I don’t get credit cards

Hi RIP friends,

I got my first real Credit Card few days ago. I didn’t own one before. Well, as I’ve explained previously, I had some sort of similar tools, like rechargeable debit cards and Hooli issued credit cards, but they’re not the same thing. I never had this sort of monthly threat “pay your bill or we’ll destroy your finances”. It feels strange.

Anyway I don’t get it. I don’t understand why it works this way. The system is broken and inefficient, I really don’t understand why. Let me explain.

“RIP, but why are you complaining and then you got a card?”

  • inefficient: credit cards are too good for smart people to be true. Too bad for dumb people. This is not a stable system. It’s based on illiteracy
  • what do they have to gain from someone like me? I just pay my bills on time and that’s it. I enjoy rewards.
  • I heard that in US there are crazy rewarding credit cards, like you can get tons of benefits for just… having money borrowed at you at 0% interest!
  • My card is the only one in Switzerland with 0 fixed costs, which could have been the only reason that makes the whole system sustainable. no costs, only benefits? Why?
  • I understand VISa/Mastercard/Americanexpress circuits get money from merchants, but that’s a robbery. It’s inefficient. Merchants have to accept this extortion silently. Inefficient.
  • Cryptocurrencies are the solution for transaction? link the TED talk about the future of money.
  • Why can’t I use directly my money (checking account) to buy stuff on the internet and on physical stores? Btw, I can do it almost everywhere in Switzerland with PF or UBS. Btw, I get nothing from doing it this way, no “points”, no “rewards”.
  • Explain why I got the card (want to close UBS, want to be able to buy stuff online, want to not have to pay a monthly fee)
  • Explain that I’m going to pay my cc bill monthly, no way I’m going to pay 9.9% interest.
  • Are they just hoping I forgot to pay my bill?

11 comments

  1. You hate cash? Well that’s not really good.. Everything that’s not cash has to be paid. Credit cards? Shops pays 1-3%. Paypal? Same. Everything you pay without paying cash has to be paid. Will you be happy if next time you go buying groceries you pay 52chf instead of 50chf? Unfortunately it will never happens because Credit Card companies made (now illegal) deal with shops that did not allow them to charge the usage of credit cards. Migros/Coop etc will never try to make you pay. Not if some sort of alliance comes or the government tell them to. Airlines doesn’t follow this “rule” and started to make you pay. Some even invented a bigger surcharge (I’ve seen 15-20chf surcharge for a 100chf ticket!).
    So CC are bad imho.

    And I don’t even start the more philosofical discussion about the fact that removing the cash from the economy is basically giving too much power to governments (They can control you and your money. Example: They can decide to istantly get a percentage of your saving from your account because there isn’t enough money. It happened in a similar way already in Italy with Poste italiane accounts.)
    Also the fact that there isn’t a swiss (or european) credit card company isn’t also a good idea for the cashless society.

    1. Oops. Disregard the part where I repeat what you said. 🙂

      The discount thing is too much of a hassle and will look bad on Migros/Coop if they do that. They dig themeselve a hole by accepting CC in the 80ies when the contract clearly said that they were not allowed to pass the cost to customers.

    2. “everything that’s not cash has to be paid”… well, cash has to be paid too! Not only in terms of “minting and printing” but in terms of physical security.

      Having to pay for a digital currency is a temporary issue, it can be fixed with uber-secure cryptocurrencies. Today they make you pay (a lot) due to a monopolistic and legacy situation.

      Governments can screw you up even with paper/metal currency. Hyperinflation? Zimbabwe Dollars? Cryptocurrencies could reduce their power.

      I’m not saying they’re production ready today, but there we should aim to go in 30-50 years in my opinion.

  2. We doe have a credit card… it sometimes makes life easier… And, we do not have a credit facility attached to it. Each month, it goes out of the current account.

    One month, I did not pay attention and went in overdraft. I got directly an email from the bank to inform me. I pay a lot more attention now!

  3. Hello Mr. RIP,
    Your view on the money is so peculiar, but I obey with you as the credit cards are really very beneficial. They provide everything first and need to pay later, similar to the post paid 🙂 . And all the perks provided by the credit cards are very attractive. I only thing to be noted is to manage all the debts of the credit card to be paid every month.

  4. Thanks for such a thought-provoking text! Next time I pay for something at a small business, I’ll think twice whether my 0.5% cashback is worth ~2% lost to the merchant (http://www.moneyland.ch/en/credit-card-payments-markups-switzerland). For instance, it certainly does not make sense to donate via credit card if you can do it differently.

    BTW, Postfinance together with Coop and other merchants are pushing for people to adopt Twint, which apparently has lower costs for the merchants. I used it several times to buy stuff at Digitec and Microspot. I think this can made work without the behemoth which bitcoin has become.

  5. I have just discovered your great blog (shame on me) and I have devoured it in just few hours. I have been a fun for years of the popular American blogs on FI (and keep reading them eagerly!), but sadly I never got a link to yours.

    My comment is not directly related to this post, but I want to share with you the fact that there are unbelievable similarities in our lives, and one huge difference.
    I explain: I am also Italian, I am also a software engineer, I live in Switzerland, I am 40ish, I am aiming at FIRE, I am saving like crazy, I am investing, I am married, my wife is working, we are not that far from FIRE etc. etc., but we do have children.
    That’s not the huge difference I was talking about, even though it is heavily related.
    The thing is that, as you know, retiring in Switzerland would require much more resources, therefore a country with more reasonable costs needs to be chosen. And I am not talking about Kenya here, but rather of Italy. The problem is that my wife has started bringing up the differences in the quality of education, in the future opportunities etc. Basically she is in love with what Switzerland offers! I see that you are both determined to retire in Italy and also planning to have kids. Don’t you share the same concerns?

    1. Thanks Reitsman for your awesome comment! Wow, we are definitely on the same page! I don’t see any “huge difference” here. Yes, kids, we plan to have one or two in the near future. About Switzerland vs Italy and quality of life the RIPs are not yet convinced. Mrs. RIP loves Switzerland and she has a preference to stay here. I’m the pushy one in the couple. We both would like to not have to work though, so if it means we can reach Italian-FI in 3 years and Swiss-FI in 10 years she gets it and she’s all in.

      Anyway, we should definitely chat a bit 🙂

  6. Honestly I get all your reservations on credit cards and I agree with them whole heartedly, but I find myself actually disagreeing with your opinion. Respectfully of course. I totally agree with you that credit cards in the hands of irresponsible people are evil and quite possibly the root of many societal issues. However for those of us responsible individuals I think they are a fantastic tool. My card rewards me point like you mentioned in the post and I pay my card off every month when the bill comes due. I’ve had a credit card since I was 16 and I have never, ever missed a payment to them. Needless to say that gives me a pretty good credit score and helps when purchasing large ticket items. I had to purchase a new vehicle last year and my 800+ credit score opened up a lower interest rate for me. I couldn’t pay cash because it was unexpected at the time when my old car died, but it was paid off within six months once the assets became available. In addition I accumulate enough points through daily life, gas, groceries, etc. to essentially pay off most of a months expenses every February because of the accumulation throughout the year. So I get that the credit card companies are evil, and in fact fully support that stance, but in the right hands they actually can be a powerful tool as well. Loved the post, thanks for the interesting read!

    1. Hi Duncan, thanks for your comment.
      I see how European and US mindset differs here. You say CC are cool because they give you a lot of benefits if you “respect the rules”. For example you were able to get a nice interest rate on a vehicle purchase thanks to your credit score (why the hell do we need to have a credit score??), that’s awesome! You know what? I never had to ask for financing a purchase! Do you really need “a nice interest rate” to afford your purchases? Isn’t it simpler to just pay things with cash?
      Plus, ok, you get benefits for paying your CC bills on time, you’re gaming them! They’re losing money thanks to you! Or… aren’t they? They charge 4x your bonuses to the merchants. Merchants have to increase their prices in order to keep their margin so you’re (we all are) paying more than needed for things.
      It’s a lose/lose situation from a mathematical point of view. It’s even worse if you don’t pay your bills and go into CC debts.
      The only good point is “convenience”. Digital payments are practical, safe and simple. Only problem is that VISA/Mastercard/AmericanExpress Mafia has to go away for something less centralized and controllable.

  7. I also ordered the same card but now I’m a bit confused. Is the 1% that they promised for purchases in Migros circuit the same 1% that you get with the Cumulus card any way, or is it on top of it? If it’s the same 1% then the card actually encourages you to buy in Coop, as there you can get whatever you get with Coop loyalty card + 0.5% cashback from the Cumulus MasterCard. 😀

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