and how much interest you are going to pay. Guess who gets lower rates, people with higher scores who probably make more money, so they pay their bills easily. It gets worse. The other thing that it affects....is employment. Employers are allowed to pull someone's credit score, when they apply for a job. A number of places equate low scores with irresponsibility and a larger chance of stealing, and so they don't hire people below a certain credit score. Does this make sense? Not really, but the credit score companies make it sound really good.
It's a broken system that is heavily biased against certain classes of people.
Credit scores removed that risk from the bank manager's job, so large banks loved the idea. Now, loans get approved because of some score, and it's the same across all loans for a bank. You don't have the possibility of some employee just approving loans, and making huge mistakes about who to lend to. They also don't need bank managers like they did before, so they can also cut back their responsibilities...and pay.
The whole credit score is actually a really oppressive tool against the poor, and that's why everyone is concerned about it. It affects almost everything you do. Need a car, credit card, etc. Yep, it determines if you get a loan, and how much interest you are going to pay. Guess who gets lower rates, people with higher scores who probably make more money, so they pay their bills easily. It gets worse. The other thing that it affects....is employment. Employers are allowed to pull someone's credit score, when they apply for a job. A number of places equate low scores with irresponsibility and a larger chance of stealing, and so they don't hire people below a certain credit score. Does this make sense? Not really, but the credit score companies make it sound really good.
It's a broken system that is heavily biased against certain classes of people.
I think relying on the discretion of a bank manager / individuals is apt to be far more biased and unfair than credit score is. I do agree it's kind of scary how far and wide these scores affect you.
I assume that it is just a money-making scheme and serves no actual, logical purpose.
I had bad credit a couple years ago because I'd never had a credit card or a loan. I decided to fix it by getting a card much like this Amazon one. I attached it to my Netflix account, turned on autopay, and forgot all about it.
A few months later my credit score had skyrocketed from the mid 500's to the mid 700's.
Nothing about my income or my job stability changed in those few months. Nothing about my spending habits changed. The only thing that changed was instead of paying $9 to Netflix via my debit card, I paid via my credit card.
But this is an advantageous situation for them because they have multiple avenues to extract money. Miss a payment? Late fee. Don't pay the whole thing? Interest. Don't read every document you get in the mail? Here's a new annual fee.
I'm in a funny situation now because my score is looking pretty good, but all of the score tracking companies tell me the best way to continue improving is by getting more credit cards. How convenient.
Edit: Spelling
I had bad credit a couple years ago because I'd never had a credit card or a loan. I decided to fix it by getting a card much like this Amazon one. I attached it to my Netflix account, turned on autopay, and forgot all about it.
A few months later my credit score had skyrocketed from the mid 500's to the mid 700's.
Nothing about my income or my job stability changed in those few months. Nothing about my spending habits changed. The only thing that changed was instead of paying $9 to Netflix via my debit card, I paid via my credit card.
But this is an advantageous situation for them because they have multiple avenues to extract money. Miss a payment? Late fee. Don't pay the whole thing? Interest. Don't read every document you get in the mail? Here's a new annual fee.
I'm in a funny situation now because my score is looking pretty good, but all of the score tracking companies tell me the best way to continue improving is by getting more credit cards. How convenient.
Edit: Spelling
You didn't have "bad credit" you just had a thin file. Your score went up quickly because it was all positive indicators. I was in the same boat, never bothered with a credit card or took a car loan (bought used in cash), and my score was 500's. Couple years later and I'm just shy of 800 with 1 card (no annual fee) I barely use and have set for automatic payments through checking account.
It is both a money making scheme and it does serve a logical purpose.
You might have phone service for 20 years, pay each month by check, and never miss a payment. That will never show up on your Credit Report. But if you miss one payment, the phone company will gladly report you, regardless of the reason, to credit reporting agencies.
Financial Institutions however do report to credit reporting agencies regularly regardless of whether it's a loan or a credit card.
Having nothing on your credit report isn't necessarily a bad thing, but having a record of making monthly payments is even better. A loan costs money, in the form of interest, but a credit card doesn't necessarily cost you anything. So the theory is that you can acquire a credit card with little or no credit history, and demonstrate your ability to pay off a monthly balance and the credit card company will report that activity.
You might have phone service for 20 years, pay each month by check, and never miss a payment. That will never show up on your Credit Report. But if you miss one payment, the phone company will gladly report you, regardless of the reason, to credit reporting agencies.
Financial Institutions however do report to credit reporting agencies regularly regardless of whether it's a loan or a credit card.
Having nothing on your credit report isn't necessarily a bad thing, but having a record of making monthly payments is even better. A loan costs money, in the form of interest, but a credit card doesn't necessarily cost you anything. So the theory is that you can acquire a credit card with little or no credit history, and demonstrate your ability to pay off a monthly balance and the credit card company will report that activity.
That's not true. Post-paid subscription accounts are generally reported as open credit accounts, since they are.
Are they not required to show that information on Credit Reports? I'm only asking because I don't see any of my post-paid subscriptions like my telephone bill or Netflix account which have both been open for 10+ years on any of my 4 credit reports. I can however see that 2 week period in 2006 when a loan I had was sold three times over and each company that touched it said I was a good paying customer despite never having sent me a bill.
[deleted]
In exchange US consumers have access to a larger variety of loans. E.g., mortgages that require little to no down payment, car loans at 0% APR.
Indeed. I ran into problems for years because I'd simply never been in debt and saw no value in using a credit card over a debit card.
I hope you do now, their best feature is they are a proxy for your bank account.
It's more data for making better predictions on default. Better predictions = better returns, kinda like the stock market.
Canada has it too.
Lack of socialism, I think.
In Norway, I believe a bank is legally required to offer you a detailed, reasonable rationale if you're denied for a loan. This is to empower the consumer to fix the situation, and to avoid unfair discrimination.
This means that the bank can't reject your loan simply for being your first one, or because some black-box AI said no. Essentially you're considered trustworthy until proven otherwise.
Meanwhile, an American bank can probably tell you to get stuffed for any or no reason, meaning that the onus is on you to prove that giving you a loan is in their best interest: i.e. you have to build credit.
In Norway, I believe a bank is legally required to offer you a detailed, reasonable rationale if you're denied for a loan. This is to empower the consumer to fix the situation, and to avoid unfair discrimination.
This means that the bank can't reject your loan simply for being your first one, or because some black-box AI said no. Essentially you're considered trustworthy until proven otherwise.
Meanwhile, an American bank can probably tell you to get stuffed for any or no reason, meaning that the onus is on you to prove that giving you a loan is in their best interest: i.e. you have to build credit.
Norwegian who work in finance here. I doubt socialism is the cause. We have different financial regulations here, and I often hear Norwegian regulations are far more friendly to banks than across the pond.
It would surprise me greatly if an American bank was allowed to make arbitrary loan decisions. I am only familiar with the Norwegian financial system, but here it is a given that every single loan application that the bank either approves or rejects can stand up to scrutiny. They frequently have to in the case of collection cases (I.E determine if the bank had sufficient information to determine that a debtor could reasonably be expected to repay the debt they were issued).
It would surprise me greatly if an American bank was allowed to make arbitrary loan decisions. I am only familiar with the Norwegian financial system, but here it is a given that every single loan application that the bank either approves or rejects can stand up to scrutiny. They frequently have to in the case of collection cases (I.E determine if the bank had sufficient information to determine that a debtor could reasonably be expected to repay the debt they were issued).
Capitalism. America is addicted to credit. Hook 'em while they are young and financially dependant. You are either a producer or a consumer. The power is with the producers. The market decides on the winning company, until the other companies catch up with competing offers ("the first hit is free!").
Credit card companies make money from transactions and from people going late, but still paying up. You can get them to pay up, by threatening to nuke their credit score (this threat becomes stronger as more producers join in on this Moloch). You can get them to spend more by easing the process and offering cashbacks (which is like offering complementary bread in a restaurant and adding 10% to all prices).
It is not what consumers want, but it is what they "deserve". Producers get rich when middle- and low-class families don't have any money saved up to replace the broken fridge, so they have to rely on even more credit, forever casting them into financial serfdom. Consumers with credit card debt have zero leverage. Consumers who never default/go late, don't care, or turn their craving addiction into support of the system (nobody wants to admit that they, or the people they care about, are getting played a fool).
Removing these bizarre credit building plays, requires a change in law, a huge credit crunch/economy crash, or a cultural change. My money is on the economy crash. However, the entire credit building system proved futile during the home loan crash, so I am not holding my breath. After all, America is still a first-world country where contracting cancer can bankrupt you, while producers keep dumping toxins in the water and get off scot-free. It is ruthless. But you too can prove you are a good consumer, by building up your "social credit" score, starting with your teens.
Credit card companies make money from transactions and from people going late, but still paying up. You can get them to pay up, by threatening to nuke their credit score (this threat becomes stronger as more producers join in on this Moloch). You can get them to spend more by easing the process and offering cashbacks (which is like offering complementary bread in a restaurant and adding 10% to all prices).
It is not what consumers want, but it is what they "deserve". Producers get rich when middle- and low-class families don't have any money saved up to replace the broken fridge, so they have to rely on even more credit, forever casting them into financial serfdom. Consumers with credit card debt have zero leverage. Consumers who never default/go late, don't care, or turn their craving addiction into support of the system (nobody wants to admit that they, or the people they care about, are getting played a fool).
Removing these bizarre credit building plays, requires a change in law, a huge credit crunch/economy crash, or a cultural change. My money is on the economy crash. However, the entire credit building system proved futile during the home loan crash, so I am not holding my breath. After all, America is still a first-world country where contracting cancer can bankrupt you, while producers keep dumping toxins in the water and get off scot-free. It is ruthless. But you too can prove you are a good consumer, by building up your "social credit" score, starting with your teens.
Protip for anyone considering moving to the US. Make sure you open an Amex card in your current country at least 3 months before moving. Amex has a system where as a customer from another region they will let you open one card without needing US credit rating! Make sure you pick a card that doesn't have an annual fee as your first card, since a component of most credit scores is the age of your oldest card, so you want to keep this card open forever, so a fee would suck.
I'm approaching 2 years in the us and this has been quite helpful, however I'm still in the situation someone else mentioned. My credit score is high, but I have gotten rejections from "not long enough history" (chase)
But getting an Amex platinum after the fact was no problem to get in on the whole Airport Lounges US credit card thing.
I'm approaching 2 years in the us and this has been quite helpful, however I'm still in the situation someone else mentioned. My credit score is high, but I have gotten rejections from "not long enough history" (chase)
But getting an Amex platinum after the fact was no problem to get in on the whole Airport Lounges US credit card thing.
AFAIK, if:
1. You have had an account with the Canadian RBC Royal Bank 2. You move to a state in the US where the US RBC Bank operates in
or
1. You have had an account with the Canadian TD Bank 2. You move to a state in the US where the US TD bank operates in
then, you can ask the US banks to look at your corresponding Canadian bank's credit history in making a decision in approving you for one of the US bank's credit cards (YMMV - your mileage may vary).
1. You have had an account with the Canadian RBC Royal Bank 2. You move to a state in the US where the US RBC Bank operates in
or
1. You have had an account with the Canadian TD Bank 2. You move to a state in the US where the US TD bank operates in
then, you can ask the US banks to look at your corresponding Canadian bank's credit history in making a decision in approving you for one of the US bank's credit cards (YMMV - your mileage may vary).
Even if there is a fee, most of the time there is an option to downgrade the card to a no fee version.
This is legitimately a useful service for those who need it. The status quo has created a unintended "chicken & egg" problem wherein people need ok credit in order to start building good credit.
This acts as an escape hatch allowing people to build up their bad credit up to a point where they'd qualify for normal credit cards.
This acts as an escape hatch allowing people to build up their bad credit up to a point where they'd qualify for normal credit cards.
There are already dozens of secured credit cards for the credit-challenged: https://www.creditcards.com/secured/
The 5% back on Amazon.com purchases would give a slight edge to this new secured card.
The 5% back on Amazon.com purchases would give a slight edge to this new secured card.
5% back on only Amazon with a $120 annual fee (prime) is not very good.
Most secured cards have no rewards and many have a yearly fee. If you have prime anyways it's an amazing deal.
Sure, if you weren't otherwise gonna get Prime, you'd have to spend $2400/year to break even. If you're one of Amazon's millions of Prime subscribers, it's a no-brainer.
The target demographic might overlap with the set of people who are candidates for discounted prime membership.
Plus 28% APR, though I can't imagine holding a balance on a secured card.
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Are there any other secured CCs which would have similar benefits?
If you buy anything on Amazon, but don't have a CC this may be better than 1% back.
If you buy anything on Amazon, but don't have a CC this may be better than 1% back.
CreditCards.com does a great job comparing different cards, and if I was in a credit-challenged situation I would go for the Discover It Secured card, which offers 2% back on all purchases.
The downside to that is that Discover is accepted at significantly fewer online vendors and retailers than Visa or Mastercard.
Futurama S1E06:
Fry: "Do you take Visa?"
Clerk: "Visa hasn't existed for five hundred years."
Fry: "American Express?"
Clerk: "Six hundred years."
Fry: "Discover Card?"
Clerk: "Hmm...sorry, we don't take Discover."
Fry: "Do you take Visa?"
Clerk: "Visa hasn't existed for five hundred years."
Fry: "American Express?"
Clerk: "Six hundred years."
Fry: "Discover Card?"
Clerk: "Hmm...sorry, we don't take Discover."
In many cases you may be able to obtain a secured line of credit from one of your local credit unions if you’re the type who likes keeping your money local. They tend to be more amenable to helping their members with credit rebuilding goals.
That was the path I took, but as with all things ymmv
That was the path I took, but as with all things ymmv
Discover IT Secured is a great option.
https://www.discover.com/credit-cards/secured/
>Earn 2% Cash Back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases
I hear it auto-converts to a regular, non-secured Discover IT after like six months or so.
https://www.discover.com/credit-cards/secured/
>Earn 2% Cash Back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases
I hear it auto-converts to a regular, non-secured Discover IT after like six months or so.
This would only be worth it if you pay it off each month, as it has an insanely high interest rate of 28.24%- you can get a secured Discover card at 25.24% or 21.24% with Wells Fargo. You can do even better if you do with a credit union- DCU has secured cards around 13.75%.
Yeah, I was in that bizarre limbo for a while, where annualcreditreport.com and all the other sites would swear up and down that I have a ~730 score, all while I had no debts, but everyone classed me a subprime because I didn't have a credit history.
Even knowing that you can fix it, it's really bizarre that having e.g. utility bills -- which are extending credit to you -- count nothing towards a credit history ... but it does add to your credit history when you simply move your ordinary purchases onto a card that you pay off every month. Huh?
Edit: Reword for clarity.
Even knowing that you can fix it, it's really bizarre that having e.g. utility bills -- which are extending credit to you -- count nothing towards a credit history ... but it does add to your credit history when you simply move your ordinary purchases onto a card that you pay off every month. Huh?
Edit: Reword for clarity.
It's a system created towards incentivizing people to use credit for the purposes of capturing all users. This maximizes the number of users that mismanage their finances and pay interest on the credit usage.
Student loans with no missed payments count, even if you haven't had to make payments yet. Very helpful when I was starting out. I'd been getting preapproved offers in the mail throughout the last half or so of college and finally went with one once I had income.
After reading through the page, I don't see what makes this different from normal secured credit cards which have been around forever. Is it just the Amazon branding and gift-card promo?
You get the 5% cashback on Amazon.com purchases. That would appear to be the real value-add here, because you would also get that cashback reward using the non-secured and well-established Amazon.com credit card.
You get 5% cashback if you have Amazon prime. Assuming you are a student trying to build your credit, that's $60 a year.
That means for the 5% cash back to break even you need to spend $1200 on Amazon per year.
That's not obscene, but it doesn't really seem worth it to me unless you use Amazon a lot.
Yep, this is the kicker. They're not highlighting any other form of rewards (such as 2% cash back on everything, or airline miles) so it's not really moving the needle on anything other than the fact that it's Amazon-branded.
I see it as just another ploy to get you to spend more money in the Amazon ecosystem.
I see it as just another ploy to get you to spend more money in the Amazon ecosystem.
Because of Amazon Household [1], you do not necessarily have to hold your own Prime membership to get the 5% back. Being on a Household Prime account is enough to get the full cash back on the regular Amazon credit card, so I'd expect the same would work here. Admittedly their card marketing websites do not make this super clear.
[1]: https://www.amazon.com/myh/households
[1]: https://www.amazon.com/myh/households
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That's assuming you don't use prime for anything else, like free fast shipping, or the TV shows.
I let my Prime subscription expire 6 months ago and I honestly haven't even noticed. The quality of the Amazon experience had already declined so much that I had already stopped using Amazon for most of my shopping/streaming.
2-3 years ago, I was making a purchase on Amazon at least once a month. These days I only use Amazon for price-matching at other stores.
2-3 years ago, I was making a purchase on Amazon at least once a month. These days I only use Amazon for price-matching at other stores.
They let their store rot, I dropped prime too a while ago.
It's not a credit card. (It's not Visa, Mastercard, or Amex)
It's just a terminology thing, so not terribly important, but these types of cards are called "store cards" or "retail cards", and they are usually considered to be credit cards, despite having some differences from regular credit cards.
This card seems to allow you carry a balance from one month to the next, so that means it isn't a "charge card" which must be paid in full every month: https://en.wikipedia.org/wiki/Charge_card
This card seems to allow you carry a balance from one month to the next, so that means it isn't a "charge card" which must be paid in full every month: https://en.wikipedia.org/wiki/Charge_card
It's worse than your typical secured credit card because it locks you into Amazon.com and services that use Amazon Pay. Basically, it's an agreement to buy Amazon products or products through Amazon until Amazon determines that your purchasing and payment habits reflect those of a person with good credit.
People saying that it's great because you get 5% back on Amazon purchases are myopic. Nobody on HN would be celebrating the Starbucks Card Credit Builder where you get a 5% discount on purchases and can build credit but can only do so by purchasing products from Starbucks and its affiliates. Why? Because as others have said, there are already plenty of secured Visa/Mastercard cards out there that don't convert your capital to funnybux and lock you in to a particular vendor and its best buddies.
People saying that it's great because you get 5% back on Amazon purchases are myopic. Nobody on HN would be celebrating the Starbucks Card Credit Builder where you get a 5% discount on purchases and can build credit but can only do so by purchasing products from Starbucks and its affiliates. Why? Because as others have said, there are already plenty of secured Visa/Mastercard cards out there that don't convert your capital to funnybux and lock you in to a particular vendor and its best buddies.
On the other hand, Starbucks really only sells one sort of thing (food) while Amazon sells many things. Furthermore, Starbucks is a luxury, but on Amazon you can, I think, buy many of life's necessities at competitive prices.
I agree that the motive is not necessarily pure. Furthermore I think Amazon is a huge force opposite sustainable economics, and that the American credit system, credit bureaus, and the symbiotic partners who encourage people to take on debt and prey on them in that vulnerable, owned state, are a diabolical construct engineered for social control and a crime against the American people.
But, I think the comparison with Starbucks is not quite right. This is short-sightedly better and long-sightedly worse, for a lot of the same reasons.
I agree that the motive is not necessarily pure. Furthermore I think Amazon is a huge force opposite sustainable economics, and that the American credit system, credit bureaus, and the symbiotic partners who encourage people to take on debt and prey on them in that vulnerable, owned state, are a diabolical construct engineered for social control and a crime against the American people.
But, I think the comparison with Starbucks is not quite right. This is short-sightedly better and long-sightedly worse, for a lot of the same reasons.
You're right that it wasn't a good analogy. More like the Wal-Mart Store Card Credit Builder.
A Wal-Mart Store Card Credit builder that gave 5% cash back would be a great product for a lot of people, and just as worthy of “celebration” as this Amazon card.
I don’t have any problems with store cards in general. I see them as a mutually beneficial agreement between retailers and frequent customers. It allows the retailer to capture a portion of the transaction revenue that would normally go to a third party (and some extra data about the customer), and in return pass on some of the savings to the customer in the form of discounts and rewards.
I don’t have any problems with store cards in general. I see them as a mutually beneficial agreement between retailers and frequent customers. It allows the retailer to capture a portion of the transaction revenue that would normally go to a third party (and some extra data about the customer), and in return pass on some of the savings to the customer in the form of discounts and rewards.
You need Prime to get the 5%. Prime costs $119/year. You would need to spend $2,380 or nearly $200/mo just to make it worthwhile.
Sorry; that’s not a good product at all.
Sorry; that’s not a good product at all.
> You need Prime to get the 5%. Prime costs $119/year.
There are loopholes to this that make Prime much cheaper though.
For example, Prime Student [1] is $6.49/month or $59/year.
The EBT subsidized Prime membership mentioned elsewhere in the thread is $5.99/month (no annual discount).
You can also use Amazon Household [3] on an existing Prime membership to qualify multiple people in the household as Prime members. All members get the 5% benefit, not just the card holder. I doubt this stacks on the student version but it definitely does on vanilla Prime and likely on the subsidized version as well.
[1]: https://www.amazon.com/Amazon-Student/b?node=668781011
[2]: https://www.amazon.com/l/16256994011
[3]: https://www.amazon.com/myh/households
There are loopholes to this that make Prime much cheaper though.
For example, Prime Student [1] is $6.49/month or $59/year.
The EBT subsidized Prime membership mentioned elsewhere in the thread is $5.99/month (no annual discount).
You can also use Amazon Household [3] on an existing Prime membership to qualify multiple people in the household as Prime members. All members get the 5% benefit, not just the card holder. I doubt this stacks on the student version but it definitely does on vanilla Prime and likely on the subsidized version as well.
[1]: https://www.amazon.com/Amazon-Student/b?node=668781011
[2]: https://www.amazon.com/l/16256994011
[3]: https://www.amazon.com/myh/households
> Prime costs $119/year. You would need to spend $2,380 or nearly $200/mo just to make it worthwhile.
This assumes that one won't make use of their Prime benefits.
This assumes that one won't make use of their Prime benefits.
My last two years living in the US I spent about $3500/year at Amazon. This works out to $175/year cash back, and $105 more than my main credit card would have yielded at 2% cash back. That was enough for me to spend a few minutes applying for and setting up the card, and I was happy with the product.
You factor in the cost of the Prime membership in the break-even calculation, but as someone else noted, that does not count the value of other Prime benefits. I was already a Prime member when the store card was introduced, which means I was valuing those benefits at ~$120/yr on their own.
Different people have different shopping needs/preferences. I have no trouble conceiving of the idea that what might be a good value to me might not be for someone else. In your case, I wonder how you are able to say "Sorry; that’s not a good product at all" with such conviction when there are so many people out there (~100 million) with Prime memberships in the US.
You factor in the cost of the Prime membership in the break-even calculation, but as someone else noted, that does not count the value of other Prime benefits. I was already a Prime member when the store card was introduced, which means I was valuing those benefits at ~$120/yr on their own.
Different people have different shopping needs/preferences. I have no trouble conceiving of the idea that what might be a good value to me might not be for someone else. In your case, I wonder how you are able to say "Sorry; that’s not a good product at all" with such conviction when there are so many people out there (~100 million) with Prime memberships in the US.
> Basically, it's an agreement to buy Amazon products...
Nothing about this card locks you into buying Amazon brand products that I can tell. Buying Amazon brand products have the same effect as buying non-Amazon brand products on Amazon.
Nothing about this card locks you into buying Amazon brand products that I can tell. Buying Amazon brand products have the same effect as buying non-Amazon brand products on Amazon.
I got the cards and unlike other secured cards it didn't ask for a previous deposit and it gave me a much better balance.
It's secured manually by a deposit, which dictates your credit line. If you don't pay it back, the bank keeps the deposit.
"Normal" cards are not backed by anything.
"Normal" cards are not backed by anything.
History repeating itself...Sears was many peoples first credit cards, they'd give almost anyone a $300 card (which could only be used at their stores)
Yep. I'm really confused why this press release/advertisement for Amazon is on the front page of Hacker News. It's not new technology; it's not even close to being innovative. It's literally just an Amazon logo pasted onto an old idea. This is an advertisement.
HN just likes to have a discussion whenever Amazon offers a new product or service for whatever reason.
Same with Apple or Google.
Same with Apple or Google.
I’m relatively new around here but it’s a cringeworthy level of uncritical sycophancy. (Perhaps that’s too harsh; perhaps not.)
Same here. This belongs on r/personalfinance. Not at the front page of HN. There's nothing techy or ground breaking about this other than being offered by Amazon.
> with an eligible Prime membership
So there is a fee, it's a $119/year prime membership
So there is a fee, it's a $119/year prime membership
In the terms, there are 2 separate credit-builder cards. Only one requires Prime. The one that does not require Prime is not eligible for 5% back UNLESS the cardholder also has Prime.
> 4. The Amazon.com Store Card Credit Builder. The Amazon.com Store Card Credit Builder is available to customers with an Amazon.com account, subject to credit approval.
[...]
> 5. The Amazon Prime Store Card Credit Builder. The Amazon Prime Store Card Credit Builder, an upgrade from the Amazon.com Store Card Credit Builder, is available to customers with an Eligible Amazon Prime Membership only, subject to credit approval.
> 4. The Amazon.com Store Card Credit Builder. The Amazon.com Store Card Credit Builder is available to customers with an Amazon.com account, subject to credit approval.
[...]
> 5. The Amazon Prime Store Card Credit Builder. The Amazon Prime Store Card Credit Builder, an upgrade from the Amazon.com Store Card Credit Builder, is available to customers with an Eligible Amazon Prime Membership only, subject to credit approval.
I didn't dig into the FAQ or fine print, but I wonder what happens if you get the card, and then your Prime membership runs out?
EDIT:
> The 5% back benefit may apply to purchases (less returns and other credits) made using the Amazon.com Store Card Credit Builder when signed into an Amazon.com account with an Eligible Amazon Prime Membership, including 1-Click orders and purchases made at physical Amazon locations (in each case, where 5% back is selected as the default option or where Promotional Financing is selected as the default option but is not available for the particular purchase).
It seems like the 5% back is only for Prime membership folks. I think anyone can get the card, with or without Prime, though. So then it doesn't have a yearly fee, technically.
EDIT:
> The 5% back benefit may apply to purchases (less returns and other credits) made using the Amazon.com Store Card Credit Builder when signed into an Amazon.com account with an Eligible Amazon Prime Membership, including 1-Click orders and purchases made at physical Amazon locations (in each case, where 5% back is selected as the default option or where Promotional Financing is selected as the default option but is not available for the particular purchase).
It seems like the 5% back is only for Prime membership folks. I think anyone can get the card, with or without Prime, though. So then it doesn't have a yearly fee, technically.
It reverts to a standard Amazon.com store card without extra perks.
That wouldn't make sense. The whole point of this is for it to "upgrade" to the standard store card once you've convinced the bank you can be trusted with an unsecured credit line.
The standard store card also has this requirement. You only get 5% cash back if you have an active Prime membership.
If you let your membership run out it will only give back 3%. https://www.amazon.com/iss/credit/storecardmember?plattr=PLC...
If you let your membership run out it will only give back 3%. https://www.amazon.com/iss/credit/storecardmember?plattr=PLC...
They almost surely just close the account after some amount of time. Like any other bank if you canceled your accounts with them.
See my edit on the comment. It looks like that's only for the 5% back. There isn't a fee technically.
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There is no fee. Having prime gives you the perk of 5% cash back but you don’t need it to get a card.
It's backed by Synchrony meaning it will have impossibly shitty management tools, can't speak to a human without spending an hour on the phone. No thanks.
This is nice just for the 5% back on amazon purchases. I’ll likely set it up just to wash through all my prime purchases.
Amazon already has a regular Visa card and a store card that offer 5% back on Amazon purchases, so you don't need to get this secured card for that.
https://www.amazon.com/Amazon-Prime-Rewards-Visa-Signature-C...
https://www.amazon.com/Synchrony-Bank-Amazon-com-Store-Card/...
https://www.amazon.com/Amazon-Prime-Rewards-Visa-Signature-C...
https://www.amazon.com/Synchrony-Bank-Amazon-com-Store-Card/...
If you have okay credit, just get the normal store card.
Just pay it off fast as that interest rate is high!
Interest rates on credit cards don't matter if you pay off the statement balance on or before the due date.
The billing statements provided by these vendors, if taken at face value, clearly encourages the holding of a balance. Avoiding a balance is a reasonable goal and a smart fiscal policy, but the penalties for holding a balance, in my opinion, should not be so high.
I think a 28% APR is way high and their tiered financing strikes me as complicated. Do they clearly describe the tiers and payments required to stay in compliance and avoid that hefty interest rate? I bet they don't, that certainly isn't the case with other Synchrony cards.
I think a 28% APR is way high and their tiered financing strikes me as complicated. Do they clearly describe the tiers and payments required to stay in compliance and avoid that hefty interest rate? I bet they don't, that certainly isn't the case with other Synchrony cards.
Every single credit card statement I’ve ever seen clearly states the balance and payment due date before which interest will begin to accrue. Every single one offers an option to automatically pay it every month so you don’t even have to do anything, other than not spend more than the cash you have in your bank account.
Yep, same here. But this card has broken the interest free purchases into three tiers based on their cost. That is a $25 item will be interested free for 30 days but a $250 item might be interest free for sixty days. This seems pretty complicated and could be difficult to manage for a consumer.
They're also required to include the "if you only make minimum payments, it'll take x months and cost you $y dollars" wording.
>other than not spend more than the cash you have in your bank account.
So then why bother opening a credit card?
So then why bother opening a credit card?
Float, cash back/mileage rewards, emergencies?
Plus, if you're traveling, you really don't want to put hotels or rental cars on a debit card - they put a huge hold on your balance.
Plus, if you're traveling, you really don't want to put hotels or rental cars on a debit card - they put a huge hold on your balance.
> Plus, if you're traveling, you really don't want to put hotels or rental cars on a debit card - they put a huge hold on your balance.
Isn't any hold equally large on a credit card? I've never noticed any differences in the size of holds between credit and debit (Finnish VISA cards).
Isn't any hold equally large on a credit card? I've never noticed any differences in the size of holds between credit and debit (Finnish VISA cards).
It’s the same, but people tend to pay large bills using bank accounts (in the US, landlords, mortgage issuers, taxes for government, insurance, utilities, tuition, etc typically don’t accept credit cards for payment.)
So you don’t want to give someone access to your bank account unless you absolutely have to, since they can “authorize” or “hold” funds in your account which can cause other expenses to not get paid.
So you don’t want to give someone access to your bank account unless you absolutely have to, since they can “authorize” or “hold” funds in your account which can cause other expenses to not get paid.
Makes sense.
Somewhat related, I'm guessing from this that card usage limits are not common in US? Here almost(?) all debit/credit cards have daily limits that you can change via web/app/call, so there can be no arbitrarily sized holds.
Somewhat related, I'm guessing from this that card usage limits are not common in US? Here almost(?) all debit/credit cards have daily limits that you can change via web/app/call, so there can be no arbitrarily sized holds.
There probably are, but they apply to the total of all transactions, so it wouldn’t seem useful against protecting from a single merchant using up all of your funds/credit.
It's the same size, but smaller impact on credit cards. If there's a $1000 hold on your debit card, your bank account needs to have at least $1000. If there's a $1000 hold on your credit card, you only have to wind up fronting the cash for what actually ends up getting charged.
AN: this all is US-centric, other countries typically have lower cash-back rates and may have differing laws and regulations.
1. Cashback. You can expect a minimum of 2% with relatively easy to get cards.
2. Consumer protection. A bunch of this has been extended to debit cards, but it's more of a courtesy from Visa et al rather than a legal obligation. In short, you are legally protected from being made to pay debts that you do not rightfully owe. Anything you pay for with a credit card is incurring a debt rather than giving someone money. This is important because if the merchant uses fraud or misrepresentation and is not willing to fix things, you can assert your legal protection against the invalid debt through a charge-back. If you use cash, your legal recourse is suing them, which at the minimum will cost you a full day in small claims court.
3. Credit card float - buy now, pay a month from now. This isn't as big of a deal as the cash back, since you should have cash at least a month in advance, but at least it gets you the interest payments. The real benefit is that you can largely eliminate non-planned transactions from hitting your bank account balance, which gives you certainty of avoiding overdraft fees. If your everyday spend is on credit, you can look up last month's credit card statement balances and known fixed expenses (like rent) and verify that your bank account will remain positive through the end of the month.
4. Better fraud-handling flow. Your bank has 10 days to refund or give provisional credit for debit fraud. So it means you can be out thousands of dollars for over a week while they investigate. Credit card fraud has a much better flow - the issuer cancels your card and mails you a new one, and never collects any money from you.
1. Cashback. You can expect a minimum of 2% with relatively easy to get cards.
2. Consumer protection. A bunch of this has been extended to debit cards, but it's more of a courtesy from Visa et al rather than a legal obligation. In short, you are legally protected from being made to pay debts that you do not rightfully owe. Anything you pay for with a credit card is incurring a debt rather than giving someone money. This is important because if the merchant uses fraud or misrepresentation and is not willing to fix things, you can assert your legal protection against the invalid debt through a charge-back. If you use cash, your legal recourse is suing them, which at the minimum will cost you a full day in small claims court.
3. Credit card float - buy now, pay a month from now. This isn't as big of a deal as the cash back, since you should have cash at least a month in advance, but at least it gets you the interest payments. The real benefit is that you can largely eliminate non-planned transactions from hitting your bank account balance, which gives you certainty of avoiding overdraft fees. If your everyday spend is on credit, you can look up last month's credit card statement balances and known fixed expenses (like rent) and verify that your bank account will remain positive through the end of the month.
4. Better fraud-handling flow. Your bank has 10 days to refund or give provisional credit for debit fraud. So it means you can be out thousands of dollars for over a week while they investigate. Credit card fraud has a much better flow - the issuer cancels your card and mails you a new one, and never collects any money from you.
Cashback is free money to you. It's also a proxy to your bank account, easier to cancel and get a new one than my debit card at least, easier to dispute transactions, better app than my bank (quality of life I guess), can lock the card if you lost it on a night out, and unlock it if you find it in your jeans later that day.
1) A month-long interest free loan. That's a nice-to-have.
2) Benefits - purchase protection, extended warranty, return protection, travel insurance, rental car insurance, free checked bag, etc.
3) Earn cash/miles on purchases.
4) Ease-of-use, I don't have to go to the ATM and take out cash. Sure, I can use a debit card, but that's giving someone access to my checking account, with a credit card I'm playing with someone else's money, I don't have to worry about my mortgage bouncing if there's unauthorized charges, for example.
5) Sometimes required when renting a car.
2) Benefits - purchase protection, extended warranty, return protection, travel insurance, rental car insurance, free checked bag, etc.
3) Earn cash/miles on purchases.
4) Ease-of-use, I don't have to go to the ATM and take out cash. Sure, I can use a debit card, but that's giving someone access to my checking account, with a credit card I'm playing with someone else's money, I don't have to worry about my mortgage bouncing if there's unauthorized charges, for example.
5) Sometimes required when renting a car.
Because I get an interest free loan for somewhere between 20 to 45 days which with I can earn interest on (currently 2.25% per year), and I get an additional minimum of 2.5%+ cash back on the amount I purchase, and I get the ability to call up a bank and dispute a payment if a merchant tries to screw me.
And various other benefits such as airline and hotel status.
I don’t see a reason to turn down free money.
And various other benefits such as airline and hotel status.
I don’t see a reason to turn down free money.
I just finished a bankruptcy a month ago. Before a tenant fiasco my credit score was ~800. Now that I've gone through the process I'm at ~630. It's not that bad.
But when I went to look for an apartment in NYC. I was constantly denied due to the bankruptcy on my record. I felt the solution they offered was downright predatory. Either a for paid guarantor. Which took 3 months rent as a non refundable collateral, then an additional 3 months as buffer for failed rent. That was on top of most land lords wanting 6 to 8 months rent for down payment. Another service I saw was a guarantor insurance plan. Which tacked an extra ~8% as an insurance fee for the first year, than 5% the next year.
The only reason I care about my score right now. Is related to putting a roof over my head. Due to the above I went down to Philly and only had to put up four months instead of the typical three.
To rebuild my credit I had two secured cards. One for monthly services, the other for larger purchases. I paid them down to 10% each month. This is what brought my score to around 630ish range.
Since being discharged. I have been receiving offers that feel predatory to me. House loans with a consultation fee. Or auto loans with really high APR. I've also received a number of credit rebuilding loan offers. Which have non-refundable application fees ranging from 75$-100% with a variable APR between 24-32%.
I'm blessed to be a well paid software employee. Because once you're on the other side of the fence. No one trusts you, and the fine print is much more aggressive. I really feel now for people who are barely scraping by. Having to sign these agreements just to cover a roof.
I will look at this just to rebuild my score. It may not be the best. The only other company that approved me was Dell.
We do need a better program to help people recover. Without penalizing them with higher APR or hidden fees. If they got into that perilous position. They may not be on the best footing.
But when I went to look for an apartment in NYC. I was constantly denied due to the bankruptcy on my record. I felt the solution they offered was downright predatory. Either a for paid guarantor. Which took 3 months rent as a non refundable collateral, then an additional 3 months as buffer for failed rent. That was on top of most land lords wanting 6 to 8 months rent for down payment. Another service I saw was a guarantor insurance plan. Which tacked an extra ~8% as an insurance fee for the first year, than 5% the next year.
The only reason I care about my score right now. Is related to putting a roof over my head. Due to the above I went down to Philly and only had to put up four months instead of the typical three.
To rebuild my credit I had two secured cards. One for monthly services, the other for larger purchases. I paid them down to 10% each month. This is what brought my score to around 630ish range.
Since being discharged. I have been receiving offers that feel predatory to me. House loans with a consultation fee. Or auto loans with really high APR. I've also received a number of credit rebuilding loan offers. Which have non-refundable application fees ranging from 75$-100% with a variable APR between 24-32%.
I'm blessed to be a well paid software employee. Because once you're on the other side of the fence. No one trusts you, and the fine print is much more aggressive. I really feel now for people who are barely scraping by. Having to sign these agreements just to cover a roof.
I will look at this just to rebuild my score. It may not be the best. The only other company that approved me was Dell.
We do need a better program to help people recover. Without penalizing them with higher APR or hidden fees. If they got into that perilous position. They may not be on the best footing.
The only drawback I can think of for this is that it's a PLCC and not a Visa or a Mastercard. That said it looks like it's got some neat benefits like the 5% back on Amazon purchases and promotional financing that seem to be on cards for people with established credit.
This is called a "secured" card. Pretty much all banks offer this.
Makes sense as Amazon wants to get to as many people as possible and those who can't keep a card ... might want a handy route to build credit and still use Amazon.
I think most banks had secured credit cards for long time. I got mine from bank of America with 300 deposit which gave me 300 limit. they refunded it after 6 months
This is perfect for immigrants who have good income but can't get approved for any credit cards because of lack of history.
Immigrant here. I've got approved for $10K CC at BofA without any history, just provided a bunch of documentation like proof of income. It's also a good idea to apply for some credit union to loan your vehicle even you can afford buying it for cash.
This would have been great when I arrived in US with zero credit history. While I did get secured card from the bank, it took for ever to get a line of credit of more than $500/month.
The "monitor/improve your credit score" approach is good too as it can be a very foreign concept when you come from Europe...
Here is an article with the same story from a different source: https://www.marketwatch.com/story/amazons-new-credit-card-ta... .
The comments here about how bad America's privatized credit system is, make me wonder what it would take to "disrupt" that industry. I guess the hard thing is that it's about having relationships with all these giant institutions, so there's a strong in-group bias.
> standard variable purchase APR is 28.24%
Amazon has practically brought payday loans to scale.
Amazon has practically brought payday loans to scale.
Payday loans are often 300-600%. Or at least were in many states before regulation was passed. See here for details state by state:
https://paydayloaninfo.org/state-information
That said, APR of 20%+ on high reward credit cards is not uncommon. I have various cards with various APRs over 20%. I have never paid a penny of interest on them so I don't track which APR is which.. usually the juicier the "reward" of a card, the higher the APR. Which matters not if you fully repay.
https://paydayloaninfo.org/state-information
That said, APR of 20%+ on high reward credit cards is not uncommon. I have various cards with various APRs over 20%. I have never paid a penny of interest on them so I don't track which APR is which.. usually the juicier the "reward" of a card, the higher the APR. Which matters not if you fully repay.
This seems to be on par with most other store cards, for example a card from Best Buy.
There should be more was for people to build credit within our financial system, this along with some recent efforts by the bigger institutions to incorporate factors like utility bills are a nice step forward.
Have you read the terms for those up-your-score programs? If I were a CRA in light of all of my issues from FCRA transgressions to gaping security holes I'd want the entire world in mandatory arbitration for everything.
Looks like Amazon has figured out where to find even more Amazon.com customers by helping improve otherwise risky consumers' credit. Even applying gives $10 — in the form of an Amazon gift card.
Does this tie in with recent news about local pushback against cash-free businesses, on social-justice grounds? (Amazon cash-free stores not accessible to poor people without credit cards.)
The APR is required to be prominently displayed so consumers can do their due diligence on deciding on a card.
But whatever, obviously Amazon is getting into the slave credit business. Like they care, and like anyone would bother holding them accountable.