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So in Europe I have a credit card connected to my savings account. When I buy something I get a debt on my card that is automatically paid each Monday. It's basically just a short buffer that let's me review the transactions but I don't really accumulate any debt. How does that work in USA? How do people end up with so much credit card debt?
That's interesting. Which country if you don't mind? Here in Switzerland my bank still gives me a monthly credit card bill in the e-banking interface, which I can then settle from my account. Or I can pre-fill the credit card if I want to (useful if you're planning holidays and want to boost the available monthly limit for example). I think I could also set up direct debit, to settle the bill from the account automatically, but that would still happen on a monthly cycle.
I wish I could do it weekly, or even daily. In the US it's monthly. To be completely honest, I wish credit cards didn't exist at all. They're a tax on the financially illererate, and the fact that financially responsible people can gain an essentially free 1.5% (or more) cash back isn't enough reason for them to exist. I'd happily forgo the cash back to be rid of them.
Cannot you get a charge card in US?
Cashbacks aren't free, obviously. The merchant pays for it, which means that they factor it in to their pricing.
Yeah, free isn't the right way to put it, but I'm not sure what other word to use, considering that most places don't have different pricing for debit/credit (God bless Winco for not accepting credit).
Our credit cards are attached to bank accounts for monthly payments.
Credit cards companies in the US encourage putting all your expenses on the card to get cash back bonuses and other perks. They only require minimum monthly payments, and whatever carries over month to month is charged crazy high interest rates. Like over 25%.
Do they somehow encourage paying only the minimum each month? I think what I'm asking is if people tend to pay everything at the end of the month and have 0 credit card debt at beginning of each month or does everyone have some debt all the time for some reason?
I get it that if you don't have enough money to cover your daily expenses you will just start accumulation more and more debt but what if you make more money than you spend? People just pay it right away, right?
I personally pay mine off every month, but I am more fortunate than many. I think a lot of people fall behind on their bills.
People have to prioritize rent and utilities every month just to stay off the streets. Then food, healthcare, and other essential expenses need to be taken care of. Anything that can't be paid for out of pocket goes on the credit card, and since you only need to make a minimum payment on a credit card, a lot of people will do that to keep their heads above water until next month rolls around.
It's a vicious cycle and once that interest gets added in you are really only paying down the interest and not reducing the principal.
It seems to me that a lot of US people use credit cards to smoothen over larger purchases, so if you buy say a guitar for your hobby it doesn’t come all for this month’s budget but you plan to pay it off over multiple months. Often, credit card companies also encourage this behavior, giving short term low interest loans. But the overall market in the US is way more volatile than in Europe, so in the months you are paying off (your guitar, that fancy holiday, the tickets to a show…) you could lose your job, or the interests on your house mortgage could change significantly. And you are screwed.
Overall, Europeans tend to dislike credit unless it’s in the format of a mortgage, while it is a much more widespread form of payment in the US (and many other places). So, to most of your questions the answer is: most people have some credit card debt at all times.
That's how it works in the US if you're financially responsible. If not, you pay the minimum payment which is financing the remaining balance at extortionate rates that amount to never paying off the debt.
And you are incentivised and/or tricked into paying only the minimum payment to ensure that you go into debt.
That's the whole point of a credit card: to enslave people via debt.
The bank WOULD NOT HAVE CREATED IT FOR ANY OTHER REASON.
By not having any savings to pay off the debt they just accrued, so their debt increases from interest...?