One thing that's not mentioned in this article is that credit card companies will sometimes make last-ditch "clear your debt at a discount" offers before passing your debt on to a collection agency.
This happened to me many years ago. In the wake of the '08 financial crisis, I'd lost my job abruptly and decided to go travelling.
I'd accumulated a balance that was fairly substantial for me at the time (on the order of $10-15k, IIRC) and had been struggling to make the payments. I'd probably been 2-3 months behind on multiple occasions over the course of a year or so when a letter appeared that essentially said "we don't like you and we're going to close your account and pass your debt to a collection agency. However, if you pay off a portion of your balance in 4 monthly payments, and don't miss any of those payment dates, we'll wipe the rest."
I don't recall exactly what the discount was, but it was very substantial. In total I only had to pay something like 30-40% of the balance that I owed, so it was a very good deal. I'm not normally one to skip out on my debts but this was a huge relief to have a chance to be free of that debt: I pulled a lot of strings to make those payments on time!
True to their word, they wiped my entire balance and closed my account, and I never heard from them again (nor any collection agencies).
This is because debt collection is a terrible deal: debt like this sells for a very steep discount, because debt collectors generally have a low rate of success of collecting. They essentially rely on apathy, ignorance, or compliance from the debtor, and if there's any resistance put up they essentially just write it off as it's no longer worth the effort (especially because debt collectors often don't have any actual evidence of a debt owed: they get a spreadsheet with names, addresses, and amount owed, and that's it. Something like that doesn't tend to stand up in court). So you probably gave them a better deal then the debt collectors.
Fwiw, a friend works at a collection agency (that’s an entire different story), and it’s exactly as you say. Extremely rare that a company that sells their debt to the collection company will provide them any additional information regarding the debt.
My friend has told me that on occasion the debt collection company will reach out to the original owners of the debt and request additional information, but seldom get a response.
Anyone reading this, it is absolutely in your best interest to fight any debt, no matter if you believe you owe it or not. Nothing changes if you fight it and they have sufficient proof. Best case scenario is they wipe it from your credit report.
If you’ve already began making payments then you’re SOL, as making payments is considered ownership of the debt in question.
Yeah, I’ve had a few things go to collections agency in Europe, most of them small debts from FedEx paying customs charges for a package delivered to me and never telling me they did, sending it right to collections agency.
> if there's any resistance put up they essentially just write it off as it's no longer worth the effort
That's rarely the case. Debt collection agencies will absolutely hound you and your relatives, damn the laws, to try and milk value from you, for quite some time. They will then go to conferences and brag about how they have tricked people into claiming debts, the ways they have harassed people, and other atrocious things.
same experience, except it wasn't that simple. A family member told me I should settle with them, because that's what they did too. They wiped the balance and closed the account but the settlement stayed on my credit score for 7 years. I had a friend who was getting calls by a debt servicer and was making it seem like no big deal. I told my friend to ask the person about the 7 years, the person reluctantly admitted that his credit score will be flagged for 7 years.
So this is a good point. From the perspective of your credit score, the damage is done when you get to that point. Settling a debt hurts.
Where settling a debt has "value" is around mortgages. It shows that even though the damage was done, you did something to make it right. When underwriters get into the nuances of your credit, they will ask about this.
On a related matter, credit "repair" agencies work very simply, and in a few ways, one being the stress relief of redirecting calls to them rather than you.
But how do they actually "repair" your credit?
Every derogatory item, accurate or not, they dispute, hoping the merchant won't respond or follow process. If they do? They dispute it again. And again. Hoping to catch them out.
If you want to buy a home you have to pay it, even if you’re past the seven years window. Or at least that’s what USAA did to us.
I had a credit card debt of about $700 after a failed startup that, when I called TD, I was unable to pay. It was “written off.” The debt was from 2015 and I was purchasing a home in the spring of 2023 and despite the balance having been written off 8 years ago, USAA demanded it be settled. So I spent 12+ hours in a Kafkaesque circle of hell trying to find someone to TAKE MY MONEY! Even the agents at TD found it sad-funny how desperate I was to pay and yet they seemingly had no system in place for me to pay off the debt I did owe them at some level. Ultimately, I got escalated so someone high enough up with enough tenure to find the right system to pay and a fax(!) was sent to USAA to settle that underwriting line item.
Interestingly, USAA also managed to find that I had a $25 Comcast bill from something like 11 years ago, likely having missed a final bill on move out of some apartment. This wasn’t reported on my credit report, ever. Somehow they managed to find it and I needed to pay.
I would love to know now about the underwriting process and how they find non-reported debts like my Comcast bill.
This seems like pedantry on the USAA part. They should add some small fraction of a point to your rate and move on.
I understand you probably get extra benefits with USAA but this would be an automatic disqualification for me and I’d move kn to a different servicer. However, that is _painful_ in the middle of a closing.
Truth be told - we’re looking at ditching them but with banking, home, and auto we are likely stuck with them for the fact of inertia.
Our mortgage was immediately sold to another firm, so there’s no nicety on the part of having a consistent firm there. The process was painful, our processor was impossible to get in touch with, often a 48 hour lag for a reply.
Shortly before moving I was side-swiped by a man suffering a medical incident (diabetic coma after a blood draw) while at a red light. Our premium increased due to “driver history” a month later.
I’ve previously worked directly with USAA staff for due diligence when selling software / services to their firm and they are absolutely on the ball on that front. However, their actual software as an end-user is a hassle, e.g. password rules and UX that look about 25 years old at this point and suggest some languishing old mainframe.
If you are in CA statewide it is illegal to increase your rates for a not at fault crash.
In most other states insurers will increase your rate even if you are not at fault and you only made a claim with the at fault party or your insurer is successful subrogating
If you have Costco membership I highly suggest switching to them for all of your insurance needs, IF they have that service available in your area.
I’m in the Midwest and I pull quotes every 3 years, and Costco has always been a few hundred cheaper than the other cats with the same or better coverage.
Banking should be a credit union unless you require some weird need from USAA.
To be honest, I never bought into the USAA hype, their marketing is strong but their “benefits” aren’t anything more than what’s found at competing banks. Credit unions provide better services and benefits to their customers anyhow.
They are fantastic for banking and insurance but there's no particular reason to get your mortgage from them. When I looked their rates weren't any better.
They are reported somewhere, that's how they find them. USAA will tell you their source if you ask - you have the right to it under the FCRA.
I've noticed sometimes some "weird" debts only show up on TransUnion and only TransUnion. If you're "checking your credit" with Equifax or Experian you won't see them. There is also "other" credit reports like Chexsystems.
Worse than just that, it is also taxable. So you think you're paying a few hundred to close it out, then you get zinged for more taxes in April. If you were counting on getting a refund, you might come up short.
... only if they're no longer considered necessary for the purpose of judging your creditworthiness. So in practice you're unlikely to get anything expunged ahead of schedule, filing a complaint only makes sense if the credit reporting agency kept your data for longer than they said they would (in Germany, this is 3 years at most).
Do you have a source that specifically states I can get a bad debt scrubbed from my credit rating under GDPR provisions? It doesn’t match my understating of GDPR at all.
The record can technically be correct but not in "pursuit of a legitimate interest". In that case the negative record can be "corrected".
So, in my case. When I was a teenager I opened a second bank account with credit card. In only used the card once for something small and forgot about it. Throughout the years the cost of this card started to built up, messages to pay back where not received because I already had a different address and phone number.
Years later this resulted in a negative BKR registration for me. I explained the situation to the bank (that could technically let the registration be removed) but they refused. Later I had a lawyer order them to remove the registration, on grounds that me forgetting about a credit card when I was young was no reason to believe I wouldn't be paying my mortgage. The registration was therefor not in "pursuit of a legitimate interest". The bank honored this.
It seems like this is the solution: Anytime your debt is sold on, the debtor has the right of first refusal on the price it is being sold for.
If the bank is willing to ding your credit sore and move on through parting with your $1000 of debt for $100, then you should have the opportunity to buy it at that price and be done as well.
I suppose the problem is that if that becomes too prevalent, people will stop paying their bill in the hope that the credit card company will give them a discount
Back in the early '10s I was reading a report from a guy who had stellar credit and the card limits to go with them. He ran up about $100,000 of debt on his cards on purpose and stopped making payments. He then approached his bank to settle the debt and negotiated a 60% discount. The account was marked "paid by customer" so it never appeared on his on his credit report as a default. He did get dinged for missing payments though, but was $60,000 richer.
I have a family member who did something similar - perfect credit and defaulted on purpose. On a rental property, he was underwater on the mortgage at the time of the 2008 crash, so he simply stopped paying and let the bank foreclose and came out ahead that way. Trashed his credit rating but he never had any need for it, he had enough to buy his own house and car outright.
> On a rental property, he was underwater on the mortgage at the time of the 2008 crash
What I don't understand is why people worried so much about being underwater. As long as you kept making payments, couldn't you ride it out and still own the house as the market recovers?
> Trashed his credit rating but he never had any need for it, he had enough to buy his own house and car outright.
This feels like it should be considered some kind of fraud.
The rest of the story in this case was that the tenant had also stopped paying, so it was easier to just let the bank deal with the eviction. As for why worry about being underwater - it's because you don't know the time frame of the recovery; the appreciation might have lagged behind the mortgage interest for the life of the loan, as far as anyone could see in the depth of the crash in 2008.
This is a lot harder to do these days. Not impossible, but definitely harder. The CRA contracts disallow marking an account as paid that was not paid in full (more commonly, people try to negotiate 'pay for delete' to remove derogatory histories).
Yes, but "defaulting on $100k as an income strategy" is a tier above the usual tax avoidance schemes in terms of risk, so I suspect he availed himself of those too and wound up paying very little tax on the $60k.
Higher rates on what exactly? Isn't it pretty much just mortgage rates? Plenty of people have no plan or desire to buy property within the next seven years.
In the US, it also means things like getting denied for jobs and apartments.
Car loans will be more: You might not be able to easily buy a new car.
And that's not even getting into some of the other random things. You'll need to pay upfront to replace the washer that went out instead of financing - unless that financing is through one of the rent-to-own places (which still might be cheaper than going to the pay laundry). Same for, say, dental work: Some places used to let you pay in installments if you had adequate enough credit.
How on earth can people be denied jobs for poor credit? You're not a creditor to your employer! Isn't this just the "social credit" system that people worry about in China, except privatised?
I applied for a job at a gas station in the late 90's. The store manager had to get permission to run a credit check that I needed for the job: The dude explained that folks with bad credit were more likely to steal from the company.
Which isn't true, of course, and they had other ways to check for theft - but this didn't stop them.
I think the burden of proof is in the other direction: if someone is going to use some sort of signal or test to determine if someone is eligible for employment, it is on them to present evidence that the signal/test actually accomplishes the objective they expect it to.
In California, it is illegal to use a credit report in employment decisions (unless the position is in finance/accounting). Clearly lawmakers have decided that this sort of test isn't helpful, and is abused to deny qualified people employment.
No, but they might want to turn away a specific employee for an otherwise protected reason. Don't want to hire a black employee? Run a credit check. Statistically, black individuals have lower credit scores than white individuals. Deny them a job based on their credit score.
While that makes some sense, I'm apparently having a hard time getting over my conception that a private business would ever give the rejected candidate a specific reason they weren't offered the position. Surely this is cultural on my part.
I have no evidence either way, but it is not absurd in my opinion to suggest that people who make poor life decisions in one area of their lives might also make poor life decisions elsewhere.
A bad credit score doesn't really mean you've made bad choices. It just means you had some bad luck.
The reasons for your bad luck can range from medical bills, job loss, missing work when poor (it snowballs) and other such things. It might mean you made a bad decision when you were 18, but it is still hanging around on your credit. You might have been in a financially abusive relationship.
Shit happens, and it is naive to think that you have absolute control over all of it. A few folks simply don't pay, sure, but you can't tell this from a credit report.
And it isn't like you are going to get credit for paying most normal bills on time. Landlords and utilities rarely report positives to the agencies.
And even with all this, it shouldn't realistically mean that folks can't get back up. Most jobs don't need credit checks, nor do most apartments (or at least, limited checks).
> A bad credit score doesn't really mean you've made bad choices.
It doesn't necessarily mean this, sure. But, if we found a thousand people with bad credit scores and did a deep audit, we wouldn't discover 1000 who had unavoidable, unpredictable misfortune. We likely wouldn't even find 500.
> Shit happens, and it is naive to think
I've heard alot of "shit happens" excuses over the years. Few of them struck me as "no matter what this person might have done, they were just fucked from day one". Shit doesn't happen, either in frequency or degree, nearly enough to explain the bad situations many are in. They tend to have alot of minor misfortunes sprinkled here and there among gigantic piles of poor decisions.
>And it isn't like you are going to get credit for paying most normal bills on time. Landlords and utilities rarely report positives to the agencies.
Funnily enough, I work adjacent to a company called Rent Dynamics, and one of the features that they offer is positive credit reporting for those who pay the rent on time. There are others that do this too.
I'm still skeptical of the concept.
Should some company hiring say "sure, he defaulted on that $18,000 of credit card debt 3 years ago, but look... he's paid his rent on time for the last 4 months knowing that if he screws that up he'll be evicted, and that counts for something!" ?
Is that feature worth the slow accretion of extra (and sometimes hidden) fees that are pushing housing/rental prices higher in an era of skyrocking housing costs? Remember, this isn't something that shows up for luxury apartments, it's for the not-quite-slums apartments.
We might find that landlords will do positive credit reporting here in the next few years, and that it's not the good thing you think it to be.
> Should some company hiring say "sure, he defaulted on that $18,000 of credit card debt 3 years ago, but look... he's paid his rent on time for the last 4 months knowing that if he screws that up he'll be evicted, and that counts for something!" ?
No, they shouldn't be looking at this in the first place, because it is -- at best! -- tangentially related to job performance. If you're worried that your employee is going to be distracted by personal financial issues, taking away their option to have steady income certainly isn't going to fix the situation.
> Is that feature worth the slow accretion of extra (and sometimes hidden) fees that are pushing housing/rental prices higher in an era of skyrocking housing costs?
What does this have to do with anything? Housing costs are skyrocketing primarily because of housing scarcity in desirable places to live (where existing residents have enacted policy to restrict further building). On top of that, we have wages that have not been keeping up with inflation, and a general increase in income inequality that helps to push housing further out of reach.
> Funnily enough, I work adjacent to a company called Rent Dynamics, and one of the features that they offer is positive credit reporting for those who pay the rent on time. There are others that do this too.
I actually feel that such companies should not be allowed to report a tradeline.
No company / landlord (and doubly so when you go with, as you say, 'not-quite-slumbs') is offering you rent in arrears. You're paying, in advance, and no credit was extended to you.
To me this is a bastardization of the credit system that's only got potential positive reporting as a side effect. Let's be real, companies like yours real customers are landlords/property managers, not tenants.
Thank you for this comment. You have shared an insight I had not come to see on my own. I doubt I would have come to it by myself.
> Let's be real, companies like yours real customers are landlords/property managers, not tenants.
They are very much so. But if we can help them be more attractive to their customers (renters), then our own products might be more sought after. Or at least that's the theory my bosses operate from.
The point is that a credit report is probably a poor signal of risk when it comes to the kinds of things most employers care about when considering hiring someone.
If you have evidence to support the idea that a credit report actually is a good signal here, then by all means, present it. If not, then the default assumption should be that it's not useful, or at the very least not equitable. We shouldn't be adding qualifications to things based on guesswork.
And in general, we very often legally require companies assume higher risk in various things (including hiring) in the name of anti-discrimination (for one thing). We consider this to be a benefit to society. In this specific case, I want the person who has bad credit to be able to obtain steady employment (and on decent terms; not just one out of the fewer jobs they'd have to take because the others disqualified them based on their credit) because that's pretty much the only way they'll be able to improve their credit. They'll be able to become more financially stable, perhaps be able to buy a home. All of this is a benefit to the stability of society.
The thing that generally pisses me off about attitudes like yours is that it advocates for a system where when you do one thing wrong, you get further restricted in ways where you're guaranteed to do more wrong things, and every step you take -- even steps taken in good faith, in seemingly the right direction -- makes it harder to dig yourself out from under the mess.
I've found that the people with these attitudes are usually those who have either a) never experienced much in the way of hardship, or b) are one of the rare cases who managed to dig themselves out, despite all the adversity, and now have a chip on their shoulder that makes them advocate for continuing to make it hard for everyone else.
> If not, then the default assumption should be that it's not useful, or at the very least not equitable. We shouldn't be adding qualifications to things based on guesswork.
In a free country, that's for them to decide. I don't think it should be a default assumption. Neither does the government, where excessive debt tends to signal a willingness to commit treason for those who try to get security clearances.
If someone would try to sell documents to the Russians because they carry a x5 debt load of what they should for their income, is it really so ridiculous a concern that they might skim the till for the same reason?
> And in general, we very often legally require companies assume higher risk in various things
Sure, when it's morally the right thing to do, or when it would create perverse incentives if they didn't.
Here? They just won't hire anyone. Self-pay at the pumps, no convenience store at all, or some horrendous gigantic vending machine deal, no employees. That doesn't serve the community, customers, and Mr.-I-Think-Credit-Cards-Mean-Free-Money gets no job.
> The thing that generally pisses me off about attitudes like yours is that it advocates for a system where when you do one thing wrong,
It wasn't "did one thing wrong". It's always "did one thing wrong, then like a misbehaving child decided to do five other things wrong out of spite or for shits and giggles or whatever."
And that behavior's just dangerous to fucking society as a whole.
> I've found that the people with these attitudes are usually those who have either a) never experienced much in the way of hardship, o
Then I'm your counter-example. Grew up on food stamps. Remember living out of a car when I was a kid. Free school lunches. Not just for a little while, first through highschool.
> and now have a chip on their shoulder that makes them advocate for continuing to make it hard for everyone else.
The universe makes it hard on them, and everyone else. Stop expecting others to try to make it easy on screwups.
Well, people can be denied jobs for almost every reason (except a couple explicitly listed taboo reasons i.e. protected classes), so if any employer believes that defaulting on your debt correlates with e.g. trustworthiness of a candidate, they are free to use credit rating as (dis)qualifying criteria - no matter if that belief is true or not.
Sure, but just because something is legally allowed, it doesn't mean we're not permitted to argue that it's a bad practice.
Some places don't legally allow this, so we should think about why: because it's abused, perhaps? Because it furthers discrimination?
The list of current protected classes isn't some holy thing; we can and should add to things that companies aren't permitted to discriminate based on, when those things are found to be harmful to people and society.
Someone with poor credit may be assumed more likely to commit fraud or steal from the company. Someone with poor credit might also be assumed to be personally irresponsible and lazy, and more likely to slack off, ignore necessary details or cut corners.
It isn't fair but in the US money carries moral weight, and many people assume the less of it you have, the worse of a person you are.
If you live in California your credit score can’t be factored into hiring unless you directly deal with company finances in a specific way, namely in the roles of accounting or finance.
Even if you’re a software engineer working on financial software you’re exempt because you have no direct and common access to the company purse.
There’s a few other states that have laws like this I can’t recall them though l
Your statement is still true if you remove "in debt" from it. The question is whether or not being in debt (or having poor credit) meaningfully increases the chances of someone taking the offer from that bad actor. I'm not convinced it doe.
>Owing money around really does sound like something a bad person would do.
Why would this be your default assumption? People can end up owing money for any number of moral reasons. I'd rather someone have 10,000 in debt because they borrowed to help someone with medical debt who would have died otherwise, than for that hypothetical person to die because of a lack of money. From there, it's easy to posit someone losing their job to be a caretaker for said hypothetical person. Et voilà, there's your unpaid debt yet (IMHO) for completely moral reasons. My opinion on debt has substantially changed once I encountered "Debt : the First 5,000 Years".
Except no one has presented any evidence that bad debt is an indicator of job performance issues.
Car insurance providers have a ton of data that correlates all those factors you mentioned, so for the most part it's reasonably fair for them to set rates based on that. No such data exists when it comes to debt and employment, as far as I can see. Just a bunch of people here arguing back and forth for their personal opinion.
There isn't any evidence, it isn't actually true. Debt is inescapable in a country where a trip in an ambulance can wipe out a family's entire income. It's just a cultural prejudice born from the American idolization of free markets (which itself is a vestigial expression of European classism and belief in noble divinity), rugged individualism (and a pathological fear of societal bonds) and the Protestant work ethic, mixed with a bit of racism and xenophobia.
That's a weird position to take, considering that one of the foundational concepts of the global financial system is debt. Without debt, our financial system would look very different, and almost certainly not in a good way.
Using debt wisely as an individual is a great way to be able to have and do things that you wouldn't otherwise be able to have and do, and it's perfectly possible to manage that responsibly.
In my 20s I had a girlfriend who considered it a negative that I was carrying educational debt. Despite the fact that a) I was easily making my monthly payment and living within my means, and b) taking on that debt allowed me to attend a top-tier university, which ended up opening several doors in my later professional life that likely would not have otherwise been open to me. My life (15+ years later) is immeasurably better for having taken on that debt, which I fully repaid years ago.
Sure, there's such a thing has taking on too much debt, and being unable to service your debt within the financial framework of your income and expenses. But even if that happens, you're most like not a "bad person". Financial literacy and education in many places (especially the US) is not particularly great, so it's no surprise that many people make bad financial decisions.
It isn't about owing money or even debt. You can be in a lot of debt and have good credit. You can also have very little debt and have very poor credit because you couldn't pay a hospital bill or didn't get the final electric bill from your old apartment paid before it went to collections.
It is really about keeping poor people out. You might be able to argue something about responsibility if you can prove that they could pay the debt and chose not to.
Disagree. There's no intent to keep poor people out. Someone who has little but doesn't spend too much will generally have good credit.
Creditors these days tend to treat medical debt separately--someone who has only medical debt probably is someone who is responsible but something happened to them. Likewise, back in the era of the housing collapse and strategic default creditors would look at someone who had a foreclosure but nothing else far more favorably than someone who had a variety of debt issues.
Someone who has little but doesn't spend too much will generally have good credit.
No. Living within your means makes you wind up with no credit.
Utilities and landlords rarely report your on-time payments, after all. You have no history, and you need to prove yourself instead of the lenders assuming you are responsible.
And I'll mention here that different places hound folks with a recent bankruptcy, despite a variety of debt issues that led to bankruptcy.
And you can't even measure responsibility from whether or not it is medical debt. I struggled in my early to mid 20's because my then spouse wound up with a major mental health issue. He wound up on disability, and before (and sometimes after) would take money from our account or out of my purse. I know in hindsight that I should have taken different actions, but I didn't think about it in the midst of constant stress.
And at least I was finally able to leave, some years too late, but that shouldn't be required. I left due to unhappiness, not because of the illness. It would be worse if it were a child's sickness that caused the struggle - the bills might be in the spouse's name instead of yours. None of that would show up on a credit report.
Get a store card, use it for things you would have bought anyway. You can build from there. Note that your credit report doesn't really care about how much you borrowed, but how good you were about paying it back.
> Someone who has little but doesn't spend too much will generally have good credit.
No, that metric has nothing to do with it. The main things that affect your credit score are a) age of oldest credit line, b) on-time payment history, c) amount of available credit, d) credit utilization.
While "not spending too much" can be correlated to (b) and (d), it's not always a particularly strong correlation.
And even if you do all those things right, one bill -- even for $50 -- sent to collections (because your automated bill pay randomly stopped working and you didn't notice for several months -- this happened to me) can knock 50-100 points off your credit rating. Sometimes you can get this fixed, but the biller has no obligation to send a correction to the credit bureaus even if you pay the $50 and explain why you missed the bill. Enjoy waiting 7 years for that negative report to "scroll off" your score calculation. It just did for me a few months ago, and despite the fact that I have otherwise excellent credit, I was surprised how much my score went up after this was off my record.
Ah, yes, that matters so much when applying for a gas station attendant job.
But please, most people have debt! Mortgages, a car loan, educational debt. Revolving credit card debt, even if they pay off the statement balance every month. (Maybe you personally don't, but you are not typical if that's the case!)
Sure, if you have debts that you are having trouble paying, maybe you'd be more susceptible to accepting a bribe or caving to blackmail? But c'mon, for most jobs out there this is just not a consideration.
Most homeowners have debt. So do lots of folks that own cars. And credit cards. And poor people unfortunate enough to wind up in the hospital with sub-par health insurance. And 18 year old college students with bad judgement about credit cards.
Are all of these folks more susceptible to bribes and blackmail? This is a sizeable portion of the population.
Does bad credit of someone that just declared bankruptcy make someone more susceptible?
Couldn't a company just lessen this by paying well so that folks can get out of debt?
The reality is that credit rating has a strong correlation with responsibility. Thus, for example, in places where it's legal to do so insurance rates will be different.
This does end up sweeping up a few who were hit by unavoidable circumstances but most people who get in credit trouble were skating too close to the edge.
The fact that in some (many?) places it's illegal to set insurance rates based on credit reports should tell us something: that at best they're an unreliable measure, and at worst they're (ab)used to discriminate.
> The reality is that credit rating has a strong correlation with responsibility.
No, the reality is that responsibility is but one component of credit rating - another, moreso, being 'how attractive are you as a customer to credit providers'.
This is why your score might drop when you pay off an account, or close it. Defenders of the system and CRAs will say "well, there's less information to assess your creditworthiness now that that account is closed", as if, say, you had ten years of on time payments on that account, but they mean nothing.
Note that exceptions to the correlation has both false positives and false negatives.
e.g. On opposite side of people with bad credit who got hit by unavoidable circumstances, there are people like my partner who have limited credit score upside because they don’t use much credit. My partner has a mortgage with me, but other than that, she doesn’t have any debt and doesn’t use credit cards (other than the prepaid variety which pull directly from bank accounts and don’t contribute to credit scores.)
Because for the most part, private companies who you have alienated yourself from have competitors, and don't enforce their displeasure with you at the end of a bayonet while holding shackles. State Level credit system is an actual dystopia.
Bah. If you have no intention on purchasing a home then you're free to not care.
- Buy a used car in cash and wait a couple years for the bankruptcy mark to fall off.
- Your credit has to be absolutely thrashed to not get an apartment, even then there are plenty of private landlords that won't do a credit check.
Its almost as though the presupposition is that you need financing for anything in life. You can save and pay cash, its possible. People have been doing this for generations and have been just fine. Businesses need to run off credit, individuals don't. Pay your way and live reasonably.
I always find it weird when someone puts forth the attitude of, essentially, "you don't really need these things that other people have, so just deny yourself the things you want and it's all good!"
I will certainly agree that "keeping up with the Joneses" is a very real phenomenon, and we are marketed to death to get us to want things we don't need, that actually won't make ourselves happier or our lives better.
But there's a lot of wiggle room there. Debt is a useful tool, and it can measurably make our lives better if used wisely and responsibly. Should a few mistakes push you into a different class of people who don't have access to that? I would say no, that's unjust.
And that's without getting into all the ways that a credit report often doesn't accurately reflect your ability to manage debt, either just because of its imprecision, or because of reporting errors and unaccountable businesses that don't care who gets screwed over.
Any sort of credit. Car loans, credit cards, overdrafts, phone contracts, personal loans, if you are a business owner they can affect your commercial loans. Rental agreements too.
As the article points out, the credit card company getting 30-40% was actually a great deal for them: if they had to sell your debt to collections, they probably would have only gotten 3-4% from that sale.
There was a case a few year back around the time of the 2008 recession where a man in debt used the Fair Debt Collection Practices Act to earn a decent living from their aggressive/dishonest practices. I did try Googling for the story, but I could find it.
His process was to let them lie to him - he even encouraged it, all while he was recording the call. After the call ended he'd launch a legal claim for compensation and he'd always win.
For example if they implied he could be jailed for not paying him debt, he ask them to confirm what they must said and use that as evidence of a violation of the FDCPA.
His logic was that in the good days credit companies were begging him to take on debt, but when the economy crashed and he found himself out of work they weren't so understanding about his circumstances.
> On June 25, 2021, the Supreme Court of the United States held that a plaintiff must suffer a concrete injury resulting from a defendant’s statutory violation to have Article III standing to pursue damages from that defendant in federal court. The Court also held that plaintiffs in a class action must prove that every class member has standing for each claim asserted and for each form of relief sought.
Meanwhile, a "website designer" who's never deployed a website, was never hired to create one and who suffered zero injury gets a ruling. This SCOTUS is invalid.
> Meanwhile, a "website designer" who's never deployed a website, was never hired to create one and who suffered zero injury gets a ruling. This SCOTUS is invalid.
Where did you get the idea that she's never deployed a website? I've never heard anyone say that. (And at the very least, she has her own site, https://303creative.com/ )
> Puzzlingly, before she actually filed the first suit in 2016, Smith had apparently never designed a wedding website. Even weirder: She had never apparently been asked to provide services to a same-sex couple up to that point either.
And the customer who "requested" the site was fake, too:
> But after The New Republic reached out to Stewart directly—his contact information was readily accessible in court documents—the story fell apart: He said he had never submitted the form; he said TNR’s call was “the very first time I’ve heard of it.”
> It was later discovered by The New Republic that Smith had made a wedding website for a heterosexual couple in 2015, which had been removed from her business's profile prior to her filing the case but remained visible in the Wayback Machine archives
Of course it was removed from her business's profile. Under Colorado law she wasn't allowed to offer to create any wedding sites unless she was willing to create LGBT wedding sites.
She wasn't, so she removed references to wedding sites. Why do you find that strange?
> To change this, we should require some kind of supermajority to confirm judicial appointments at all levels.
That was the de facto situation until 2013 (until 2017 for the Supreme Court).[1] The Republican SCOTUS majority became entrenched when Mitch McConnell refused to allow the Senate to consider Merrick Garland in early 2016, though. That wasn't luck.
> The Democrats would have done the exact same if given the opportunity
What would the Democrats be doing if they had a supreme court majority? I don't really follow US politics that closely but I got the impression that the Democrats were mostly about not rocking the boat too much?
Morality is not subjective. There are definitions of that are more correct than others. Otherwise laws and prosocial behavior would be impossible to define.
It is subjective. They are "more correct" from your historical context.
Assuming you're in a western nation, this means a Christian context.
Other nations and religions see it as immoral to eat pig or be homosexual. You might say they are "less correct" definitions, but that is from the Christian ancestry of which the western world was built from.
Counties that don't come from Christian roots, don't have the same moral definitions.
That wasn't "bothsidesing" the issue. Whatever your current political opinion, the potential is still there for abuse by either party, and there's room for improvement in the process. The point still stands.
Yeah this does not impact cases brought before state courts:
> Article III, § 2 of the U.S. Constitution limits federal court jurisdiction to cases and controversies. But the Supreme Court has held “the constraints of Article III do not apply to state courts, and accordingly the state courts are not bound by the limitations of a case or controversy or other federal rules of justiciability even when they address issues of federal law, as when they are called upon to interpret the Constitution or, in this case, a federal statute.” ASARCO Inc. v. Kadish, 490 U.S. 605, 617 (1989).
$75k if you mean the usual amount in controversy requirement for diversity jurisdiction, no? Anyway, the FDCPA specifically gives federal courts jurisdiction over FDCPA violations “regardless of the amount in controversy”, so there’s no minimum.
Still, the FDCPA jurisdiction provision is non-exclusive, meaning state courts also remain a viable option.
That ruling only applies to federal courts. FDCPA claims can be, and sometimes are, filed in state courts, which are allowed to be more permissive about standing rules (to the extent permitted by state constitutions and laws) than federal courts.
I had a bunch of idiotic debt collectors after me in dealing with my mother's estate. (*None* of them listened to the simple instruction that it's an estate issue, file with such-and-such court. The clock ran out, they all ended up with $0.) Rare was it a call that didn't violate the FDCPA. Unfortunately, I live in a state that's all-party with regards to phone calls even though we're one-party in person.
Recycling my post from when this link was submitted 32 days ago.
_____
While I highly encourage everyone to read this in its entirely, I think it's worth a quick summary of the bits that may be personally-useful to those who don't:
* If it comes to a lawsuit in a court case, DO NOT IGNORE IT. If you don't show up, collector gets a kind of automatic win called a default judgement, and that's how you end up losing your house or having money vanish from your bank-account. If you do show up, they might instantly offer you a discount deal, often because they know their position is very shaky and they don't actually want to spend money fighting a court case that might be unwinnable against a strong opponent.
* Ask for proof. Debt collectors often lack documentation that you are legally-entitled to. ("Debt verification" under the "FDCPA".) Many never got it form the original bank, and don't want to spend time/money getting it. Asking for that proof means they may just give up and move on to a cheaper/easier person.
* Don't be fooled into paying for other people's debt. At least in the US, debts end when the original debtor dies, except in the sense of money taken away from the debtor's stuff before it reaches heirs. You can't ever "inherit negative money". Spousal stuff is more complex, but don't get fooled into paying something you don't even owe.
* Debt collectors will often make threats that are both impossible and illegal. This means you can only benefit from having everything in writing. (Or by clearly announcing that you will record a call, and then recording it.)
* The law (FDCPA) only allows debt collectors to call family members in order to get your contact information... But some of them use this as a form of harassment/coercion. There's no magic-wand for this part.
* If you agree to a vague "payment plan" and then send them the first check or bank-account info, watch out: Even if you don't write another check, they will find ways to withdraw money out of that account at the exact worst moments for you... but the best for them.
I'm in Canada so laws are different but what I found here is when I ask for proof they don't send it, they just sell the "debt" to a different agency and then I start getting harassed again 2 months later, rinse and repeat.
(I put debt in quotes because the alleged debt is with a company I've never done business with, so I assume it's completely fake, mistaken identity, or identity theft.)
I got one that must have been mistaken, sent off the letter asking for evidence and it shows up from a new guy instead. Same letter to the new guy, it never returned.
There is one simple change I would like to see to the industry--if a debt is challenged it should be illegal to sell while the challenge clock is running and if it's not substantiated it should be illegal to sell, period. You should not have to play whack-a-mole with bogus or mistaken identity debt.
I would also like to see the FDCPA remedies applied to everyone--you should have the same causes of action even if it's not your debt.
Just an FYI it is illegal if you ask. Or something like that IANAL. The author of the original article has a “what letter to write to debt collectors” article and basically says something to the affect of
“Please provide me proof that this debt is valid. Or else please notify all credit agencies that this debt is invalid and should be scrubbed. You are not allowed to sell or collect on this debt until you tell me it’s real”.
Of course doesn’t mean people follow the law. But sometimes you have to have intention in explicitly asking them to delete the record if they don’t have proof.
It is in this domain, of broken promises and broken people that you can establish what a society is really made of. Graeber's Debt is obligatory reading (alas not easy to read) if you want to dig into the painful history of debt relations between humans.
The post provides excellent insights into the odious side of consumer finance. It feels like a follow up with ideas about reform would not be wasted effort: Once this domain meets the odious side of tech (uncontrolled data collection, tracking etc) the toxicity will grow exponentially.
Some credit card companies - in the UK at least - specifically target people with poor credit scores with rates up to 99.9%(!)
And it's normal practice - but utterly perverse logic - to increase the rate of anyone who starts missing payments.
Debt collectors can get a court order to put a lien on property, and then get another court order to force sale of that property and repayment of the debt.
Of course the collectors bought the debt for some tiny percentage of its nominal value, so this is immensely profitable.
The outcome is that if you lend to poor people with poor credit scores there's an excellent chance you'll be able to secure a supposedly unsecured debt on their property and make them homeless, with a huge margin of profitability.
There are also ambiguous and murky connections between the debt collectors and the credit card companies which allow the latter to distance themselves from the harassment and aggression of the collection companies.
At the same time there's an incredibly toxic combination of wages decreasing in real terms, exploding property prices (both renting and buying), exploitative health care costs, constant ad noise promoting pointless lifestyle spending, and constant reinforcement of the belief that if you're in debt in a glorious economy of freedom and opportunity it's entirely your own fault.
It's a perfect storm of financial servitude. The credit industry is just one part of it.
I am far from religious, but one thing most religious traditions have common is how they ban usury/interest which would make much of global finance we have today “haram”.
You can see the reverse effect too not only at an individual but collective level. Once the religious ethos disappears from a sect, widespread adoption of debt becomes the norm.
Whether or not it happened exactly as described within the Torah/Bible, we have plenty of records to indicate ancient societies regularly overturned debts.
... Unless you're making a joke that it happened but was not "celebrated" because most people didn't like it.
> one thing most religious traditions have common is how they ban usury/interest which would make much of global finance we have today “haram”.
The way Islamic finance avoids interest [1] - the bank buys a property and sells/leases it back to the borrower at a slightly higher price, paid in installments - sounds more like semantics than actually avoiding interest altogether.
It seems to rely on a belief that there is a fundamental difference between rent paid on borrowed money (AKA interest), and rent paid borrow the use of real property.
The virtue in Islamic banking seems to be that it has a healthy skepticism of financial derivative products, preferring to invest directly in physical assets and businesses. This probably avoids a great deal of risk (trading off the upside too).
But debt and interest are both sound concepts, and both are critical towards building an advanced society. Being able to borrow money from the future is enormously powerful.
...but it's not exploitation. Your head is thinking about bad debt, but bad debt is only a tiny fraction of total debt. It certainly makes for excellent highly memorable emotionally charged stories, which is why we are here, but the fact of that matter is that overwhelming majority of debt is paid off and bears actual fruit.
Even debt like student loans, which gets almost universally panned, is still good debt. The ROI on a collage education is ~1000% (amount borrowed/paid off vs. increased lifetime earnings). On paper your are still dumb to not take out student loans to get a degree.
No I was pointing out that simply because something is beneficial for some people doesn't mean we should want it to exist, which is what I read your comment as saying. Please don't tell me what I am thinking.
You're making the argument that cars shouldn't exist because some people die because of them.
Like I said, debt is overwhelmingly useful to the vast majority of people who use it.
We're not gonna ban cars because a handful of highly emotional road tragedies. We're not gonna abolish debt because of a handful of deranged debt collector stories.
If you want to make an argument make one. "Some people like it" isn't a strong one but if that's all you got I guess.
"We're not going to" presupposed the outcome. I don't agree and won't contend it, since you're not willing to say anything that can be refuted. I'm not the author of the future I can't say what we're gonna. But then neither are you.
"Some people like it" isn't a strong one because it's a straw man of my argument.
"The overwhelming majority bear tangible benefit from it" is the actual argument.
Debt is a core instrument of modern first world society. Just think about how many people would own a car, much less a home, if you had to pay for it all up front.
While having a car today is necessary when living any place where a century of planning has assumed everyone who matters has a car, this state of affairs is not indisputably better than what might have happened otherwise.
Home mortgages are only a few hundred years old, and it's not like they started out as prevalent as they are today.
---
Just because we find ourselves in a particular place today doesn't mean other options aren't feasible. Assuming no better options could have ever existed sounds depressing.
I don't think he needs excuses but his errors and political biases pale in comparison to the systemic hypocrisy and gross inadequacy of an entire profession. Somehow the astrologers advising the emperors du jour have managed to declare themselves scientists and even receive Nobel prizes [1].
The hope is that others will manage to pick up the thread of inquiry and somehow integrate his historical and anthropological observations into a more truthful type of economics.
[1] There are always exceptions. A tiny number of economists do seem to grasp the nature of debt and money better than the vast crowd regurgitating banalities.
Debt crisis followed by debt relief is historically normal. Prompting Graeber to wonder if capitalism is inherently unstable.
Maybe capitalism somehow requires debt relief (eg jubilees, bankruptcy). Then we should codify it. Instead of continuing to treat them as unanticipated, unfortunate one-offs.
Our recurring bubbles and bailouts seem to be keeping with Graeber's thesis.
It's more complicated than lenders opposing inflation but debtors favoring it. That only works if people are pure lenders or pure debtors.
In reality most people carrying significant debt are people who are strongly affected by inflation of the prices of goods and services, and most people and institutions who are in a position to lend are not as affected by such inflation.
The most at-risk people are those who are both in a lot of debt and also affected by the rising cost of goods in services. This can be anyone carrying a significant mortgage payment (as a % of income) and supporting a family simultaneously. High inflation hits these people especially hard because pay raises and real-debt-dilution often do not keep up with the rising costs of goods and services.
This can cause a great deal of financial fragility in the short term, even if the individual has good long term prospects due to inflation-based debt dilution.
I am quite rabid as far as libertarians go, but even I acknowledge the necessity of bankruptcy protection.
Without it, lenders can lend to anyone regardless of whether it's likely to be paid back, or even whether or not it's possible for them to pay it back. Then those lenders turn around, and demand that all of society pays for debt enforcement through the court system (or in extreme scenarios, through punishment).
Lenders have a responsibility to only extend credit in narrow circumstances, or they need to lose protection for it. The easiest way to do that is with bankruptcy. Borrowers are still discouraged from using it (it's limited to once every 7 years, and punishes besides), so there's little moral hazard there.
Lenders that are businessmen rather than scammers are more than capable of the diligence necessary to avoid bad loans (and the few that are inevitable are a cost of doing business). Lazy, incompetent, or unethical lenders deserve the losses incurred from those practices.
I don't think any of this is a mark against capitalism.
Of course it requires debt relief, things go _wrong_ all the time, that’s just life and how the world works.
Debt relief is also necessary for a peaceful society. If you can’t legally discharge debt in some manner we’d have companies hiring enforcers like a shark loan would.
It’s not a problem of capitalism, it’s a problem of reality.
> It’s not a problem of capitalism, it’s a problem of reality.
I'm really not sure about that.
> Of course it requires debt relief, things go _wrong_ all the time, that’s just life and how the world works.
Yet funnily enough the people on top of all these vast structures sail away from their sinking ships on parachutes of gold (if they're even sinking: a lot of times they just sit and collect vast sums of unearned wealth because they had a lot of wealth already).
If debt is such a bad business why are so many massive institutions in it, not discharging debt, and raking in the profits by the shovelful?
> Debt relief is also necessary for a peaceful society. If you can’t legally discharge debt in some manner we’d have companies hiring enforcers like a shark loan would.
This however we can agree on. As the amount of debts that can be accrued and not discharged (student loans being the biggest) goes up, the economy seems ever more unstable and unsustainable. As it turns out when you strip mine your consumers wallets from every angle, eventually they seem to be unable to buy things for some reason. Then demand craters and your economy stalls.
And just to head off this reply I always get in these discussions about useless degrees and STEM and etc. etc., I think to be frank, if indeed we're only interested in financing "worthwhile" educations, then that should be enforced by the financier, no? A bank wouldn't loan you $200,000 to buy a single-wide trailer on rented land, the asset is not now nor would it ever be worth that, so why is a student able to borrow six figures for a again in quotes, "worthless" literature degree, and be strapped to that one decision they made for life?
I think you mistook my comment as a defense of capitalism. Although I do believe a system based on private property and individual freedom is superior to the alternative, I wasn’t making that statement. I was just pointing out something at a much lower level: we need debt relief because we don’t live in a perfect world, things go south and we need for people to be able to move on. That’s it.
We could talk about the inequalities built into the system, but that would be a different conversation.
Yes and: As an anthropologist, Graeber details historical examples of capital, markets, debt, currency, etc.
TLDR: They're all ancient.
Graeber doesn't try to define capitalism much less Capitalism. He cares about social structures and relations, not finance and monetary policy.
But absolutely do not take me as an authority on Graeber or these subjects. He spent decades researching and refining. I'm just relating my noob understanding of his writing.
It’s even more cathartic to show up in court with a motion in hand to dismiss with prejudice and a second motion barring them from both servicing and selling the alleged debt. That’s almost a money maker, since winning their suit entitles you to compensation for filing fees, and violating the second order can be wildly punitive if you haul the collector back into court.
There's a point in this article where Patrick suggests you Google "litigious debtor scrub" to confirm a point he's making, and when you get to that point --- not before --- I highly recommend doing the search and reading some of the links, because they're pretty funny.
I have come to truly loathe debt collection agencies. I see them as a pox. I’ve witnessed their conferences and the way they view other people. I’ve witnessed their tactics at work against people who were vulnerable.
Several years ago I was caught up in a case of mistaken identity with a debt collector. It was with glee that I sent them letters that included the (pre-purchased) tracking number for the envelope in the subject line. It was with glee that I sent those letters signature required, return receipt.
It was with glee that I offered them a settlement on terms I knew they couldn’t legally reply to, because they knew they had the wrong person and had already disclosed too much information without verifying my identity. It was with glee that I took the advice of an attorney to do all of that. To dangle a carrot I knew they could never grab.
patio11’s prior writing on this topic helped give me the knowledge and fortitude to successfully dispute several thousand dollars of fraudulent claims that Enterprise rental cars tried to collect from me. As he alluded to, my high-FICO self felt morally bound to settle and pay for the dented bumper, but they definitely violated the FDCPA and some CFPB rules (in writing!), which I enumerated for them. Maybe if I went “all the way” I could have paid $0 and gotten on the litigious debtor scrub list, but I worried that could somehow have been held against me in the future.
Yeah, that line stood out to me... I don't know how many of those high FICO score people pay because of morality verse how many pay because they want to continue to have access to lower cost debt that having a high FICO score gets you.
Well, challenging the debt on legal grounds shouldn't negatively impact your FICO score.
Presumably also if enough people broke this system, debt collection would be forced to change in a way that made it harder for people to do this. It is perhaps better if people who can manage to pay it do, so people who can't retain the ability to exploit the bad recordkeeping in the system as it is today?
Eventually your challenge (assuming you win) will have any negatives removed from your FICO score, but it may remain for a time while the challenge is in process and during that time you don't have the high score. Worse the lower score may mean other changes to your behavior that affect your credit indirectly - if you don't take out a loan you would have for example.
Article is great, (with it being written by pat mckenzie that is almost tautological)
> The value of portfolios is a huge discount to the face value of the debts; at the point where a lender has only worked it themselves and the debt is a few months delinquent, portfolios generally fetch about 5 cents on the dollar. That value will continue to decay over time.
I agree with his point directionally (the value of the sold debt is far below the face value of the balance) but he is off on the absolute value. You can expect more like 7-15% after working the account for 4-5 months.
> Debts are conveyed to the debt buyers as large CSV files with minimal supporting documentation.
This is funny - it is true that just big ole csv files (only ever opened in excel of course) are the way the debt is sold but how else would you suggest it be done? And in my experience you provide the debt collections agency all supporting contracts and account documents for each loan.
> in my experience you provide the debt collections agency all supporting contracts and account documents for each loan
This might be true for first party lender to first party debt buyer, but it often falls apart after that first step.
The article mentioned the chain of debt ownership and that, in my experience, is where contracts and supporting docs are lost. Once you're buying debt 3 or 4 steps removed from the primary lender the documentation becomes sparser and sparser, which is why as the article rightly said, most of these "last mile" agencies rely on people's ignorance and use a "spray and pray" strategy for debt collection.
My experience, from a large primary card issuer in the US, was that most of the major, reputable debt purchasing agencies would only buy primary debt portfolios that had _contractual guarantees_ about the accuracy of the supporting contracts and docs. They'd spend a lot of time and effort reviewing them, but they would in turn outright _refuse_ any such provisions when THEY sold their debt to smaller agencies!
If the contracts and supporting documentation were digitized, you could theoretically upload them to S3 or similar and include links to them in the CSV.
> Many people have suggestions for obvious improvements here, which might rhyme with the Federal Trade Commission’s suggestions from 2010 or the Consumer Financial Protection Bureau’s spate of rulemaking from 2021 through 2023 or the FDCPA from 1978.
I would humbly suggest looking at how different countries deal with the same issues, and seeing what works and what doesn't work. Many of the differences will be cultural, some will be differences in laws and regulations. Some will be systematic differences, some will be down to random chance.
I always enjoy patio11's writing, and I think a bit part is he writes as if the reader is intelligent but not knowledgeable about the topic, which is the best way to teach. The other three permutations of those bools are much more common.
> you, reader, use credit cards in preference to debit cards as a payment instrument
Reader from Europe here. I use debit cards for daily payments, that's just the most standard expected payment method in Europe (with mobile payments now replacing it. Is a mobile payment app more like a debit or like a credit card? I have no idea actually!).
But credit cards for online payments on the internet because (despite some debit card based systems existing which don't seem to work by default) on the internet credit cards seems to be the main supported payment method, including e.g. through Paypal, but also for local online shops, airlines, ...
So in the US credit card vs debit card is probably an important distinction between buying on actual credit or not and all the fun stuff they have there like credit ratings, but in Europe the main distinction seems to simply be which one works for online purchases or not. Of course some reward programs for credit cards do exist here, I think American Express specifically has some benefits to the user but isn't accepted everywhere (Heard from other users, don't have this one myself. I'm not really into rewards programs myself, why not just make the stuff you buy cheaper instead?). Also, visa and mastercard seem to have no practical difference and some banks just give both.
If this view is naive or incomplete, it probably just shows credit cards are indeed not as important in Europe, if they gave some huge benefit I'd have known!
Edit: I don't mean to say credit and debt collection doesn't exist in Europe. All the stuff like payday loans, car loans and buying on credit from some stores exists.
There is zero chance that I, a US resident, will ever use debit cards for anything. The reason is that in the event of a fraudulent charge (which still happens surprisingly often, given that chips were supposed to put an end to that):
- With a debit card, I am out $X of my own money, until the bank can be bothered to agree that the charge is fraudulent and refund my money, which can take weeks or months, if at all. Good luck paying rent or buying food or whatnot in the meantime if you don't have a nice savings cushion.
- With a credit card, I am out $0 of my own money, and now the bank is potentially out $X of THEIR own money, making them significantly more motivated to investigate promptly and agree that the charge is fraudulent. For however long this takes, I still have my own money to pay rent and buy food, and I'm not on the hook for paying the fraudulent charge.
The fact that credit cards tend to have "rewards" in the form of cash back or airline miles or whatever is secondary to me, personally, although I do take advantage of this as much as possible.
> The reason is that in the event of a fraudulent charge
Not sure if a fraudulent charge of a debit card is a thing I ever heard of in Europe. These cards have also been using chips for over 20 years. Maybe they work differently here.
To me credit cards sound less secure than debit cards: debit cards have chips and pin codes. With credit cards, knowing the number is in theory enough (they have digital verification now too though). Also, with debit cards, you put it in the payment terminal yourself.
With credit cards, in the US I've had the waiters in restaurants taking your credit card from your table, walking to somewhere else with it, and giving it back to you later. I had never seen that before (In Europe, they carry a portable payment thingie in which you can put/tap credit or debit cards to the table). How is that more secure? They could easily copy the number there.
The U.S. has legislation limiting consumer liability of credit card fraud to $50, and many cards will further waive that to $0. It's just simply not the consumer's problem if someone copies their credit card number and uses it for fraud. They just have to call the bank to report the fraud, and then the bank will cancel the old card, issue a new one, and then it's the bank's problem on how to get the money back.
In the US, fraudulent charges are rampant. The default expectation is that a card eventually has fraudulent charges.
A slightly different but similar issue is paying for services in advance but never rendered. When that happens on a credit card I just inform the card issuer and they handle it.
That credit cards don't have PIN codes has nothing to do with them being credit cards vs debit cards, it's just a choice by the industry to not institute them.
It is less that cards don't have PINs for the chip, but that they still have magnetic stripes. It is still possible to skim the card info. I assume that there is mandate to update equipment but I still see registers with swipe. Issuers can distribute cards without magstripe in 2027. But they keep pushing the date out.
IIRC with most credit card purchases in the US, if the retailer only takes magnetic strips, they're liable themselves; if the issuing bank doesn't offer EMV cards, then they're liable; after that is the credit card company I believe, who has an option to put up to $50 liability on the owner (though they rarely do).
Generally I've seen this happen when you've contracted to do business in some form and the other side reneges on it in some way. Like you ordered something online and it never ships.
We were going to get a large water purifier from Costco. On the order of $6000. We paid, but we had 3 days to cancel. We found it for significantly cheaper the next day and cancelled. 3 months later Costco still hadn't reversed the charge, so we challenged it with the credit card company. Fixed in 24 hours.
Also, it's worth pointing out that when you challenge something successfully, it's effectively like it never happened. Interest gets rolled back and you can call to have late payments associated with that time period striken from your credit report.
On the flip side, I would never use a debit card. I've been told "your pin was used so it must have been you" when contesting small things there. Credit card have chips and some banks allow you to use pins.
Same. I have a debit card that I literally only ever use to take money out of a secure bank ATM (the ones attached to actual branches), or ID myself at the bank teller.
Every single thing I'm actually paying for goes on one a handful of cards.
There is zero chance that I, a US resident, will ever use debit cards for anything.
Does being a US resident have any meaning here? I mean, does the rest of the world not secure credit card payments, or does the rest of the world secure debit card payments like the US secures credit card payment?
Yes, the residence matters - in USA (and some other countries, I think at least UK as well) there are major legal differences between debit cards and credit cards with respect what the consumer rights and practical protections are for them, and in other countries (like in EU payment laws) debit card payments get all the same or almost the protections as credit card payments.
In the US if your credit card number is compromised you are legally out at most $50 (I haven't checked in 20 years so this may have changed, my comment is at least partially historical). In almost all cases the bank will just wave that $50 as they are already paying the rest. If your debit card is compromised the money comes from your account and legally they don't have to return it to you, instead you need to figure out who defrauded you and collect (my info is 20 years out of date so this is almost certainly wrong), though in practice the banks will probably return your money and collect on your behalf but this takes a month.
Note that the above is about the number, which is not secure in any situation. You don't need to have someones credit card, you just need to know the numbers. If you compromise an insecure website and get these details (bank rules don't allow storing the numbers, but if the website doesn't follow the rules). You can also take a picture of a card as someone is scanning it.
Europe went to the chip and pin system, plus a system where they bring cards readers to each table because they did not have the above protection for credit cards. Thus in Europe you would be a fool to let your waiter take your credit card to a backroom to pay for a meal because the waiter can then copy the numbers and/or the magstripe, and then use your credit card after returning the physical one to you (again, this is 20 years out of date, laws have changed but I don't know how!). Since the US has (20 years ago) better consumer protection laws around credit cards, people didn't care that chip+pin was more secure as practically it didn't make any difference, and for a while banks figured it wasn't worth caring. Once banks started caring everyone switched to the chip in the US - but we mostly don't use a PIN as the annoyance of needing to remember a PIN isn't worth putting on consumers here. (also Europe has made the portable terminals cheap so you find a lot of portable terminals here as well so cards are less likely to leave the owners hands thus making the PIN less important)
In EU law all payments get pretty much the same protections as USA credit card payments, even for debit cards the customer is legally out at most 50 EUR, so there is no advantage in it being a credit card.
The motivation of Chip&PIN in EU is driven by the fact that banks are forced to cover most of the fraud costs (as opposed to USA, where much of stolen card fraud is forced upon merchants), so they have a motivation to actually prevent it; and the inconvenience of PIN is mitigated by highly prevalent contactless (and PIN-less) chip payments for small transactions.
There are things which come with being the richest country and a really populous one - you're targeted by all kinds of scammers who view you as the best target. Similar to how startups try to serve the U.S. market since it's 300 million relatively wealthy people. You could start your startup in Germany, but is the market there for what you're doing? Scammers use the same logic.
I assume the rest of the world is less stupid/greedy than the US here, but honestly I have no idea how this works elsewhere - that's the reason for the "US resident" clarification.
Yeah, I don't use rewards or loyalty programs at all; I don't like giving over the headspace to corporate manipulators. But I still use debit cards very carefully because of the better protections from fraud for credit transactions.
The rise of the chip card may have fixed that; it's been a long time since I've had a problem. But I'm reluctant to find out.
I will say, it seems better than it used to be in the pre-chip days, but I've had to replace my primary CC once already this year due to an obviously fraudulent charge. To the credit of my bank, it was virtually painless - I had a new card in under 24 hours, and I didn't have to think about the $2000+ charge at all until they confirmed (two months later!) that it was in fact fraud.
Agreed. Using flat 1.5% cashback cards with autopay + setting the cashback balance to auto apply to each statement is the convenience compromise I have found
If I use a credit card, I pay up to 20% on the outstanding amount. If I use my debit card, I get interest on the money that I don't spend. I also cannot spend more than what is in my account. If there is a charge I disagree with, I can easily reverse it without any cost. And I have never met anyone who had a fraudulent charge (without being dumb). To me, I cannot understand why anyone would use a credit card unless debit isn't accepted. I use that card maybe once a year for paying toll on the highway.
Paying your credit card off fully every month ensures you don’t pay any interest (use it like a debit card). Wrt the earning interest point, consider that with a credit card you still get interest on the money you don’t spend, and you can also collect interest on the money you do spend (eg I buy something for $100 on the 15th, I can collect interest on the $100 until I have to actually pay the bill on the 1st of next month). Not to mention that you also pay 1-1.5% less for everything you use a card for due to cashback schemes. I definitely see why it might seem weird the way Americans use credit cards but it is mostly rational.
> If I use a credit card, I pay up to 20% on the outstanding amount.
Key is never having outstanding debt. Pay your credit card balance in full. Most people with credit cards do this. I have never met anyone who paid any interest on their credit card because everyone I know pays it in full each month.
> And I have never met anyone who had a fraudulent charge (without being dumb).
And? The point is if it happens, you are far safer with a credit card than a debit card. Once the money is gone from the credit card, it's the credit card companies problem. Once the money is gone from your debit, it's your problem.
> To me, I cannot understand why anyone would use a credit card unless debit isn't accepted.
Because credit card is more secure. As the OP already told you.
As long as you have financial discipline, using a credit card is smarter than using a debit. It's a simple concept.
In the US, the terms of service are much better for credit cards than debit cards, so even folks who pay off their cards every month (for example, airline miles cardholders) prefer credit cards because of superior ToS.
The terms on credit cards are expensive for issuers, so debit cards were introduced with terms more favorable to issuers. Even if they improved the terms, consumers would still be hesitant to use them because US debit cards' reputation is tainted.
Europe has much stronger consumer protections, so I can only assume EU debit cards dont share the disadvantages of US debit cards.
It’s so severe that even if they improved the terms, nobody would use them because US debit cards' reputation is tainted.
Say what now?
“According to the 2019 Federal Reserve Payments Study1, “Debit cards, including both prepaid and non-prepaid, were used almost twice as often as credit cards in 2018, but the value of credit card payments exceeded the value of debit card payments by almost 30%.”
And
In Visa’s Operational Performance Data4 report for the three months ending on Dec. 31, 2020, it reports $741 billion in U.S. debit transaction volume, a 17.4% increase over the previous year. It compares to $542 billion in credit card volume.
The difference I see is that in Europe, at least where I live, at the end of the month the bank will charge your bank account with the full amount of whatever is the balance of your credit card.
If you have no money you will go into overdraft and that’s about it, you basically have a problem and the bank will keep nagging about that overdraft if you don’t have an agreement.
The goal is to use the “credit” of the credit card for 30 days as a convenience. The implicit expectation is that it will be paid in full at the end of the month.
In countries like US and South America (e.g.) many people see credit card as free money (that they don’t have), so when the end of the month comes they simply don’t have the money to pay the balance or pay very little of it. The consequence is what we all know: high interest on the balance which keeps snowballing.
I know in south america banks even have interface for payment in instalments etc. Here in Europe, at least my bank they don’t have have such feature, I guess it’s just not meant to be used and abused they way it happens in other places.
Gotta love when you’re eating at a restaurant in Chile and when it’s time to pay they ask if you want it billed on your card in 6 monthly installments. Even as an American, it always makes me laugh a bit at the absurdity of doing that for your meals.
What you are talking about is a Charge card, but in Europe you can get a Revolving credit[1] card as well but I would say they are not as common as in US.
On the Charge "credit" card you don't pay interest unless you go into overdraft at the end of the payment day for the month.
With the revolving credit you pay the balance on your own terms but you pay the interest rate for it until closed.
[In the UK] despite the verbiage on most sites still saying "credit card", I've been using ordinary debit cards (from both Visa and MC) online for as long as I've shopped online, and never had a single issue related to them being debit. For many years I didn't even have a credit card
Edit: it's possible that this is an issue of semantics. My cards have been debit cards in every sense of the term - they are labelled as such, are linked to a specific current account, and debit it immediately - but I don't think any of mine have actually said Visa/Mastercard Debit. So strictly speaking they may be implemented as a sort of instant-clearing credit card - essentially shimming debit onto credit infra. I don't know a whole lot about the finance industry or its tech, so if anyone can chip in please do
Edit 2: Ah, my current one does have "debit" in the MC hologram on the back
I'm in the UK and my debit card literally says "VISA debit" in the lower right corner (with "debit" in much smaller text).
In any case, there are a couple of important semantic differences between a debit card vs a credit card that you pay off immediately:
* you automatically get insurance/protection for certain purchases in a credit card (so I read, I've never used it)
* It's much worse if someone steals your debit card details and starts making purchases than it is for a credit card, because it's linked to your current account that you use for other stuff. If your credit card gets deactivated for a while then it's no big deal really.
> ...because it's linked to your current account that you use for other stuff.
I solve this by having separate accounts for the debit cards that get manually populated with some money every now and again.
I also have a separate account to pay "Bills that will make me homeless if I don't pay them", so no matter what happens with my debit cards (and no matter how long it takes the bank-issued checks (some of my creditors still refuse to do electronic transfers, I have no idea why) to be cashed), I know those pending payments are accounted for and will not bounce.
The "automatic insurance" thing is called section 75 protection. Legally it's more limited than you might think - it only applies to purchases over £100 and under £30000 for example and I think there's a lack of clarity if eg PayPal purchases are covered or not even within those limits.
However, the debit card industry (as do some other oddities like Amex charge cards) largely voluntarily offer very similar protection to section 75 on debit card purchases and the credit card industry largely voluntarily offer the same protection on purchases under £100.
Back in the day, UK debit cards were issued on distinct networks from credit cards - eg: Switch, Solo, and Maestro. Those cards weren't necessarily accepted in all the same places as credit cards, particularly internationally.
But over the past 10 years or so, those debit card networks have been phased out in the UK and almost universally replaced with Visa and Mastercard debit cards. As far as acceptance goes, these are pretty much 100% identical to using credit cards on those same networks.
I think it's just inexact US terminology that has become global through the internet because they (IMO rightly) mostly use credit cards for normal purchases. My browser says it saves 'credit cards' - in reality it saves both credit and debit.
> Is a mobile payment app more like a debit or like a credit card?
My understanding is that the mobile payment app is just a medium for a virtual debit or credit card
> on the internet credit cards seems to be the main supported payment method
Over many years, I've never had any issue paying with debit cards on the internet, except _once_ to rent a bike on a taiwanese website (bc they do a credit card hold).
This probably depends a bit on which part of Europe. In the UK the consumer protection law surrounding credit cards is stronger so it's better to use a credit card for larger purchases especially.
For daily payments shops all accept both credit and debit and
there's no difference to the consumer whether they happen to tap a credit or debit card.
My Finnish debit and credit cards are equally accepted everywhere. I normally pay with Apple Pay, also sometimes chip & pin, and of course online.
For all purposes, they are the same. In fact, they are bundled in the same physical card. The only difference is that one debits my account immediately (usually, unless the point of sale is not networked), and the other collects debt I usually pay off at the end of the next month.
I've never had any special rewards or cash back programs associated with my cards. There is some kind of travel insurance bundled with my Visa Credit cards, but that's kind of worthless for me as I usually have other insurance in place already.
Not sure if this is different in Europe (check before saying it’s different, many people in the US aren’t aware of this either) but in the US at least all credit card transactions (and possibly debit too?) incur like a 3% fee. You’re paying that fee (either directly or through it being built into the price of goods) no matter what. The reason to use a card with a good rewards program is so that you actually get something in return for that small fee. So there is a sense in which you need to play the rewards game, otherwise you’re just paying more for goods for no reason.
It’s a bit more insidious than that in that in a lot of stores and restaurants in America owners just bake that fee into the price instead of explicitly passing it onto the consumer and giving them the choice on whether they want to pay it. So if you use a debit card in the states you are usually actually subsidizing everyone else’s 3% fees (there are in fact places that explicitly charge the 3% fee to credit card users but they are rarer in comparison)
That fee is massive business for Visa etc. There was a pretty big battle between Walmart and the credit card companies a few years ago because Walmart started defaulting to “debit” as the option when you stuck a debit card into their machines (debit cards can be run as either debit or credit) in order to save money. Which of course removed that money directly from the pockets of the payment processors.
a lot of stores and restaurants in America owners just bake that fee into the price instead of explicitly passing it onto the consumer
Not really. Most businesses don't set prices based on "cost plus" methodology. Maximizing profit based on price and volume is how most do it. Some merchants may choose to absorb the 3%, to compete on price and maximize profit through higher volume than a competitor who charges the same price but doesn't accept credit cards.
You "always pay the 3% fee" the same way you "always pay" for anything else the merchant may offer but you don't use: curbside pick-up, free delivery, the "free gift with purchase" you don't accept because you don't need it, generous returns policy, etc, etc.
For a long time the merchant agreement for accepting credit cards required that you not charge a different price so merchants where forced to bake the price in.
Though the costs of cash and checks is probably more than the 3% fee on a credit card. Cash needs to be counted twice at the register, then change made which again is counted twice (at least, sometimes a 3rd time if the numbers are not the same!), then at the end of the day the manager needs to count it all twice again, and even then mistakes are made. On top of that is often stolen: by robbery, dishonest clerks, management fraud, and owner fraud (owners are defrauding the IRS, while management implies someone not the owner who is trusted to count the cash). Checks need to be counted as well, and they can bounce thus being worth very little (they are sold to collections - see article for hints to how that works). Credit cards by contrast are run electronically and so know instantly you are paid you don't have the overhead of adding up the numbers. (debit cards with the lower fees are still subsidizing the others)
Interchange fees are a feature of all major card platforms (Visa, Mastercard, Amex, etc), however the fees have been regulated and limited in Europe, with credit card interchange fee being capped at 0.3% and the total merchant cost for cards generally being <1%. But, of course, that also means that there really isn't free money for any meaningful "rewards game" for EU cards.
Are debit cards really not accepted online? I thought that save for some very specific applications, all Visa or MasterCard branded cards should work online. Never got a Visa refused, and it's a Visa Debit.
I know that some places like Germany informally refer to any Visa or Mastercard as a "credit card", in contrast to true(?) debit systems such as Maestro or V-Pay. So if a place says "No credit cards", it means that Visa and Mastercard cards of any kind are not accepted.
It differs by banks and countries, but e.g. my Dutch debit card only has an IBAN number on it, so anything set up to accept credit card numbers won't accept it.
Almost every online web shop here will accept debit cards, but it's through a Dutch specific payment mechanism (iDEAL).
That's because in the Netherlands most banks used Maestro (owned by Mastercard) and Vpay (owned by Visa) as international debit circuit.
The acceptance for Maestro and Vpay online is much lower than "normal" Mastercard Debit and Visa Debit. Acceptance for Mastercard Debit and Visa Debit is practically the same online as Mastercard Credit and Visa Credit.
Maestro is being sunset by Mastercard and no new card can be issued. Only Mastercard Debit. So the problem with the fact that Dutch debit cards (Maestro) are not accepted online will be solved in a couple of years.
The one case I'm aware of in Europe where debit vs. credit makes a real difference is car rental companies.
They will only accept credit cards, not debit cards. Unless you also agree to pay for their shady and useless insurance (useless because typically the broker already offers better and cheaper insurance, so in this case you double pay).
Required watching for you Europeans, by a man who became an expert on payment fraud (by mostly making up his background but then legitimately becoming famous and an expert LOL)
USA: debit cards and credit cards are both offered through banks. They operate on the same payment infrastructure (Visa, Mastercard, etc). They are all equally accepted. The only difference between them from a consumer standpoint is that a debit card immediately withdraws the money from your account and typically requires a PIN for purchases, whereas a credit card operates on credit -- ie you acquire debt when you make purchases but your bank account balance stays the same -- and usually requires just a signature, and not even always that. On a credit card, you have a (very high) interest rate, but only on balances that are carried over past the end of the month: if you pay off the entire statement balance by the due date, there's no interest. More concretely: an August statement contains all transactions for August, but you receive it during mid-September, with a due date by the end of September. So by the time you've paid your August credit, you've made more purchases, and the total balance is higher than the statement balance. You only get charged interest on the August debt that is left over after the due date; September debt continues on in limbo until its statement due date. Payment processors make money per transaction, banks make money by the ridiculously high (~20%) interest rates they charge when people don't actually pay off the statement. Both credit cards and debit cards are ubiquitous; you get a debit card any time you open a checking account, and almost everyone has a credit card (77%, and the average person has 3+ cards [1]). You do not need a savings/checking account to have a credit card account at a bank. Credit card debt is extremely widespread, currently over $1 trillion USD for the country as a whole. If a merchant says "No credit cards allowed", they may still accept debit cards, even though they operate on the same payment infrastructure.
Germany: the terms "debit card" (typically "Girokarte" or "EC Karte"; I've literally never heard someone outside of a finance context say "Debitkarte") and "credit card" ("Kreditkarte") are used almost exclusively to describe the payment infrastructure, and only the payment infrastructure. Girokarten operate on a completely different payment infrastructure and are accepted at most in-person merchants and government buildings. Meanwhile "Kreditkarte" is, at least in everyday language, only used to describe the payment infrastructure, and are not always accepted at in-person merchants, and only rarely at government buildings. If a government agency (or shop) says "No payment with Kredikarte is possible", they mean no payment with Visa/Mastercard/etc is possible. Whether it operates as an instant-debit or a revolving-credit basis is completely irrelevant. A Kreditkarte is always through Visa, Mastercard, etc, but a Girokarte never is. That's the primary difference here. Meanwhile, Kreditkarten that actually extend you credit are vanishingly rare in Germany; as a US citizen [2], I haven't even tried to find one, so I can't speak to the internal mechanics of actually having one. But I can say that the vast majority of people I've talked to here simply don't understand what the difference is in the US (I think this is compounded by the language barrier, because like many English -> German loanwords, "Kreditkarte" doesn't mean the same thing as its English root).
[1] https://www.bankrate.com/finance/credit-cards/credit-card-ow...
[2] The US places large reporting requirements on foreign banks offering services to US citizens, making it very difficult to open accounts. Many foreign banks simply refuse to do business with US citizens. As with taxes, there are no exceptions for non-residents ("expats"). In some destination countries it can pose a significant burden to new immigrants.
The Netherlands: the terms "debit card" (typically “pinpas”) and "credit card" ("creditcard") are used exclusively to describe the payment infrastructure, and only the payment infrastructure. In everyday language, ‘pinpas’ always refers to Maestro/VPay, which are networks run by resp. MasterCard/Visa but are nonetheless incompatible*, and are accepted almost everywhere, while ‘creditcard’ always refers to MasterCard/Visa, which are almost never accepted, except at touristic attractions.
However, as the Maestro and VPay networks are being shut down by MasterCard and Visa, things are in the process of changing. Most payment terminals now accept MasterCard/Visa as well as Maestro/VPay, though due to EU/EEA legislation, some may only accept debit cards as well as credit cards issued outside the EU/EEA (but not credit cards issued inside the EU/EEA).
At the moment, most banks are still issuing Maestro/VPay-based debit cards, likely because a small amount of payment terminals still doesn’t accept MasterCard/Visa. However, some smaller banks have already started to issue MasterCard/Visa-based debit cards.
* Historically, ‘pinpas’ referred to cards on the domestic PIN network, which were usually co-branded as Maestro for international use. With the introduction of EMV, the PIN network was retired, but debit cards are referred to as pinpassen to this day.
> Most payment terminals now accept MasterCard/Visa as well as Maestro/VPay, though due to EU/EEA legislation, some may only accept debit cards as well as credit cards issued outside the EU/EEA (but not credit cards issued inside the EU/EEA).
Why is this? If this is about the fee-capping rules, I would have expected that they’d disallow foreign credit cards and allow EU/EEA credit cards, since the foreign credit cards are not subject to the fee cap even when used within the EU.
Apparently it ends up being the intersection between the MasterCard/Visa ‘honor all cards’ rule (i.e. ‘if you accept MasterCard, you must accept all MasterCards’) and EU legislation saying ‘actually, you’re free not to accept cards with higher fees’.
I’m not really sure why said legislation doesn’t end up applying to foreign cards, though.
Another interesting point about fees is that when retiring the old domestic PIN network, Dutch banks ended up negotiating very low fees for domestic debit (then Maestro) transaction. Therefore, debit can end up being a lot cheaper than credit [1].
I’ve definitely seen some places in Europe that only take credit cards from within Europe, such as the French mobile phone provider SFR, and others that charge extra fees for non-European cards, such as the German airline Lufthansa. So whatever set of conditions leads to the outcome you’re describing might be specific to the Netherlands. Most merchants I’ve seen within Germany don’t treat European credit cards any differently from foreign ones, but some do reject cards without a 3D Secure system.
That's interesting; major Dutch banks ING [1] and Rabobank [2] say that acceptance of non-EEA credit cards will be mandatory, with ING explicitly stating that this is due to MasterCard and Visa rules:
> 5. What if I don’t want to accept credit card payments?
> While there is no immediate need to make this change, by the end of 2024 all merchants will be obliged to accept all card products from Mastercard and Visa, under the Honor All Cards Rule, which states that if a merchant accepts one type of that brand’s cards, they must accept them all. Merchants who accept Visa and Mastercards’ debit cards are also required to accept Visa and Mastercard’s credit cards (if they are issued outside EEA)
> This means that if you as a merchant accept any kind of Mastercard or Visa card, you must accept all Mastercards or Visa cards: debit, credit, prepaid and commercial. However, legislation does allow you, as a merchant, to refuse acceptance of credit cards issued in the EEA that are in scope of the Interchange Fee Regulation, article 10; if you wish to arrange this, you can reach out to your terminal supplier.
Strangely though, the third major bank (ABN AMRO) actually doesn't seem to mention this and only mentions EEA debit cards [3].
From your quote, it sounds like the ability to exclude EEA credit cards will only to ones "that are in the scope of the Interchange Fee Regulation, article 10", with other EEA credit cards still being mandatorily accepted. Am I misreading?
Living since 2004 in Germany, Kreditkarte is definitly a known term and people known the difference.
I guess the biggest difference from US is that you need to earn the Kreditkarte, not everyone gets to own one if the bank account isn't that inspiring, and even after getting one, the limits depend on how healthy the bank account tends to be on average.
To be clear, people know the difference between Kreditkarte and Girokarte. Also, some nuance here: using the terms "Karte" and "Kreditkarte" interchangeably isn't the same thing as "people don't know the difference". I'm not making a statement about whether or not people understand the difference between direct debit and revolving credit as concepts. I'm making a statement on the language that is used to describe them, which is IMO a pretty strong indicator of how fundamentally different the attitudes towards card payment are in the two countries.
These things can and do vary regionally, but at least here (working class Berlin area), "Kreditkarte" or simply "Karte" is colloquially used for all plastic cards that are not Girokarten, when discussing in German (I'm a near-native speaker), regardless of whether or not it's revolving credit or direct debit. This could certainly be regional, but at least here, this includes in government buildings: "Keine Kreditzahlung möglich" (no payment with credit card possible) is used semi-interchangeably with "Keine Kartenzahlung möglich" (no payment with card possible -- note no explicit "credit"), and it means that they don't have any payment terminals that work with visa/mastercard payment processing, regardless of whether it's based on revolving credit or direct debit. Note that "Keine Kartenzahlung möglich" may also mean that Girokarten cannot be used, or it may say something like "Kartenzahlung nur eingeschränkt möglich" (card payment only limitedly possible). This can vary even from merchant to merchant and based on context: a grocery store that usually accepts Kreditkarten and Girokarten might say "Kartenzahlung nur eingeschränkt möglich" to note that their Visa/Mastercard PoS system is currently offline, but that they're still accepting Girokarten. But a bar that says "Keine Kreditzahlung möglich" is usually cash-only.
Again, I'm talking about the everyday colloquial language used by working-class people in German language (a chunk of the people I'm talking about have very limited English anyways). This is different in circles that have higher amounts of financial literacy, or more exposure to American culture. I'm not talking about the kinds of people who follow Finanzfluss (then it's a different story) or have studied/traveled to the US, and I'm also not claiming that people don't actually know the difference. I'm trying to highlight how different the two systems are based on what words are and are not in regular usage and how their meanings are different in the two countries.
Even in the local Ämtern? In my experience they're the worst offenders here.
For example, Zahlungsmöglichkeiten on these two pages:
[1] "Am Standort kann bar und mit girocard (mit PIN) (ehemals EC-Karte) bezahlt werden." This means nothing with Visa/Mastercard, period. Doesn't matter if you have a direct debit account or revolving credit. If you try to pay with eg an N26 Debit Mastercard, they say "Leider akzeptieren wir hier keine Kreditkarten". This language is basically standard in Berlin. When I responded with "das ist doch keine Kreditkarte, sondern eine Debitkarte" they said "ne, kommt von Mastercard, ist ne Kreditkarte. Sorry."
[2] "Zahlungen sind auch mit Kreditkarte möglich (VISA, Mastercard und Maestro)." They don't differentiate between Kredit- and Debitkarte when you're actually there; the only difference at this location is that they have Zahlungsautomaten that are integrated with the payment processors. This is a perfect example: Kreditkarte here explicitly refers to the payment processing system and not to the way the payment is booked to your account.
Sure, but that doesn't answer my question. What I'm saying is, the Ämter in Berlin are explicitly using the term "Kreditkarte" to refer to all Visa/Mastercard/Maestro cards, including debit cards. In Berlin, only the locations that say they accept Kreditkarten, will accept debit cards that are backed by Visa/Mastercard/Maestro payment infrastructure. If they only say they accept Girokarte, then they will not accept debit cards. What I'm asking is, does Hamburg use the same language at Ämtern as Berlin, or does it differentiate explicitly between Girokarte, Kreditkarte, and Debitkarte? I've tried to find this myself online, but I don't see anything official.
Here's another example [1, page 116] from the BMI (so, federal now): "Haben Sie ein Konto bei einer Bank oder einer Sparkasse, wird Ihnen häufig eine Giro-card oder eine Kreditkarte ausgestellt (zum Teil gegen Gebühr), mit der Sie bezahlen können. Der bezahlte Betrag wird dann automatisch von Ihrem Konto abgebucht"
> If you have an account by a bank or a Sparkasse (special kind of bank), you will often be issued a Girokarte or a Kreditkarte (sometimes for a fee), with which you can pay. The paid amount will then be automatically deducted from your account.
Note that Debitkarte isn't even mentioned, and the behavior described for both kinds of cards is the same. This is not true of Kreditkarten that operate on a revolving credit basis; the amount is not automatically deducted from your account, but rather paid later. To me, this language is pretty clear: the federal government sees the system as "you either have a Girokarte or a Kreditkarte" and that Debitkarten are included in Kreditkarten.
And, actually, even better, this bit from wikipedia [2] is explicit: "Der Begriff Kreditkarte wird international nicht einheitlich verwendet. In den deutschsprachigen Ländern werden damit sowohl echte Kreditkarten als auch Chargekarten, Daily-Chargekarten, Scheck- bzw. Debitkarten und Prepaidkarten bezeichnet"
> The term Kreditkarte is not uniformly used internationally. In German-speaking countries it may refer to real credit cards, as well as charge cards, daily charge cards, check-cards or debit cards.
Girokarte is a synonym for Debitkarte, just like in France or Swiss Romade one would say carte bleue instead of carte debit, in Portugal Multibanco instead of cartão de débito,...
As for the rest, I guest we are wasting each other's time discussing this any furher.
I'm not sure how to handle this because it's both incorrect in technical language (Girocards are exclusive to a particular payment infrastructure that only exists in Germany, unless partnered with a separate payment infrastructure, but the co-branded payment infrastructure is only used outside of Germany [1]) as well as incorrect with respect to my experience with everyday language, including all of the links I've provided including from official government sources.
But I agree on one thing: it's a waste of time to keep talking about this.
The advantage to the company with rewards is they get to keep your money while you think about how to spend it and you might never spend it. See gift cards & book tokens too, what a scam.
Right now, the bank that issued my credit card has just under $2000 worth of accumulated rewards that I haven't gone to push the buttons to convert to cash in my account.
If I'd consistently used a debit card instead to make those purchases, there wouldn't be any such balance, but I also wouldn't have any more money either.
I don't quite see this as being something where I should change my behavior in order to avoid this "scam".
One good thing that came from this thread is I went to my bank's website, clicked a few buttons, and $1990 is being converted from rewards points to cash that will hit my account next week. They really got me on that scam and I hope they'll get me again every couple of years.
Or, you know they could just pay it in without you doing anything. While that's sitting there as rewards you don't get interest on it but they can still use it.
> The former advocate in me will observe that the single most effective method for resolving debts is carefully sending a series of letters invoking one’s rights under the FDCPA (and other legislation)
Can we get a summary of which letters / rights to invoke?
That is an interesting read indeed. I found the parts about not showing anger and not pretending to write like a lawyer to be particularly illuminating.
this was an awesome article that I think will literally help myself and others in dealing with bureaucracy of any kind. Wow. saved that one. As well as the things the other commenter mentioned I liked the parts about finding who to write to at large companies. very useful
As a counterpoint, I live in the US and I use credit cards exclusively. Why?
* Amex with 6% cashback on groceries
* Visa with 5.25% cashback on gas
* Visa that adds 2 years or more to manufacturers warranty.
* Credit cards with promotions that end up paying for my family trips around the country and abroad. E.g airline miles or transferable points that are equivalent to $500-$1500 per promotional period
I see no point in using debit cards except for the rarest event of me getting some cash out of ATM
Around 2015 I saw the IT inards of a local debt collector. It was a 1980's PC with a monochrome CRT (yes, a real greenscreen).
Their office was located in a low tier residential appartment. Debtors had to interact and pay through an improvised hatch DIY'd into the appartment's front door.
My sleep went from bad to utterly shittastic a few years ago and I ended up missing several items that went to debt collection. They were medical bills I would only be too happy to pay and it’s a very weird feeling. I haven’t carried any debt for decades at this point, not even car or house.
I am still scheming ways to pay the creditors by getting them to accept a check, but it’s hard after they’ve gone to collection.
When one uses credit to an extreme and it suddenly changes under you, the conversation becomes interesting. The issue is - one negative thing like a 30 day lack of payment - tanks a score based on things you mostly can't control aside from paying bills.
I had this happen recently because in the US mortgages get sold repeatedly and on one propery I have it was sold 3x in a year and somehow I missed one thing. Shouldn't have, but multiple addresses, shifting mortgages, etc. The funny thing, once the "deliquenct" account agency wasn't involved, the score ticked back up.
In the US - credit is a game, it's based on how much you make (or how much you claim you can make), making payments, an keeping a score high. If you hit a high threshhold and suddenly sink after years of relationships...those old relationships can help with debt and collection.
At a certain point, institutions you have dealt with want to maintain healthy relationships.
I've have great credit situations with Amex and Citi going back decades and leveraged those to offset/erase turmoil issues.
I'm in a position now where I have been on medical disability for about 5 years. I have had no difficulty keeping it. Half of it is judgment proof I believe (SSDI), and the other half (Unum private insurance) I think is not.
Because I live in Los Angeles where the only medical care I have found in the past 5 years has actually helped me improve, my cost of living and expenses have been high. Too high for my disability. I also had a brief stint of randomly having UHC cobra insurance, which basically denied every claim sent to them, which seems entirely insane.
Long story short, I have like maybe $30000 in CC debt and $50000 in medical debt that has gone unpaid at this point. I can't pay these things off and pay for food simultaneously with my standard of living in LA, and because I am severely disabled, it doesn't really seem like an option for me to compromise on my standard of living.
I think my private insurance is not judgment proof, but I am not certain. Am I just going to eventually get entirely screwed over here? Like... what actually can I do?
Copyright predators in Germany operate like debt collectors from the article. The moment they fetch your personal details from the ISP, you're their debtor.
> I will bet you that, in practice, they simply avoid collecting against anyone who demonstrates ability and financial resources to enforce their rights. This is one for the history books of borked equilibriums. We devoted substantial efforts to pro-consumer legislation to address abuse of (mostly) poor people. We gated redress behind labor that is abundantly available in the professional managerial class and scarce outside of it, like writing letters and counting to 30 days. (People telling me they were incapable of doing these two things is why I started ghostwriting letters for debtors.) We now have literal computer programs exempting heuristically identified professional managerial class members from debt collection, inclusive of their legitimate debts, so that debt collectors can more profitably conserve their time to do abusive and frequently illegal shakedowns of the people the legislation was meant to benefit.
That is such a common pattern. Growing up, I saw the same happen with the German welfare system: there's enough of a social safety net in that country that no one would have to be homeless. But, to access the social safety net, you have to navigate some minimal amount of bureaucracy and paperwork.
That bar isn't very high, but if you have at least that minimal skill with paperwork literacy, you are also much more likely to have a job and much less likely to need the welfare.
So all in all, Germany still has homeless people, despite welfare programs generous enough in principle that no one needs to be homeless.
Addendum: Singapore has an ingenious system to ration the amount of subsidies you get on hospital bills without any bureaucracy. The basic idea is that when you go for a hospital stay, you get to pick how much etxra creature comforts you are getting, like your own private room vs an open word with many beds. The copay for the fancier options rises 'progressively' enough, that the absolute amount of government subsidy goes down. People tend to self-sort voluntarily.
The medical care you receive is the same for any of the options.
I can imagine an argument that this is somehow against the dignity of poor people to put them into comparatively crowded wards, and that everyone should get the same treatment (like eg the British NHS does, modulo the option to go to a private hospital for enough money). But I suspect many of the poorer people are happier to put up with that 'indignity' than with paperwork and privacy-invading bureaucratic means testing.
In total, adding up private and public expenditures, Singapore spends about half as much on healthcare as a proportion of GDP than the UK does, which spends about half as much as the US. Medical outcomes are no worse in the cheaper systems.
A little over a decade ago I knew a young adult in the US that had a pretty rough life and I was trying to help her get back on her feet.
When you’re homeless, it’s hard to get mail, and hard to keep your stuff; going from nothing to your standard documents is tricky.
To get your birth certificate, you need to write a check to the state at some address where you’ll be able to receive mail in 2-4 weeks.
Once you have that, you can go into the social security office and request a replacement social security card. Which they’ll mail to you in 2-4 weeks. There’s also a lifetime limit to how many times you can replace your card, which is surprisingly small.
State ID cards also get mailed to you. Moreover, you need to provide proof of your address, and the address gets printed on the card. We used my address, but no good deed goes unpunished - the address on your ID card gets published in the paper when you’re arrested. Then my nosy neighbor asks if everyone is alright because someone living at my house got arrested for possession of meth.
On top of each of those steps costing money and being hard to do when you’re homeless, there’s a dependency chain. You got to do them one at a time.
Navigating the public bureaucracy is an annoyance for someone in what patio11 calls the professional/managerial class. There are other social strata’s where it’s a virtual impossibility without help. That’s important to keep in mind when you’re thinking about welfare bureaucracy or voter ID laws or anything like that.
The really shit side: its impossible to change your drivers license (which is your "official address") to homeless.
And if you get sued, they send your mail to that former address, regardless if you ever get it.
And, well, I was sued. My parents destroyed my mail. And had a summary judgement against me on a case I didnt know exist, to an address I couldn't change cause I didnt have a new one.
German driver's licences don't normally have addresses on them. You can easily find example pictures of them with an image search on the web.
> If legal actions were to occur involving an average person, how does that person get notified?
The authorities send you a letter at the address that's registered with them (if you have one and they have one). That system is just completely independent of driver's licenses.
Your government ID card and passport do have your address on them (if you have one).
Interestingly, I also don't have a fixed address in Germany, because I haven't lived there in a while.
Officially, you need to tell them that you are leaving, but for the longest time I did not. (Mostly out of laziness.) They tracked me down once in Singapore to remind me to pay back my student loans, and I dutifully complied.
My passport shows my Australian address, because that's where I lived when I last had to renew that document. (And it also only shows that I lived in Sydney without any further details. German addresses would tell to the street and number etc.)
---
Just to summarize: Germany does have many of the same issues in general (but the exact details vary). It just so happens that in Germany this system does not intersect (much) with driver's licenses.
Mostly because Driver's licenses are not used as general ID cards in Germany.
> That’s important to keep in mind when you’re thinking about welfare bureaucracy or voter ID laws or anything like that.
Amen to that. Though luckily while it's huge problem for the former, it doesn't matter for the latter. (Because individuals by and large don't benefit from being able to vote. Voting is at best something altruistic, individuals do out of civic duty.)
Is there supposed to be a restricted demographic with a monopoly on identification? The overwhelming majority of Americans have one. Even the large majority of any given minority group does. And if this is a legitimate concern it could be mitigated by, for example, making it free to get a state ID. Address whatever prevents some people from having one, instead of not requiring it.
But also, isn't your disaster scenario the thing that happens in a democracy regardless? Majority rule when you're the minority.
What you're left with is the fairness argument: It's supposed to be one person, one vote. But that's the argument the proponents of voter ID make.
Have you read the rest of the discussion, or at least the comments higher up the chain?
> Is there supposed to be a restricted demographic with a monopoly on identification? [...] mitigated by, for example, making it free to get a state ID.
We were talking about how many ostensibly free resources, rights and welfare are gated behind paperwork and bureaucracy. The discussion was exactly about just making something free is only a small part; and most of the time money isn't even the biggest hurdle for poor people.
I don't have too strong of an opinion on voter id laws. (I grew up in Germany where approximately everyone a government ID, and you need it for voting. And that seems to work ok. And the US system of mostly not requiring voter ID also seems to work ok.) But despite my lack of opinion on whether those laws are good or not, I can understand that just making ID cost $0 misses most of the hurdles in practice.
But isn't that the point? You have to address the other hurdles too.
For most benefits programs that is still going to be necessary even if you remove means testing, because some kind of identification would be necessary to keep someone from claiming the benefit an unlimited number of times. Which is the same as the problem with voting.
Singapore has an ingenious system to ration the amount of subsidies you get on hospital bills without any bureaucracy. The basic idea is that when you go for a hospital stay, you get to pick how much extra creature comforts you are getting, like your own private room vs an open word with many beds. The copay for the fancier options rises 'progressively' enough, that the absolute amount of government subsidy goes down. People tend to self-sort voluntarily.
The medical care you receive is the same for any of the options.
I can imagine an argument that this is somehow against the dignity of poor people to put them into comparatively crowded wards, and that everyone should get the same treatment (like eg the British NHS does, modulo the option to go to a private hospital for enough money). But I suspect many of the poorer people are happier to put up with that 'indignity' than with paperwork and privacy-invading bureaucratic means testing.
In total, adding up private and public expenditures, Singapore spends about half as much on healthcare as a proportion of GDP than the UK does, which spends about half as much as the US. Medical outcomes are no worse in the cheaper systems.
That works for medicine because nobody wants two appendectomies. But plenty of people would want a second apartment, an unlimited amount of subsidized food they could resell, another UBI or social security payment etc. Then everyone backs up their truck to fill it with a fungible commodity being offered below the market price.
The biggest problem with most of these things isn't that they require ID, it's that they require means testing. Showing your ID is, I mean, you take it out of your pocket. We could make one sufficiently easy to get and then it works for everything.
But if you also have to show that you're currently unemployed but previously made an amount of money within the eligibility threshold but haven't been unemployed for more than six months to collect unemployment and then show that you don't have investment income more than some other amount to get food assistance and then show that your household income is below some other threshold to get housing assistance etc. etc., that's a hot mess.
The sensible thing to do is replace all of said mess with a UBI, which doesn't require means testing and so doesn't require all of that paperwork. But it still requires something basic to keep you from getting more than one.
You can give out welfare without id or means testing: just require people to hang out in a specific place, and give them eg five dollars each hour.
It's a terrible wast of people's time, but it solves the specific problem.
> The sensible thing to do is replace all of said mess with a UBI, which doesn't require means testing and so doesn't require all of that paperwork.
Yes, though instead of saying that UBI doesn't require means testing, I would say that a UBI folds the means testing of the tax system and the welfare system into one, and then decides on the net payment (constant UBI - taxes) that you get.
At least that point of view makes sense for something like personal income taxes. If most of your tax take comes from VAT or land value taxes, this framing is less useful.
> You can give out welfare without id or means testing: just require people to hang out in a specific place, and give them eg five dollars each hour.
You can do this, but is that supposed to be less burdensome than requiring ID?
> Yes, though instead of saying that UBI doesn't require means testing, I would say that a UBI folds the means testing of the tax system and the welfare system into one, and then decides on the net payment (constant UBI - taxes) that you get.
That's fine from a theoretical perspective, but the practical point is that it doesn't require separate means testing paperwork for the transfer payment.
> At least that point of view makes sense for something like personal income taxes. If most of your tax take comes from VAT or land value taxes, this framing is less useful.
Only in the sense that it would remove the means testing whatsoever.
If you look at the effective rate curve of a flat tax - UBI, it's quite progressive and can be made arbitrarily so by adjusting the tax rate and the amount of the UBI. And this is in fact the preferred way to do it, because phase outs for existing benefits programs are often higher than tax rates paid in higher tax brackets, especially when combined with a lower but still non-zero tax rate at low to middle income levels.
Switching to a flat combined tax-and-phase-out rate would be no less and possibly more progressive than the existing system, while also being vastly simpler and require no means testing paperwork or privacy-invasive income tracking of any kind.
I agree that individual votes by and large don’t matter, but when public policy makes it harder for an entire class of people to vote, that does matter, especially when there’s a correlation between the class of people and policy preferences.
This is the same with tax collection in the US (seen different versions of this done by IRS, California’s BOE and SF treasury)
It goes something like this: they send you a scary looking letter telling you there’s something off about your taxes, you then need to call them (because they don’t do email and mailing anything will go over the time limit to comply), then they tell you more in detail what the problem is and push you to amend your return forms, once you do, you’ve legally accepted liability for whatever extra taxes they convinced you you owed (and will have to pay)
What most people should actually do: they send you a scary letter, you tell them to audit you, usually they’ll stop here, if they audit you and make a final assessment against you, you tell them you want to go to court, they’ll almost definitely drop it at this point, unless you actually owe them taxes and it’s such an easy and big case that they are willing to go through the trouble
Most people will just amend their return forms and pay, because it’s just too scary to even think of going against these agencies
Sent me a letter saying that because I had filed my federal return with my Arkansas address I clearly lived in the state, and because I hadn't filed a state return they were assessing taxes on me for the entire year at the single rate.
I called and they said the same thing, I interrupted them and said "so should I tell California to fight you over this money, since I lived there until (XX/YY/ZZZZ)?" Oh and here's my AR lease, here's my CA lease, my CA tax return, me transferring my license to an AR drivers license, and me transferring my vehicle registration on (XX/YY/ZZZZ). Anything else I can help you get from the state, since you don't seem to have access, but do from the feds.
I got the most sheepish "this case is resolved" letter from them <72 hours later.
Perhaps you have had a different experience but the IRS has always been polite and helpful in the few cases where I had income tax disputes. The key is to follow the process instead of trying to argue with bureaucrats or treat them as enemies.
Compliance deadlines are measured in months. You have plenty of time to mail responses. Usually they'll put a hold on collection activities while you have a dispute pending.
It depends on the situation. They might be polite but unwilling to budge on the issue.
My mother had a problem back before "identity theft" became a common term. Apparently someone used her SS# with their employer. The IRS was coming after her about the unreported income. Hey, that's not mine! Contact your employer and get it fixed. I've never heard of them let alone worked for them and I can't find them, can you give me their address? (This was pre-internet.) No, we aren't allowed to, you need to get it fixed.
I went off to college at that point and never learned how it ended up.
Similarly with the British system, especially the disability system. You have to fill in a 160-page form and turn up to an appointment. They interpret everything you have written on the form as evidence of ability, including turning up to the appointment itself. Ability to fill in a form and turn up to an appointment is used as evidence that you should be capable of having a job, and are therefore ineligible for help. You are denied.
You then take the case to tribunal, where it is put in front of a normal non-rigged judge who interprets the law in a reasonable manner, and are awarded your disability benefits.
This process takes about a year and is basically impossible unless you get help from someone who is "professional managerial class" enough to work the system for you.
Coda: periodically they write to you to check that e.g. the two legs you lost have not grown back. This must also be dealt with.
Sounds about like my understanding of how disability works in the US, also. If you have one clear-cut showstopper it's not a problem but anything else expect to be denied and you probably have to hire a lawyer.
> So all in all, Germany still has homeless people, despite welfare programs generous enough in principle that no one needs to be homeless.
One of the reasons is that for being part of those programs, the people have to want to be re-integrated, leave out any kind of drugs that there were using, take part in employment trainings,... and not everyone is keen in going through that and rather stay on the streets.
I would formulate it slightly more cynically: to be part of many programs you have to go through the right motions so that the civil servant in charge can tick the box that says 'wants to be re-integrated' etc.
If you are literate enough with bureaucracy and paperwork, that's not too much of a hassle; and they can't really look into your heart and see that you'd really rather sit at home, collect welfare and play computer games, compared to working a low paying, entry-level job.
But the skills that make this dissembling easy are also the same skills that make holding down many kinds of job easy. Especially low level, white collar jobs. Conversely, the people who can't get nor keep a job or also likely to lack these skills and preferences for playing the bureaucracy.
The welfare system requires more than a minimal amount of paperwork, and a lot of people are surprisingly bad with paperwork. Then you have immigrants who don't have access to this system, or are afraid to use it.
> "a lot of people are surprisingly bad with paperwork."
I guess you're writing for a class of people for whom this is easier. But perhaps a more informative view of the situation, rather than saying "people are bad at this" may instead be to realise that if you're able to deal with this sort of stuff without issue, you are very likely in the minority (very few are as good at this as us). This can perhaps inform how you feel about certain requirements for certain programs.
As an illustrative example, a great many otherwise highly capable people who are able to write impressive art or fiction (including for example, many famous musicians and authors) struggle mightily with contracts and managers on the regular.
> (like eg the British NHS does, modulo the option to go to a private hospital for enough money)
IME it's more complicated than that.
Firstly, the NHS allows consultants to do private work, making use of NHS resources, including beds, radiography and theatres. Secondly, a consultant can refer you back to the NHS for treatment, effectively "jumping the queue".
I would never rely on a private hospital. They never have an emergency department, and emergencies happen in hospitals too. Many private hospitals can only treat certain types of case; I wouldn't want to be stuck in a hospital that couldn't treat anything that happened to me.
> Secondly, a consultant can refer you back to the NHS for treatment, effectively "jumping the queue".
The patient would go to the back of the NHS queue, so I'm not sure how they're jumping anything.
The real problem is that private healthcare over-treats people with unnecessary surgery, and cherrypicks the easy stuff, but dumps patients back into NHS care as soon as they get complex.
> The patient would go to the back of the NHS queue
This is not true.
I went to the NHS over my kid's glue-ear. We had to see a consultant, but the earliest appointment was 9 months, and the hearing problem was impeding our child's language acquisition. So we went private, and had an appointment with the consultant in a few weeks. The consultant recommended surgery to install grommets (wow!), and a few weeks later we attended for NHS surgery, to be performed by the same consultant.
This was 30 years ago; but I've been told recently (a couple of days ago) that this still goes on.
Singapore has many systems, rules and laws that would not and could not work elsewhere. It's great that it works for them, but it doesn't work in the USA, or most other countries. I will point out that they are an affluent, monocultural, somewhat xenophobic, authoritarian and borderline fascist city-state.
Singapore has only recently become affluent, mostly thanks to hard work by the locals, but also partially thanks to policies that did not discourage people from putting in that hard work.
I'm not sure what you mean by monocultural? Singapore is famously multicultural.
Singapore is very open to foreigners. Almost no one's family has been here for longer than three or four generations. I'm not sure where you get xenophobic from? (However, they do like some foreigners more than others. Just like in the rest of the world, people who came from affluent places to spend money are typically the most welcome visitors.)
Authoritarian might be true, depending on your definition of the world. To call them 'borderline fascist' you'd need a rather torturous definition of fascism (or a generous definition of borderline).
Yes, Singapore is a city-state. For comparison, Berlin and Hamburg are also city states in the federal system of Germany and enjoy considerable autonomy, but with less success. I agree that more cities should become independent and be better run as city-states. London would be an interesting candidate.
> To call them 'borderline fascist' you'd need a rather torturous definition of fascism (or a generous definition of borderline).
Does hanging people arrested with small enough amounts of drugs that you'd get a relatively minor punishment in the U.S. not at least toe the borderline of fascism?
not really. fascism isn't just "doles out severe punishments." It's a slightly tired trope to trot out Umberto Eco's definitions of fascism but suffice to say it's a name for a political tendancy that appeals heavily to imagined glorious history and family while stoking fear of a destabilising influence within society, taken to extremes. It usually also emphasises emergency needing reliance on strong leaders and distain for comittee and taking time to make right decisions that work for everyone.
Sometimes people get all upset when they hear some of these characterisations, because they personally think family ought to be more important, or that people are ignoring a proud shared history. Maybe they feel that beuracracy and comittee meetings have led to overcomplexity. It turns out as with anything else these things are perfectly fine and not bad until this way of thinking becomes the sole goal of the leading class, they become highly authoritarian, and it lashes out more and more at any percieved imperfection in society regardless of severity.
Does this fit with singapore, to a greater or lesser extent? I really don't know. But I understand why people would feel annoyed by simplifying it down to "strong laws against drugs"
> Does hanging people arrested with small enough amounts of drugs that you'd get a relatively minor punishment in the U.S. not at least toe the borderline of fascism?
No. Why?
Singapore goes up to the death penalty for trading in drugs. Consumers of drugs face punishment, but not the death penalty.
In any case, harsh punishment does not make anything fascist (nor does comparatively lax punishment make something not fascist).
Eg the US is not fascist, despite them handing out harsher sentences for eg drug offenses than other parts of the world (or even the US itself at different points in time).
(Just to be clear: I like living in my adopted home of Singapore. I disagree with their drug policies, and think drugs in general even 'hard' ones should mostly be taxed, not banned. But I don't harsh punishments for some behaviour is a sign of fascism. Especially if the laws are clear and knowable, and there's a scrupulous legal system that predictably enforces these laws for all without prejudice.)
> Does hanging people arrested with small enough amounts of drugs that you'd get a relatively minor punishment in the U.S. not at least toe the borderline of fascism?
No.
Fascism, of course, tends to incorporate harsh punishments for (at least some) criminals, but that's neither central to fascism nor is it sufficient for fascism, you don't get anywhere near the borderline of fascism just with ahesh criminal punishments forbthings that are widely criminalized in liberal regimes.
It may be bad, but not all bad things are fascist.
Fascism is very specifically about about the subordination of all competing spheres to the State. "All within the state, nothing outside the state, nothing against the state."
No, it's well known to everyone everywhere that trafficking drugs into Singapore will get you a death sentence. Those drugs destroy families, they absolutely destroy families.
Singapore may be many of those things but it's not "monocultural". Besides the fact that it has 4 official languages, foreigners make up about 30% of the resident population - a much higher portion than the USA, for example!
> [...] foreigners make up about 30% of the resident population - a much higher portion than the USA, for example!
I mostly disagree with acyou's comment, but since Singapore is a city as much as a state, the more enlightening comparison might be with how many of eg New York City's residents were born out of town? (Or perhaps how many of NYC's residents were born out of the country? It's murky, and there might not be one best comparison.)
In any case, I agree that Singapore is not 'monocultural'.
To push your point a bit further, my high school History teacher (I went to HS in NYC), would constantly remind us that New York was nothing like the rest of America.
I think they're using this to mean "doesn't have a visible ethnically different underclass". Such a thing would never be allowed to be visible in Singapore.
Weren't there reports back in the Occupy Wall Street days of people organizing to buy up debt like this and then just forgive it all?
It sounds like debts are sold in such bulk that there's no way to do something very targeted, like starting an org in your town to buy debt from your ZIP and collecting contributions to cancel your neighbors' debts, but if these debts are already only worth 5¢ on the dollar to the sellers, it seems like it would make quite a news story if you could.
If I could buy up $2000 of my neighbors' debt for $100 and remove that burden from them? I think I would, at least occasionally.
But even if you don't assume goodwill, if the whole community knew the plan was to buy and cancel everyone's debt, you could probably get the debtors themselves to band together to do it!
There are some non-profits specializing in buying up medical debt and forgiving it (e.g. RIP Medical Debt [0]). These non-profits usually rely on individual donations, and $100 can relieve as much as $10,000 of medical debt. They also frequently rely on donations from other organizations such as churches [1]. There are examples of churches buying up tens of millions of dollars worth of debt [2]. I'm not aware of this being done for other kinds of debts, although I would assume it happens.
I never heard of buying credit debt, but I had heard of people buying medical debt in this manner. I get and respect the medical debt concept. Credit debt though is a tough one. How can you tell that someone ran up credit debt because they were paying for medical bills or something vs debt financing shopping sprees or vacations? Giving those who fall on hard times help is admirable. Giving people bad at personal finance a free ride is not
This strikes me as the same as saying “but the homeless person might take my $5 to buy whiskey instead of a hot meal.”
Or, possibly more apropos to your example, “how do I know my medical debt relief payment goes to someone who truly Deserves It because of bad luck and not someone whose poor diet and exercise habits lead to their stroke?”
The system is designed to turn bad choices into bad luck - and the opposite - and to pass moral judgements on those who need help. Reject the framing and help people; most are good and deserving.
If you want to think of me in that tone, then fine, but I never caveated the medical debt. As the sibling comment to you said, medical debt in a civilized society is just wrong. So I really don't care why the medical care was needed. Helping people out of debt for medical reasons is commendable.
The thing I specifically caveated was people making bad financial decisions on their own. Sure, maybe giving an 18 year old $5k credit limit is not a smart thing on the creditor's part, but not everyone financing retail therapy sessions via credit is an 18 year old. The whole 30 thousandaire outspending their earnings for FOMO or keeping up with the Joneses or whatever does not seem like something we need to bail out.
Frankly the vast majority of people with credit card debt I know still deserve relief. Even people who are under significant credit card debt due to frivolous spending— they likely need therapy or time to budget or similar but now they cannot due to the crushing weight and stress of credit card debt. Or they could’ve been able to pay it off but an emergency happened and they got laid off or they were already barely scraping by and now their car broke down or something.
I think we worry too much about what if undeserving people receive help. Most people are good people who just got caught out on something and could use some help getting themselves out of some goddamn 25% interest craziness.
There's a huuuuge difference from being poor serfs in the feudal lord's fiefdom than someone that can't say no to a sale but can't actually afford it and buys on credit.
Not the parent commenter but to chime in: I don't want to be a moral judge but I'd rather give money to someone actually poor than to someone richer than me that just lives beyond their means.
I said that I wasn't familiar with the concept of buying credit debt, but specifically said I was familiar with buy medical debt. I then compare and contrasted how I feel they are different. I also said that buying credit debt isn't necessarily a bad thing, but due diligence should be applied to whose debt is getting wiped out.
You've spun into something it's not to make a point. Which I'm still not sure what it is
if you're talking about the random person that approaches you on the street, then yes, that's a high possibility. but there are homeless that are not addicts and don't necessarily live on the streets.
i think this confusion is something holding back progress on homelessness.
When you say “don’t give cash to homeless people” obviously you’re talking about beggars and street vagrants, not whatever demographic some NGO has decided to formally define as “homeless” in order to game the statistics.
First, I didn't say "don't give cash to homeless people" because I do have a very different interpretation of being homeless. The view you take sounds like you've been privileged enough to have never been homeless yourself. I promise you will think of homelessness in a very different manner if you ever have the misfortune of being homeless. I specifically modified the comment to call out addicts.
I have on multiple occasions helped someone out that was facing some very difficult decisions because of not having a place to stay. People that are not addicts can be put in making choices that they would never even consider in a normal situation, but we faced with sleeping in a car/street/public shelter, those choices suddenly start to look more acceptable. Even more so if you have kids.
> First, I didn't say "don't give cash to homeless people"
Sorry, I meant “you” in the general sense, not you personally.
> The view you take sounds like you've been privileged
Stuff it with the personal comments.
> I have on multiple occasions helped someone out that was facing some very difficult decisions because of not having a place to stay.
I have as well. And in my experience, at least with street people, it’s much better to give them bottled water and food than to give them cash. If it’s a family member or someone you actually know, that’s a completely different situation than what most people (not you, to be clear!) are talking about when they say “don't give cash to homeless people”.
Medical debt shouldn't be a thing in a civilized society. Credit card debt is a failure of the financial system to properly assess risk, credit cards shouldn't be that easy to get, and predatory credit card offers should be outlawed. Similar to how identity theft is somehow your problem when it's actually the banks and other systems that enable it.
I’m not sure saying credit cards should be harder to get is the correct stance. I saw a paper talking about the rise of payday loans came at the cost of pawn shops. Basically there is a lot of demand for short term loans, I would argue that better access to credit would help many people greatly.
The only thing I’m unclear on is how to avoid the predatory aspect. I’d assume that part of the usury terms of these kinds of loans is a response to such small amounts. Just paying the hourly cost of dealing with the transaction could put a $200 dollar loan into 5% territory without taking into account any risk profile.
I’d be intereted in running experiments similar to cash giving charities. Measure how much a $2000 line of credit does to improve lives (hopefully without making them worse).
> Giving people bad at personal finance a free ride is not
I get what you're saying but if you've ever gotten to "I now have enough credit card debt for it to be A Problem", the baseline level of stress in your entire life gets pretty high. That doesn't mean that suddenly everyone has "learned their lesson forever", but especially for stuff like "I was bad at personal finance in my 20s, and now I am better but the debt is still around and a problem", helping people with that debt can just make somebody's life much better.
Nothing is guaranteed but if it were a family member and you had a way to clear out some stuff for pennies on the dollar, it feels like the right sort of thing to do.
You've moved the goalposts with making it a family member. What about total strangers?
Student loan debt is an entirely different thing though. I'm still on the fence about student loan forgiveness because I specifically stopped going to school because I did not want to take on the debt. It's a sensitive subject, and I am sympathetic to it. I'd be much more open to 0%, or partial payoff to reduce the obviously bloated amounts the schools are charging.
I didn't mean to move goalposts, and I don't really believe this is something where you can be "right or wrong" about. Just expressing how I feel about it.
The thing I was implicitly thinking is that you might do that for somebody you care about, and ultimately things like debt forgiveness programs are also about giving compassion to people you might not know.
The obvious limitation is that they only sell hopeless debt for pennies on the dollar - no lender will allow a community to buy all of their debt at a significant discount. You'll be able to buy your neighbors' debt only if your neighbour is either a complete deadbeat or their circumstances have changed so much that they are totally bankrupt; every other neighbor's debt won't be for sale.
People are less likely to pay their debts if they think their debts will be sold to someone who will forgive it, so the debt issuer's other non-written-off debts will be harder to collect (since now those people know that they might be able to get out of their debts by waiting and hoping they get sold to a debt-forgiver).
That becomes a problem if debt forgivers become a large percentage of purchasers. It doesn't "only work the first time", it only works as long as you're in a tiny minority, which will likely be forever. The debt issuer won't take notice until the value of their debt starts to drop.
The debt issuer would note that they had to write most of that debt off, so the credit score impact will mean that the same borrower will have a much harder time getting another loan.
Ah, you're interpreting it differently: I took them as saying that you can only buy debt and forgive it once, not that you can only have your debt forgiven once.
What if debts were all perfectly organized? If you miss a payment, the collector would email you an electronic copy of the contract, and the parts in breach would be highlighted. Further assume that the contract itself is simple and understandable, and the debtors knew they were in breach of fairly obvious clauses (e.g. send this payment by this date). And let's also assume all collectors act in good faith and warn you of upcoming obligations.
And then let's say there was an efficient and fair legal process, and if the debtor still doesn't pay for an extended time, it would be economical to sue individual debtors, and get judgements, and enforce them as prescribed by law.
Is that better?
My guess is probably not. Small debts are in a weird optional world and if you don't pay the main problem is that you have trouble borrowing more, or need to borrow at bad rates (maybe check cashing instead of formal credit). The collectors are some weird outgrowth of this model, and they don't really serve any useful purpose. But it might be better than actually enforcing small debts against people as the current laws allow.
Of course, ideally, we'd just be honest and call it an optional system. To be in good standing with lenders, pay your debts. If you don't care, then don't, and maybe be locked out of borrowing in the future. And larger debts would be handled separately, with collateral, etc.
Off topic: I've ignored any medical bills I thought were unfair for 12+ years. It's probably over $10k in bills altogether. It's never shown up on my credit reports though (I check often and bought a house last year). So your results may vary. In the mean time I just throw out the debt collector bills as I get them.
> A statute of limitations is the limited period of time creditors or debt collectors have to file a lawsuit to recover a debt. Most statutes of limitations fall in the three to six years range, although in some jurisdictions they may extend for longer. Statutes of limitation may vary depending on state laws, the type of debt you have, or the state law named in your credit agreement.
Someone in a similar situation to yours might consider researching your state's statute of limitations on debt, and if your debts are expired based on that statute, file a complaint with the CFPB, FTC, and your state's attorney general to report a debt collector's FDCPA violations. Not legal advice.
Let me describe the situation the other person is talking about, with two examples that happened to me in the past year.
1. I scheduled a colonoscopy with a hospital. They charged me $300 for the procedure, which I paid up front. Everything went smoothly and there were no delays, complications, or followups. A week later they sent me a bill for over $1k. They had not applied my $300 payment towards the total. They had not waited for insurance to reimburse them. They simply decided they could arbitrarily charge me more, and they did. Fortunately, my wife is somewhat familiar with medical billing and we did not pay. Insurance reimbursed them, then we called them and told them to apply the $300 we had already paid, at which point we owed nothing. If we had paid the $1k+ bill, I am sure we would not have been reimbursed.
2. I went to a clinic for a minor sports injury. They charged me a $60 consultation fee which I paid up front; I then spoke to the doctor for 15 minutes and got a prescription. A week later, I got a bill demanding an additional $180, and in that bill they claimed they had already been paid by my insurance. I checked with my insurance provider and found they had not even filed the claim yet. I ignored the bill, insurance reimbursed them, and they have not contacted me since.
Your characterization is ignorant of how scummy medical billing actually is.
> Your characterization is ignorant of how scummy medical billing actually is.
Concur completely. I once lived in a state where "Balance billing" was illegal, yet despite having a bluechip insurance plan, seeing some physicians in-network AND paying the co-pay at the same time, I could always count on being balance billed.
GRRRR. Talk about a seriously ticked off customer. Given what I know about medical billing though, I would not be surprised to hear that insurance companies were likewise trying to bilk the practices, forcing these shady responses (My wife's practice has an in-network private practice model, but insurers refuse to accept the billing rates they agreed to as a part of contract with the practice, and they play an intentional game of denials after previous authorizations, or, they intentionally send patients checks which the PTs go and cash, and fail to reimburse the practice)
FWIW for #1 if you had paid the fraudulent $1k bill, after your "insurance" paid you could have likely spent more time on the phone with the provider and gotten them to refund you. Of course if you had paid the fraudulent bill promptly they might not have even bothered billing your "insurance", meaning even more time/rounds on the phone in order to get them to do that.
I'll provide an example...while heavily medicated after breaking both of my legs I signed something on an Ipad, once. I asked for a copy and they weren't able to provide me one. After more than a dozen phone calls I was finally able to get a copy. But that involved figuring out whether it was the company that rented me the wheelchair, the company that billed me, the company that billed my insurance, or the company that owned all of those companies. They provided me three documents I had signed with not the same signature on them. Then when I asked them to pickup the 'rental' that they never told me was a rental, it took five phone calls and over two weeks (during which time they billed me and my insurance for another month of renal). They finally came and picked it up within three hours when I had the news reporter who covered my accident get in touch with the CEO's office.
I reported all this, with call recordings, logs, notes, etc. to my insurance's fraud hotline and they closed the file without doing anything.
Much of health care in the US is wrapped in a blanket of outright fraud. You can't agree to be a victim of fraud. Until I get to charge them for the time I spend correcting their billing mistakes I am totally fine deciding what bill is appropriate and what bill is not on my own.
I can count on one hand the number of times in my entire life that I've agreed to a price for a healthcare service in advance and they actually billed me the agreed upon price and no more.
Dentists tend to work that way. Now, the price they'll charge for any given service is super-arbitrary, as is what they'll claim you need. But they will quote you up-front for what they'll be charging you.
> nothing better than someone who agrees to a service then decides later that they aren’t going to pay because now the deal is “unfair.”
I would agree for any medical transaction where the price for the service was disclosed prior to the transaction. Hell, I’d even agree if an estimate with a low and a high range were provided.
I don’t know about you, but in my lifetime the number of times this has happened rounds to 0%. And I ask for the price at a rate significantly higher than the average medical consumer.
So, since the entire industry has completely and totally failed at price transparency, then I’m completely on the side of someone who makes this decision.
When they agreed to the service 12+ years ago, were they shown the costs? Would you say their purchase was fully informed? Hell for all we know it was an ER visit and they had absolutely no say in the matter.
> Hell for all we know it was an ER visit and they had absolutely no say in the matter
This has been tried in case law, and failed. Even if you're documented unconscious, the EMTs are allowed to make a good faith assumption that you want reasonable efforts of resuscitation. Look up "implied consent" laws.
The EMTs assess your financial situation before deciding if you can afford their actions?
(Charging people for emergency treatment is one of the most insane aspects of the US system, and we need to fight it as long as possible in the UK before it gets inflicted on us)
I understand how it works, I think you’re missing the thrust of my point. Buying a car for an agreed-on price is one thing. Opaque medical billing where we don’t even know what is covered, let alone what it costs, is very different.
You plead poverty with the ambulance company and hope they'll settle on a reduced amount with you. They may also put you on a payment plan, or report non full on time payment to the credit bureaus. Sometimes all 3.
More like you went to your favorite restaurant and wanted the fish but there was no price on it, and when you asked how much it would cost they would ask if you had insurance or not because that would determine your price, so you say no insurance and they say okay well it could cost anywhere between $10 and $1500 and then you get the fish and enjoy it and they give you the bill after and it's actually $10,500.
Don't forget the social shaming where the waiters act like you're ridiculous for possibly caring about how much the fish might cost. No well defined consideration means there is no contract. No contract means there is no legitimate basis to bill for anything more than reimbursement of costs that have been actually incurred.
That reminds me of the time I went to my favorite local restaurant for my annual complimentary dinner and received a bill the following month for $150 then received another bill several weeks later for a further $175.
You standing on this system like it is worth defending is pathetic. You are lower than a worm if you can't see the inhumanity of the system and how defending it is anti-human. If I heard you say something like this in person you wouldn't do it again.
Until our latest insurance, Ive never had a medical interaction in the US that didn't involve my wife fighting some midwit over the phone for an hour over billing mistakes.
She's probably saved us $5-10k, probably $50k for her extended family (about five nuclear families)
I've done the same, with the same results, because I've rarely come across a medical bill that is actually correct.
I'll call the provider once and explain what's wrong with the bill. Either they fix it, or I ignore them completely after that. Their bills go straight to the trash unopened.
Frequently as soon as you explain they need to fix something they just completely drop the bill for the same reasons as in this article: It's simply not worth their trouble to bill accurately, and they don't have the ability to do so. (And I'm talking about the provider here, not a debt collector.)
I've never once had a provider actually fix the bill, the closest I've gotten (just once so far) is a "courtesy credit" to make the bill what I told them it should be, and I paid that one.
All the others didn't fix the bill, so I didn't pay them.
Yeah, to fix it would mean giving the insurance back the money on whatever was wrong.
The whole system is a mess. I had a bill rejected by the insurance as a duplicate. No, but I could easily see why they thought it was--and they told me how it should be billed so it wouldn't be rejected. Call the lab, tell them what they did wrong in the billing. They resubmit unchanged. The insurance won't accept my statement that it's legit. Call the lab, simply offer to pay it at the negotiated rate (which is all I was after, the deductible wasn't met.) Round and round--finally the insurance rejects it as billed too late and the whole thing goes away.
Is there a chance for a HN starter upper to "fix" some of this (or at least a service to tell you what to do), or is it just too spaghetti like? Not from the US so haven't experienced it.
The same thing that's keeping the biller from doing it correctly will also keep the startup from fixing it.
Unless you intend it to be a manual process, which isn't practical since you'll need info from everyone that's going to be hard to collect, i.e. the same problem the biller has.
The way it used to work was the biller charged insurance, and insurance paid, and that was the end of it. No one ever double checked anything.
Obama (with Obamacare) changed that - now everyone has a high deductible, insurance pays part, but you pay part. And suddenly people are motivated to check the bills.
Realistically the biller just drops bills where the person has to pay, and they live off of what insurance pays automatically.
The "on paper" of what American health care is, vs the reality are very different. The reality is weirder, but better (by better I mean less expensive than it looks on paper).
> I have had substantially more at-bats with debt collectors than most people, as a result of an old hobby of writing letters on behalf of debtors to their lenders and non-affiliated debt collectors.
What kind of "old hobby" is this? My hobbies are.. well, ok, I do help my family with their various enterprises in my free time.
To be fair, it took writing this comment to make the mental leap :D
I've been sporadically hounded by collection agencies for the past 18 years. I moved out of the country after college and allegedly forgot to close the balance on some store credit card with a balance of like $20 or so. By the time I returned and got a US phone number and address, I was getting calls and mail from collectors.
It freaked me out at first, but I did some research and sent a debt validation letter with no reply. Of course, they were citing numbers like a $ 2,000 balance and threatening civil action all the way.
Now, it's a certainty that every few years I start getting the robo calls and have to track down the actual company. It's such a pain because I don't want to answer the phone but I need to get the actual account number and company (so many of these companies have similar names or could just be scams). So it's usually a case of my waiting until they leave a voicemail of the company and call it directly to get this info and send the letter.
It's getting harder. The last time it was voicemails from "MRS" which could be any of 3 companies. I eliminated two since I discovered they are local to other regions but for the life of me, I could not get what I needed from the supposed correct MRS. I'd call up, and one agent would say "Yes, we have your account but it's under a different name". Another would say "I'm not seeing your account". Sometimes they would try to transfer me to some other department only to drop the call.
I finally answered a call and validated my info to speak to the agent. I refused to acknowledge anything and only asked for my account number in their records, the delinquent account they were calling about and their address to send mail to. The agent gave me what must be a bogus number since I can lookup what an MRS account number should look like. I also offered to validate my current address if they would send me anything in the mail. They refused and said "My client will be pursuing civil legal action" and hung up. I did get in there that I do not want calls and to please mail me anything from now on in the call.
I ended up filing a Consumer Finance Protection Department complaint. I'm aware the agent violated a few things, like threatening legal action they don't intend to pursue and not validating those info points.
Can anyone recommend a good call recorder for iPhone? Also, I assume I'd need to inform them it's being recorded since I don't know from where they are calling.
I appreciated reading this because I work in the collections department at a large bank, and it was interesting to see a lot of what I already know confirmed while also learning a lot of new things about what happens to the debt after it leaves the bank. But come on... After all that griping, just two pathetic little paragraphs at the end under "What can be done about this?" that basically say "I'll leave it to the lawmakers." The writer is a lawyer; he couldn't come up with ANY solutions himself?
Treating one part as the 'product' and other as 'waste' is merely a matter of perspective.
Eg in the early days of web search, think Yahoo and friends before Google showed up, someone might have shown you a banner ad, but most of what is now used as essential data to target the ads better was just 'data waste' that only showed up in server logs at most.
You are getting a lot of troll replies, but it is actually interesting to think about.
The waste is uncaptured value. It is some part of your software business's domain that is just too hard, expensive, or requiring physical intervention to encode the process in their system. So the business never chooses to build that feature. This leaves some part of your business's problem domain unsolved. Potentially someone else smaller could come in and try and solve that problem and capitalize on that wasted value.
Also businesses that could have been profitable, but failed due to being out competed by businesses that secured 10X the venture capital and sold things at unsustainable prices for years.
Support, speaking as someone who for a while built a cottage business out of providing it for stuff I didn't build.
It has several flavors, but there are some common themes and causes. Developers simply like writing code more than they like writing documentation, and they like writing documentation more than they like maintaining old codebases. Meanwhile, software vendors of all kinds have universally decided that they shouldn't be spending any money on any form of technical support that comes with a heartbeat.
Down in the home and small-business markets, there are a lot of people that get absolutely screwed by this. New software comes out, something tries to auto-update (or the user is forced to update), something goes sideways, and ... that's it. Stuck. Nobody to call. Some really sharp Google skills once upon a time could sometimes find an answer, but even that's thoroughly rotted out now.
So if your small business has your entire customer database in an old version of Quickbooks running on the office PC with Windows 7 configured by the last tech to stop complaining about updates, and then one day Quickbooks refuses to launch and displays instead an obtuse error message ... what do you do? For a while, you could call me, and for several years, I mostly enjoyed building a business out of fixing these sorts of things (and helping people navigate the sometimes very tricky update process so that this wouldn't be a recurring problem).
Unfortunately, software kept getting worse, documentation kept getting harder to come by, Google kept getting worse, everything kept getting converted into subscription SaaS (which meant that most of my answers started becoming, "yeah, that's just how it works now, I can't do anything about it, yeah, it sucks, yeah, lots of other people are complaining too, no, there's nobody you can call, sorry"), and I never felt good charging a lot of money for getting people out of bad spots.
I eventually noped out of this in favor of relaxing for a while in a slightly less hopeless part of the industry, but there's still a huge, under-served market of people who are getting hosed by sociopathic technology and would pay someone just to make it work again.
The author has an excellent program model for a nonprofit that could provide low-cost debt-collection resolution services to the vulnerable populations impacted by the industry's perverse incentives. That would be cool.
If you are in Europe or the UK GDPR is your friend!
If you get contacted by a debt collector, make a Subject Access Request while you have them on the phone for all information they hold on you. In the UK they will require a 'notice of assignment' from the original issuer of the debt and any subsequent owners, along with a signed copy of the credit agreement. If they don't have this they are toothless.
If you get issued with a county court claim form hit them immediately with a SAR for the details above and reply to the claim form stating that you do not recognise that debt, that you have asked for the details above but have yet to receive them. You can make a claim from them under Civil Procedure Rules to make them hand over the docs that their case relies on. Google is your friend on this.
Great article. I like to learn how businesses really work and the unexpected ways they make money.
One nit. The author wrote "... the impression among many informed people that most defaulted debt is medically-related is the result of successful advocacy work rather than being substantially based in reality." Followed by links to illustrate the magnitude of credit card debt and some facts about medical debt in the US.
I worked for several years for a company that provides mandatory bankruptcy counseling. Debtors considering personal bankruptcy must, by law (thanks to lobbying by the credit card industry) complete a counseling/personal finance course. I could write about that fake and fraudulent process and the industry that sprung up around it (unfunded mandate, anyone?) but I'll stick to the point.
The main reason people give for considering or starting a bankruptcy filing is medical debt. Their other debts, mostly credit cards, mortgages, utilities, etc. may total to much more than the medical debt, but medical debt has more urgency. Hospitals and their corporate owners can get very aggressive collecting debts, and the same consumers that patio11 describes often fear they will lose access to their physicians, hospital, clinic, and prescriptions if they default on medical debt. So they let the credit cards and cell phone bills slide and scrape to pay the medical bills. Medical debt triggers a bigger financial meltdown, maybe leading to bankruptcy, in other words, even though it doesn't amount to nearly as much as mortgage or credit card debt.
A lot of medical expenses get charged to credit cards, as anyone who has visited a hospital, clinic, urgent care center, or pharmacy knows. The first thing you get asked at a clinic, lab, or hospital in the US is how you will pay, and if you don't have good insurance you can expect to pay up front for non-emergency or diagnostic procedures. When my grandmother died I helped clear up her finances, including paying off and closing her credit card accounts. After a long illness she had racked up thousands on credit cards, all to pharmacies and labs. That all shows up as consumer credit card debt, not medical debt.
Personal bankruptcy counseling has some of the same depressing call center aspects patio11 describes: Tales of woe, often heartbreaking to hear. Confused consumers not sure how much they owe, or to whom. Threats and intimidation from debt collectors. Debt collectors calling days after a spouse dies asserting the survivor has to pay immediately. The people who end up in bankruptcy counseling, very often poor, uneducated, and/or elderly, frequently fall prey to the bottom-feeding law firms that specialize in the field, charging hundreds or thousands of dollars for their "services," that amount to filling out boilerplate forms and filing them with the court, pulling credit reports, and getting kickbacks for sending their clients to a bankruptcy counseling provider. The government encourages bankruptcy counseling firms to push debtors into debt repayment plans or Chapter 13 bankruptcy, which are almost always going to benefit the creditors without offering much relief to the debtor.
You can file a dispute[0] about items with credit reporting services. The reporter has a time window to reply with supporting evidence. If they don't, you win the dispute by default. If they do, you can dispute it again.
I had a completely BS negative mark on my credit report[1]. I ran that process in a loop (maybe 3-4 iterations IIRC) until the reporter was either bored with it, annoyed by the paperwork, or on vacation until after their deadline. They didn't reply in time and the mistaken mark went away.
You shouldn't abuse that process to get rid of legitimate reports. In the long run it's easier to just pay your bills as best you can. But the credit reporters have all kinds of processes they can use to ruin your day. You absolutely should use the processes available to you to make sure your report's accurate.
[1] In before "you must've done something wrong!" Nope. A large government agency claimed I owed them money. I had all of the receipts showing that I paid in full. I eventually had to involve my senator, resulting in an apology letter from a very high ranking official (and I'm sure a few chewed butts). They didn't get around to removing the derogatory report, though, so I did it myself while waiting for the second senator inquiry to wrap up.
You write them a polite and direct letter (or email or webform or...). A couple of things to remember: 1) They literally work for you. You (collectively) elected them, and they get a salary to represent you. That's their job. 2) YMMV, of course, but by and large representatives love helping their constituents. It's the official reason they ran for office in the first place, and a lot of them take that seriously. And cynically, it also looks great come re-election time.
My letter looked like:
"Senator Schmuckatelli:
Please get ${federal_organization} off my back for a debt I already paid to them. # <- "BLUF", or Bottom Line Up Front
${federal_organization} claims that I owe them $X. However, I have receipts proving that I already paid that amount in full. (See enclosures A through J.) They have threatened to garnish my tax returns and wages (encl. K, notice of garnishment), and as a hard-working plebe, I can't afford that. I have written (encl. L through P, copies of my letters) and called them multiple times (encl. Q: call log) multiple times without receiving a reply.
As my senator and beloved Protector Of The Little People, could you please contact them and ask them to stop trying to collect this invalid debt?
Many thanks, and see you at the polls!
- Me"
Tell them at the start of the letter what you'd like them to do. That helps them sort your mail quickly into the right bucket. Then make your case clearly and concisely, including all the evidence you might have. You don't want them to have to look at a wall of text with a phone book's worth of unlabeled paperwork. In short, make it easy for them to help you.
Depends on the debt. If they can be paid off prior to closing, this is not true. If they are a foreclosure or bankruptcy, the waiting period is 3 years assuming extenuating circumstances (Life Happened, not just "I didn't want to pay my mortgage"). Refer to Fannie Mae, Freddie Mac, or FHA underwriting guidelines for specifics (lots of complexity here around non-QM originations, overlays, portfolio loans, etc so the answer will always be "it depends"). FHA is 3.5-10% downpayment required, depending on credit score.
(sources: have been foreclosed on after buying at the peak prior to the Global Financial Crisis, had judgements erroneously on my LexisNexis risk report for over a decade, have family in the mortgage banking industry [specifically mortgage underwriting], did a brief stint as a contract mortgage underwriter in my early 20s, and am very familiar with navigating creditor law but am not an attorney nor your attorney)
That's true in theory, though in practice any house you would actually want to live in is going may have a bunch of buyers competing on it and having an FHA loan (or VA, sadly, or USDA) ensures your bid is in last place. However, there are some conventional lenders that will do 3% if you get approved for PMI.
And yeah, some creditors will do pay-for-delete in which case you may be fine. If you have more than 1 that won't though you may have a hard time, especially if it's not due to medical or something easily justifiable.
> And yeah, some creditors will do pay-for-delete in which case you may be fine.
Pay for delete is paying to have it removed from your credit file by the data provider (either the creditor or their debt collector). This is distinctly different. You pay the debt and provide confirmation the debt was paid. Whether it is still on your credit file is immaterial to close. It's paid? You close.
(the guidelines are what makes the originated mortgages conforming, and able to be bundled for securitization and sold into the bond market; to understand mortgage guidelines is to be able to hack mortgage financing)
> Whether it is still on your credit is immaterial to close.
Not if your score is tanked from having collections on it. Again, there are guidelines, but then there’s the real world. In the real world FHA loans means any desirable house you can’t buy and if you don’t have a decent score you’re not getting PMI.
It might be a very European view to the problem but: Why does the American government does even tolerate this credit card garbage business in the first place ?
We are in the 21th century. Most payment can be validated electronically and processed under 200ms. I can pay something with my phone and get money taken directly from my bank account within seconds. There is absolutely no need of Credit Cards where Debit Cards can perfectly do the job.
So Why ? Why sponsor a system that fuck up entire families and push vulnerable people to suicide by giving them a way to pay things they can not afford in the first place ?
Why tolerate an entire industry of debt management that put people to their knees and bring literally Zero value to the real economy ? For the sake of few profits in Wall Street ?
This is complete nonsense.
I understand why the credit card business was born in the first place: Amex, Visa and MasterCard has been invented in a time where electronic payment was still a dream.
In the 60s, indeed, holding a debt record to every card holder was probably the only way to get a non physical payment system to work in the first place.
We are not in the 60s anymore. A cashless payment system does not need debt.
On the other side, if you are privileged enough to be financially stable, in the USA it’s best to pay for every single thing with a credit card.
Aside from the points and rewards, credit cards are much more likely to reverse fraud transactions. I’ve had banks deny fraud reports and demand police reports while credit cards always reverse the transaction no questions asked.
Actually it’s best to not even have a debit card in your wallet if it’s linked to your main bank account - the only debit card I carry has access to an account with a hundred dollars or so just in case I need cash.
That is just another symptom of the problem I would say. Although it does happen, there are other mechanisms in place to protect you from fraud, which discourage fraud in the first place. I’ve been paying with debit cards for more than 15 years in Europe, tens of thousands of transactions and not once did I need to reverse one.
The only time I've ever had to dispute a charge is when I bought something from a website that had apparently gone out of business without taking down their site. Weeks passed after my order, I reached out multiple times, and I never heard a peep from them. I just logged in to my Chase account, disputed it, got my money back instantly, then went on with my life.
That doesn't sound like something that's super easy to prevent.
> Europe, tens of thousands of transactions and not once did I need to reverse one.
Me neither. But (living in an EU country) every time I hear about someone who was a victim of a fraud/scam/etc. when SEPA/Bank transfers or debit cards are involved the banks just seem to pretty much tell everyone that's not their problem and that you should go the police (who obviously can hardly ever get the money back from the scammers directly, especially if they are in another country).
Some banks ever offer some sort of a "scam insurance" for a fixed monthly fee, which just seems absurd. Why do I even have to pay them in the first place (most banks charge some monthly fee just a for a debit card) if they can't guarantee they won't just start giving away my money to random people with no recourse?
OTH if you're using a credit card chargebacks seem to be an option even here (local banks just do their best to hide that from you)...
Because the vast majority of people use credit cards without messing up their lives?
I suspect most people don’t even need them but use them for cash back and consumer protection.
For people who do need them, there’s nothing inherently wrong with buying something and spreading the cost or paying for it later in return for paying some interest. Most people who do that won’t get into any trouble.
There are a hundred legal but potentially dangerous things that should be banned before credit cards if you want to go down that route. Start with guns, processed food, alcohol and social media perhaps?
> I suspect most people don’t even need them but use them for cash back and consumer protection.
Then make a debit card system with cash back and customer protection.
And kill a system that screw people with useless debts when there is no need for it.
Btw
> Because the vast majority of people use credit cards without messing up their lives?
You never know where life bring you. I can certify you that "good", "honest", "responsible" people can also get screwed under a mountain debts because some unfortunate life circumstances brought that on them.
Setting aside the cash back, which is frankly superfluous and plausibly nets negative, the credit is the active ingredient of the consumer protection, specifically the property that when something unusual happens, you still have full access to all of your rightful funds and retain full leverage while bringing your dispute. If card-issuing bank for Some Reason fails to respond to you at all for a month, it's their problem that they're short that money because it's still in your accounts, must of the time minimizing the impact on your day-to-day finances to bricking the one credit line.
> This system just make that much easier.
What are we comparing it to? Inaccessibility of credit comes with its own issues, and predatory loans can get a lot worse.
> Then make a debit card system with cash back and customer protection. And kill a system that screw people with useless debts when there is no need for it.
The debt is inherent to making the consumer protection work: the card issuer doesn't and can't take your money, they can only create a debt and ask you to repay it, and if you didn't get what you paid for you can dispute the billing before a penny leaves your account.
Guns and alcohol banned in Europe? That will surprise my hunting, schnaps-drinking grandfather. My gun-smithing hometown and the people at the Glock factory will be shocked.
I will need to tell them.
Jokes aside: guns are regulated where I am from, they are not banned. That means you have to have a weapons license and store guns properly. That license can be revoked and the guns taken if you have shown to be not mature enough to carry them, by e.g. threatening people or acting unresponsibly with guns. Xertain guns require special permits or expertise to be handled. And if you wanna shoot with LMGs, enter the military. Sounds reasonable right?
And alcohol? Legally we are allowed to drink beer at 16, hard alcohol at 18 — how is it at your place?
Someone mentioned fraud protection, to be more explicit: With credit cards, you haven't truly paid until the credit card bill gets paid. So, if you have a dispute, you don't have to pay the disputed amount until the dispute is resolved. With a debit card, you've already paid, and so you're out the money until the dispute is resolved. Now, if the dispute is not resolved in your favor, you may have to pay interest on the credit card.
Related to the above, you don't need to make sure you have the money in your debit card account before buying things. You can just charge it and then make sure you're good to pay later. Example: you don't have the cash handy right now for an emergency car repair. You can still pay the mechanic, and then be able to pay off the car repair over the next two months.
Credit is a tool. Sometimes the tool is good and useful. Sometimes you blow your foot off with it.
My experience is similar to another commenter: never in my life did I have to dispute any payment (in Europe). I understand the idea of added consumer protection, but in practice there seems to be very little need for it.
And apparently banks in Europe tend to side with the creditor anyway, so I'm not looking forward to the day I actually have to dispute anything, be it credit or debit.
It is a tool, I agree, but like any other tool it can be excessively pushed and alternatives can be prioritized or not.
As far as I can say, with a European state of mind, is that a credit card poses a risk and temptation for the average person. Not everyone is financially responsible, many times simply due to lack of proper financial education, and they deserve a little attention.
Credit cards are one of the few things where it feels like you're rewarded for playing by the rules and being prosocial and responsible. Everything else in society is set up to punish the middle class and the well-behaved, or so it often feels. So I very much doubt you'd get the middle class to vote for getting rid of them; if anything with the current breakdown in social trust I'd expect the opposite.
A lot of credit card companies offer cash back or redeemable points towards other purchases like for travel. If credit cards are used effectively (you pay back every statement balance) and the merchant isn't significantly raising the price of goods or services for transaction costs, you can make a serious amount of money back, easily in the amount of thousands of dollars per year from normal everyday use.
Edit: When I was referring to "transaction costs," I was referring to merchant fees
> The first one is just an hidden tax and garbage profits made possible only due to the monopolistic behaviour of credit card companies.
I'm not sure any supposed monopoly is necessary here to explain anything. In fact, there's no monopoly and different competing issuers have different levels of fees and 'rewards'. Eg American Express explicitly has high fees and high rewards, and competes against Visa and Mastercard (and against domestic systems in eg Germany or Japan).
A monopoly (or oligopoly or cartel) argument could perhaps explain why the smallest fees you can find are still 'high' by some arbitrary standard, but it couldn't explain why American Express is a viable competitor.
Moreover, it's an inequality engine. Get money from those who can't pay their bills (poor - they are punished bad back-breaking late fees and penalties) to those who can (middle class and the rich who usually pay their cards off in full every month so never pay any interest, and get cashbacks and bonuses/airline miles/etc).
A lot of the American consumer finance infrastructure seems to be set up like a regressive tax on poor people who can’t avoid using the system.
If you don’t have money, banks will charge you $15 / month for a basic checking account, plus $50 overdraft fees if you make the slightest mistake in balancing the account (or if a company makes a fraudulent charge on your account — also dismayingly easy in the US system).
If you have any reasonable income they start waiving the fees, and beyond that they’ll shower you with offers for credit card rewards and other benefits effectively paid from the massive windfall the banks and other companies collect from the poor.
The market isn’t solving this, so there should be more regulation and very tight caps on these various fees. A bank account shouldn’t cost more than $2 / month. An overdraft shouldn’t be possible unless you opt in to a loan facility.
Why is the market like this? It's naturally harder to make money off poor people because they have less money. It's also not how retail banking works in Europe, they tend to make money off the rich here in ridiculous ways ("keep $400,000 frozen on your deposit for an almost zero interest rate and get a few useless perks like a red-carpet priority lane at the airport"). And i don't think it's regulation. Maybe European poor and American poor are different (can't do the math, don't care, have planning horizon too short)?
There are a lot of poor Americans. 22% say they have absolutely no emergency savings. That’s 57 million adults who get milked by banks at every turn.
In Europe, exorbitant fees paid by the poorest would end up getting paid by the welfare system. It would be more obvious that it’s a wealth transfer from the state to the banks and other corporations. So the government has a direct interest in enacting regulation that prevents this.
In America, the welfare system avoids transferring actual money to people as far as possible (because the system doesn’t trust poor people to handle money). Instead these transfers are made indirectly using systems like “food stamps” that you can use only to buy groceries. When the government is giving food stamps to someone, and simultaneously the same person is paying $100 in overdraft fees to a bank, it’s much less obvious who’s really paying the bank’s profit here, but it’s still the taxpayers.
It’s not even credit, you’ll get hit with fees for just having a bank account when poor.
Wells Fargo, one of the largest national banks, charges $15 / month for a checking account (last I checked) unless you keep a balance of over $1500.
And overdraft fees are hard to avoid because the American banking system is fundamentally flawed. Companies can make charges from your account if they know the number. (This is mentioned in the debt collection article too.) If you don’t have money, your account can suddenly go negative because some company somewhere decided to pull some money from you, and then the bank charges you $50 for the overdraft.
The system is so broken, it’s hard to believe from a European point of view. The USA only got European-style bank transfers this year! Until now, almost all money transfers were being bolted onto a system meant for handling paper checks.
But those thousands of dollars are effectively subsidized by every one making a credit card purchase (e.g. merchant fees) - and not everyone being able/savvy enough to utilize them well
Consider how much cheaper things might be across the board with lower fees
That money still comes from your spending with the merchant, so ultimately out of your own pocket.
But you are right, that the system is not very transparent, and merchants probably seldom give people the full discount of the costs saved when they use non-credit card payments.
Most sadly don't give a discount for not using a credit card. I've only seen my local bagel place do that. Other places say they will charge a credit card transaction fee even if you use a debit card (which still has costs for the merchant but not as much as credit cards)
You can indirectly see some of this happening though: lots of places with lower margins (ie cheaper prices) won't accept American Express, but might accepts Visa and Mastercard. That's exactly because of the difference in fees.
If you go shop at merchant A that accepts American Express, you pay a higher price no matter how you pay. But if you have a non-American Express means of payment, you can shop at merchant B, which has lower prices overall (no matter how you pay). The economic effect is similar to directly passing on the fees transparently.
> It might be a very European view to the problem but: Why does the American government does even tolerate this credit card garbage business in the first place ?
Credit cards are credit cards, even in Europe. It's just that banks issue debit cards, rather than credit cards and I think that the point. You're financial business in much of the EU is between you and your bank, not some third party credit card company. The debit cards rides on top of the networks built by VISA and MasterCard (and others) for the credit card industry, but the actual financials are between you and your bank. The bank doesn't want you to owe the credit card companies money, they want you to owe them money, but that's normally done using a loan or allow overdraft of your account.
I really think the difference is in the banks and their involvement. Now I'm not suggestions that EU banks are awesome and cuddly entities, but they are more regulated and easily replaceable within many EU country. E.g. switching banks is really not a problem it takes a few days and you don't have to do anything.
> And aren't credit card companies separated from the bank everywhere?
Do you mean in Europe? Because that is not the case in the US and India. While there are credit card companies, most banks issue credit cards themselves.
Credit card use varies substantially amongst European countries. In countries such as Norway, Switzerland, Finland, and the UK, more than 60% of the adult population has a credit card. And it's more than 55% in Germany, Austria, Spain, and Italy[1]
Cash-back credit cards are rare in the UK and Europe not because of bans, but simply because of the interchange fee caps which don't leave enough margin for card companies to offer them.
> "Credit Card payments spread over several months are discouraged or simply banned"
The fees are so heavily restricted EU wide that cashbacks are generally infeasible even where they are legal (I hadn't know they were banned in some countries) (e.g. I have card with a effective 0.2% cashback (in gift cards), it used to be 1-2% back in 2014).
Credit card debt driving families to suicide is super exaggerated. America makes it relatively easy to get rid of credit card debt through bankruptcy. And even after bankruptcy it's possible to get credit cards again after a few years. And after seven years it's completely off your credit report.
As is the notion that it's mostly medical. That was a very unscrupulous "scientist"--what the study actually found was that the majority of bankruptcies included at least one recent medical bill. Of course that nuance didn't get into the popular press very well.
A while back I saw an analysis that showed 5% of bankruptcies were actually medical--and of those half were retirees who were overspending and the medical debt was simply the straw that broke the camel's back.
That's a misunderstanding of the antecedents to death by suicide. We know (from the NCISH work in the UK) that financial distress is a significant factor for many people who die by suicide.
People who attempt suicide may be less able to see the situation with calm rationality.
An economy needs money to be created to ensure full employment. If that money is created as loans to businesses it will result in investment; to the government, in lower taxes; to homeowners, in house price bubbles, but if it is created as consumer credit it will result directly in consumption, which has the greatest social benefit since it is the purpose of an economy to enable consumption.
> EU banks also have many fees... To get a contactless debit card - there is a fee. Use your contactless debit card and pay a 1% fee on every purchase. Use your debit card in another EU country and get a 5% foreign transaction fee added on top. There is no checking account interest paid to you. You need to have a minimum balance. etc. Absolutely terrible service.
> credit cards offer credit. Essentially quick loans upto a limit with zero collateral
You say this like it is an unequivocal good, but I don't think it necessarily is. The world functioned before it was common to have instance frictionless access to a no-collateral high-rate loan.
Also, may I remind you these are for-profit loans, and the very article we're commenting under is about how they are disproportionately used to shake down poorer people.
I'm sure you can twist numbers in either way to say credit cards are net good or net bad for poor people, but it's not unquestionably good at the very least.
> Remember, nobody forces you to use credit cards.
Except two factors realistically do encourage you to. Merchants generally charge fixed prices regardless of whether you pay with credit/debit/cash. That price includes their expected credit card fee overhead, so because everyone else pays with a credit card, the price is higher. You pay that higher price whether you use a card or not, and only get the points/miles/cash back/whatever if you also use a credit card.
Secondly, credit scores force me to use a credit card. For some reason, private companies control my credit score, and my salary, savings, etc have no bearing on it.
Originally, I refused to use credit cards since I find them an unethical tool to transfer money from the poor to the rich, and so I had no credit score. When I went to rent an apartment, the landlord checked my credit score, and then could legally turn me away for not having one. Jobs I applied for checked my credit score, and could legally reject me.
I feel like the private credit agencies, and how widely credit scores are used, has in fact forced me to use a credit card, or else run the risk of each landlord running a credit check and then turning me away.
> You say this like it is an unequivocal good, but I don't think it necessarily is. The world functioned before it was common to have instance frictionless access to a no-collateral high-rate loan.
The world also functioned before we had fractional reserve banking, but somewhere along the way we realized it's better to have it than not. It doesn't have to be an unequivocal good for it to be preferable, on balance, to living without.
It's hard to do an apples to apples comparison, but there are countries where there aren't credit cards like in the US, and they are poorer for it. Giving that a proper examination would require a far larger comment box than is here.
You can choose to opt out of the system. It requires a lot of work (and poverty) but the underground economy doesn't run credit checks.
> If the govt. banned credit cards, you will then ask why poor people can't get credit.
Or alternatively, poor people would get their credit more from alternative providers. Like payday loans or pawnshops, or even loan sharks.
Those alternative sources of credit have exactly the same problem with shady collectors. The article alludes to that, but decides to focus on credit card debt.
The article also implies that perhaps regulation that encourages banks to offload credit card debt from their balance sheet might be to blame. If you instead had regulations that encouraged banks to keep credit cards on their balance sheets, and/or to make it so that debt collection agencies have to keep mentioning the co-branded sponsors (like Apple and Amazon etc), then collectors might have more of an incentive to be less shady to protect the reputation of established brands.
Reputation of established brands is very, very valuable, and does not require a lot of paperwork or bureaucracy to self-enforce. So that might actually be a better fix than enshrining yet more 'customer rights' in law, that only the literate classes who know how to navigate bureaucracy can actually enjoy.
In any case, you can just print more money, if people in the economy aren't spending enough. (In more formal terms: the central bank can control nominal gross domestic products.)
Yes, but instead of consumption, that alternative money would be biased towards investment or even less productive activities, such as house price speculation. Consumer credit creates money where it has the greatest benefit.
> [...] that alternative money would be biased towards investment or even less productive activities, such as house price speculation.
How is that supposed to work? When the central bank injects money into the economy, they don't earmark it to be only spend in specific ways.
Just to forestall one pseudo-explanation: yes, a central bank usually injects money into the economy by buying government bonds. However (a) they buy the bonds at market prices and (b) the whole process is very well known and announced in advance, so market participants can and will anticipate what is happening. Money in the economy does not act on 'hydraulic' principles where it has an effect first on where it enters the economy and then slowly works its way through.
As a hypothetical: assume that the US Fed credibly announces today in 2023 that in 2030 they are going to keep printing money until American Dollar and the Japanese Yen are at par. (At the moment, 1 USD buys about 147 Yen.)
You can bet your hat that prices in the US would react long before 2030 has arrived, and thus long before any of that new money had been printed and had any chance to slowly work its way through the economy. Nothing special would happen on 2030-01-01 when the money-printing starts, because everything would have long been priced in already for years.
The economy in general, and monetary policy specifically, is all about expectations and anticipation.
I guess the idea that directly giving out money to consumers is more beneficial to the economy (e.g. if the government just gives a $1000 check to everyone making under 100k) they are more likely to just spend it on goods and services.
If the central bank printed an equivalent amount per capita, more of it would be invested (into both productive and unproductive assets). On the other hand that wouldn't increase consumer good inflation as much.
First, if you just hand money to individuals, it's very hard to remove that money from the economy later. If the central bank injects money by buying an asset, like a government bond, they can just sell it later to (approximately) remove the same amount of money as they previously injected.
> If the central bank printed an equivalent amount per capita, more of it would be invested (into both productive and unproductive assets).
What makes you think so?
Btw, 'money' doesn't really get invested, at least not on the level of the whole economy. If someone invests money by eg buying stock, that same amount of money is now in the seller's hand.
> On the other hand that wouldn't increase consumer good inflation as much.
And if you have an inflation target, you just print more money, until you hit it.
> First, if you just hand money to individuals, it's very hard to remove that money from the economy later
I'm not really arguing that that would be a better option (outside of exceptional circumstances) though.
> What makes you think so?
Because lower income households generally have low saving rates.
> Btw, 'money' doesn't really get invested, at least not on the level of the whole economy. If someone invests money by eg buying stock, that same amount of money is now in the seller's hand.
Which drives up the stock price a bit which makes it cheaper for the company to pay its workers, allows them to issue more stock/ borrow more/acquire other companies/etc.
> And if you have an inflation target, you just print more money, until you hit it.
You can't control where that money goes to though. So you are not unlikely to end up with bubbles in specific sectors while overall CPI remains low.
Bubbles don't really exist as a meaningful empiric concept. Especially not when you have a robust short selling system so that speculators can pop 'bubbles'.
Ok, higher inflation in certain sectors. e.g. "free" money resulted in housing prices growing at a much faster pace than goods and services for an extended period of time (something similar also applies to education in the US for instance)
> short selling system so that speculators can pop 'bubbles'.
Like in real estate? I mean technically, yeah it's not even really bubble in most places (obviously not China for instance). But I'm pretty sure you understand what I'm trying to say (or should, anyway)
The Federal Reserve already overprints, that’s one reasonwhy the USD and almost every other major currency is currently struggling. Printing more money during high inflation only worsens the problems.
Maybe. But in that case, adding more consumer spending via consumer credit would be a negative, not a positive?
(Only money that's actually being actively spent makes a difference. If the Fed prints oodles of money but buries it in their backyard, it would have no impact on inflation.)
> adding more consumer spending via consumer credit would be a negative, not a positive?
In a way yeah. I mean you increase demand for goods/services without an equivalent increase in productivity you just end up with higher prices (of course the idea is that "economic" stimulus still tends to increase productivity somewhat, just by a lower % than the increase in money supply. That generally seems to be fair).
Absolutely. I am not advocating for consumer credit, in fact I find the current system immoral. I am saying that injecting Monopoly money into the economy is part of what’s gotten us into this mess.
Why have the money taken out of my bank account for a purchase made today when I can pay it without penalty 60 days later and let the money grow in my brokerage account.
Along with the usual answers like cash bank/points/consumer protection, it also decouples spending from "pay day".
Instead of going to the bank in person, talking a banker, asking for a loan, working out a payback schedule, and then filling out the paperwork for that, just swipe your credit card.
I don’t know the answer to your questions. But I do know this. People generally are weary of using their debit cards for transactions because of the security and the direct access to bank accounts. We don’t have chip pin. And if a fraudulent credit card transaction appears there is generally a lot of consumer power to get that removed, after some time. But a fraudulent or simply inaccurate debit transaction happens to you can lose a lot more. And overdraft fees can cost hundreds of dollars in a bad situation.
> Why does the American government does even tolerate this credit card garbage business in the first place ?
Why should the government be involved in tolerating or not tolerating this? Credit cards are perfectly legal, ie tolerated by the government, in most of Europe, too.
The real question is: why do customers and merchants tolerate credit cards?
> So Why ? Why sponsor a system that fuck up entire families and push vulnerable people to suicide by giving them a way to pay things they can not afford in the first place ?
Debt in general, and buying things on debt in particular, ain't unheard of in Europe either. Debt collection agencies with shady practices exist in European countries, too.
> Why tolerate an entire industry of debt management that put people to their knees and bring literally Zero value to the real economy?
Who says it brings zero value? Have a look at why customers and merchants tolerate this industry. It's more complicated than 'banks are evil, and customers and merchants are idiots'. (They might very well be, but for your explanation to work, European banks would need to be less evil, and European customers and merchants need to be less stupid.)
> In the 60s, indeed, holding a debt record to every card holder was probably the only way to get a non physical payment system to work in the first place.
I don't think that's the case. And even if it was, your explanation doesn't explain the popularity of revolving credit, instead of just paying off everything every month.
Payment by 'Eurocheque' typically involved short term debt with the merchant as well, but I don't think it had the same 'bad' influence as credit cards had.
Similarly, I don't think checks in the US cause the same issues that you are bemoaning here as credit cards do. But checks also work on something that works exactly like (short term) debt.
> A cashless payment system does not need debt.
Debt might not strictly speaking be necessary. But it doesn't by itself seem to cause the problems you are complaining about.
You're mostly correct but I should point out one thing that credit cards do that debit cards don't really do in America: fraud protection. Credit card companies spend a lot of money protecting their customers from card number theft (which is rampant in all parts of the world)
> Credit card companies spend a lot of money protecting their customers from card number theft (which is rampant in all parts of the world)
I only bite half to this argument.
If they really wanted to fight against credit card number theft, they would:
- Enforce pin payment everywhere around the world
- Ban magnetic strip payment once for all
- Enforce two factor authentication system for anything related to online payment.
They do not. Why ?
Because the fraud "real" cost is mainly thrown in the wild on the merchant that have to deal with their goods being sent and their payment being reverted.
It is a liability issue.
I am pretty sure that with a little law that, lets say, enforce Banks to reimburse their customers under 24h00 for a small fee, lets say 10$, in case of fraudulent transaction: This entire system of scam would fade away pretty quickly.
That might be true (I don't know), but then we are left with another mystery: why do credit card companies spend more effort combating fraud than debit card companies do?
(Also keep in mind that it's often the same companies that do debit and credit cards. For example, I have debit cards in the Mastercard and Visa networks, but no credit cards. I assume most of the fraud prevention efforts benefit my debit cards as well.
Also that relying on a bunch of numbers alone is pretty sketchy. But I am choosing to interpret fraud more widely, than just card number theft. I am pretty sure card number theft is pretty low(er) in parts of the world where people pay with chip-and-pin, and don't use numbered cards.)
Not all countries apply this protection to their credit cards, even if they are issued from visa/master card/Amex. For example, we knew if a Chinese restaurant in Bellevue WA would target Chinese visitors using ICBC AmEx cards because ICBC (a big bank in China) puts the onus on the consumer to prove they didn’t make the charge rather than in the business making the charge. American credit card issuers would never do that and just let you make the charge back.
Debit cards in the Netherlands at least don't have a number that can solely be used for payments. You need the physical card (with a pin code which isn't written on the card but memorised), or a virtual card like Apple Pay coupled to that card.
It seems that fraud protection is rather something that is necessary because fraud is so easy.
>they will use their substantial experience in dealing with people in poor economic circumstances to target the dates and times of day when benefits payments or paychecks have posted to your account. They’ll surge collection attempts at 3 AM on the 1st of the month, learn the differences between various banks as to when Social Security payments post, etc.
In an article full of eyebrow-raising statements this hits the hardest. Taking people's social security or welfare payments so that they might not eat is just so dirty
He states that they typically won't sue you for debts of just a few hundred dollars, but if it's over $1000, then they're more likely to sue you in order to be able to garnish your wages and bank accounts, and/or file liens against your property.
So, "maxing out all your credit cards" it depends on just how much that maxxing would be.
> This effectively makes paying consumer debts basically optional in the United States, contingent on one being sufficiently organized and informed. That is likely a surprising result to many people. Is the financial industry unaware of this? Oh no. Issuing consumer debt is an enormously profitable business. The vast majority of consumers, including those with the socioeconomic wherewithal to walk away from their debts, feel themselves morally bound and pay as agreed.
They will likely appear on your credit report and will stay in there for 7 years. So yeah, prolly, if you're not planning on using your credit for 7 years.
This happened to me many years ago. In the wake of the '08 financial crisis, I'd lost my job abruptly and decided to go travelling.
I'd accumulated a balance that was fairly substantial for me at the time (on the order of $10-15k, IIRC) and had been struggling to make the payments. I'd probably been 2-3 months behind on multiple occasions over the course of a year or so when a letter appeared that essentially said "we don't like you and we're going to close your account and pass your debt to a collection agency. However, if you pay off a portion of your balance in 4 monthly payments, and don't miss any of those payment dates, we'll wipe the rest."
I don't recall exactly what the discount was, but it was very substantial. In total I only had to pay something like 30-40% of the balance that I owed, so it was a very good deal. I'm not normally one to skip out on my debts but this was a huge relief to have a chance to be free of that debt: I pulled a lot of strings to make those payments on time!
True to their word, they wiped my entire balance and closed my account, and I never heard from them again (nor any collection agencies).