Reminder to all commenters that Europe is not a single homogeneous country and somewhat diverse in various things, including payments and finance. Credit cards are definitely a thing in many European countries.
In my corner of the world, credit cards were for buying stuff on the internet and travelling outside the EU. Now the net has evelved enough to accept our normal means of payment. I always feel insecure when using a credit card.
As a US-ian I feel exactly that way when using a debit card.
A credit card, if misused, can run up your balance and then you dispute, and don't pay anything until it's resolved. A debit card, if misused, can drain your account and leave you penniless until it's resolved.
I always find it funny that americans think the button to oppose a payement doesn't exists on my banking app because I have a debit card and not a credit card.
> the lag time between hitting the button and getting your money back can be weeks.
Nope, it's as soon as the bank is aware. In your rush to correct me, you failed to understand that there are simply better customers protection here which make a product such as a credit card mostly useless.
Pretty sure that debit chargebacks lead to an instant credit (by regulation).
I'm almost tempted to test it right now but I am pretty sure I did this once and it took under 1 day
Ok now I asked a chatbot for how this is regulated. The answer was wrong as expected but it happened to mention the applicable regulation which can be looked up at gesezte-im-internet.de
It's mostly about who possesses the money. With debit, the money is transferred. With credit, the money is scheduled for transfer, subject to my approval.
This has basically nothing to do with it. A bank deposit is a liability of the bank, and possession is not a useful lens here.
What matters are the legal and contractual rights and obligations you have against the card issuer. In the US, these are historically different for credit cards (Fed Regulation Z) and debit cards (Regulation E), but since it's now effectively the same two schemes running it all and imposing their additional liability protections (largely motivated by considerations of brand perception, which would suffer if the same logo sometimes confers weaker protections).
The main practical difference nowadays is that in the case of debit cards, you're out your own money for a few days, while with credit cards, the only thing that temporarily suffers is your open-to-buy/line of credit.
> The main practical difference nowadays is that in the case of debit cards, you're out your own money for a few days, while with credit cards, the only thing that temporarily suffers is your open-to-buy/line of credit
Right, and this is GGP's main point
The risk to a debit card user in the US is higher because the money you need to pay your rent or mortgage may temporarily disappear due to fraud, and may take longer to resolve than your deadline with your landlord. When using a credit card, that risk is not on you.
The risk isn't bank transfers to your bank for your mortgage. The risk is card skimmers at a gas station or whatever. The theft isn't when you pay your rent, the theft is something preventing you from paying your rent, due to some totally unrelated prior transaction.
I think the risk is higher in the US compared to Europe because Europe was way faster to roll out chip stuff, whereas in the US it's still somewhat common to have to use the mag stripe.
Ah, I see. This is about the prevailing consumer protections. In the US, debit is not treated with nearly as much privilege as the EU. While credit signals debt in the EU, debit signals poor financial situation in the US, since credit enjoys protections debit does not.
The fraud detection of the card processors is effective and they will disable a debit card before that happens. I've always had the money returned automatically the few times I've had one compromised.
Same fraud systems monitor credit cards except in the American case you get at worst 1% cash back so 1% off the purchase price of everything and if something does happen, and regardless of protections fraud still occurs, it’s the bank’s money that is gone and not yours.
Separately the EU is a large collection of states and each one has its varying levels of participation and sophistication with payment processing. Apple and Google Pay are both widely used and that won’t change, and by and large there’s no good reason for Europeans to not accept American credit cards so they’ll continue to do so.
Anyone telling you differently either doesn’t have the slightest idea what they’re talking about or they’re just caught up in a pointless anti-American fervor. Even in countries such as France American Express is accepted in more places.
Accepting cards from US-controlled schemes is not an issue at all. The geopolitical issue is not having any alternative, and these US schemes being the only way to pay even in domestic transactions.
Almost nobody considered this a problem until a few years ago, but the relevant EU stakeholders got pretty rattled recently [1], and my prediction is that this particular bell can't be un-rung.
They are aware of it, but there is so much US dependency that its very difficult to reverse course let along unto what has been done. The EU's age verification app will only work on Google or Apple controlled phones. A lot of payments are done on phones. A lot of other things depend on phones too - my local bus company (in the UK) requires its mobile app for some types of tickets. I have had to use phone based ID verification already.
Well it doesn’t matter whether it’s un-rung. Europe can develop payments tech, folks visiting continue to operate like they normally do. The US is increasingly accepting payment mechanisms and cards from other providers too. Continued competition is good here all else being close to equal.
Each nation or economic block or alliance or whatever will have to decide which kinds of products and services they’ll want to protect or build in-house. While the EU lambasted the United States when it began taking measures to do what the EU is doing now, it’s encouraging to see the EU change course and start to protect its industries, though who knows how effective that will be. China is looming large over the EU, Germany in particular.
That's interesting argument. Here it is usual to have a daily limit on debit cards. You can not spend more money than that, so a thief can not drain your account. Also many banks give you multiple accounts (you can transfer between them instantly). The debit card is connected to only one of them, so if you keep part of your money on the other account, that couldn't be touched even if the card payment limit has technical issues.
Multiple accounts (both debit and credit) are normal in the US as well, but I have never heard of a debit account here that has a daily spending limit.
Sounds like the US and Euro systems work fine within their own borders. Solutions designed for one make less sense in the context of the other.
It gets interesting when the two system interacts. Friends visiting the US told me that at the POS terminal they had to choose credit card despite paying with a Visa/Mastercard debit card issued by an European bank.
By the way, here banks even have daily bank / wire transfer limit that can be changed only by a personal visit to a branch, so even if your online banking credentials are stolen, the attacker can not empty your account.
And that doesn’t always work. For example, at a Chevron petrol station in California in the middle of nowhere we tried several European credit and debit cards, and nothing worked. At the end, the guy working there helped us with some prepaid option at the counter. He didn’t believe us until he tried himself that really none of our cards worked.
But the situation is way better than 5+ years ago. Back then, almost every second purchase of ours had some problem with our cards in the US. Now, we had like one or two in more than a week.
But of course, some car rental companies still pretend that they are generous that they allow debit cards. Not just in the US.
> Friends visiting the US told me that at the POS terminal they had to choose credit card despite paying with a Visa/Mastercard debit card issued by an European bank.
The "credit" button in the US really means "use the Visa/Mastercard network and don't ask me for a PIN", as opposed to "feel free to ask me for my PIN and route the transaction over one of a dozen or so US domestic debit networks". The question doesn't even make sense for non-US debit cards.
Cards and accounts often allow the owner to set those limits for e.g. withdrawals or transfers etc. There's often a separate limit for home country and abroad. They're there to limit damage that might be caused by user error or stolen cards or something like that. (Or just to provide peace of mind.)
Wells Fargo for the longest time had a daily spending limit on its Check Cards and a daily withdrawal limit. If you had a Debit (not check card) your “spending limit” was your withdrawal limit.
If you tried to make a purchase above the spending limit it was a hassle. I am old tho.
Yep, that's why I always used CC and pay in full(until it become much more logical to pay the minimum and accumulate interest that is lower than the inflation).
It's much better to be indebted when buying something simply because if something goes wrong its much easier to convince someone to take their thing back when you haven't paid yet than trying to convince someone to send your money back and accept a return.
I've never seen a CC with an APR below 20%, which inflation has never hit in the US. But the logic is sound as long as your income is tracking inflation.
In US, maybe. In Turkey before the general election in 2023 the rates were kept so ridiculously low that you could have taken cash out of your CC and put the money in the savings account in the same bank and make money out of the arbitrage. Everyone did it, having good credit meant license to print free money, IIRC it was %2-%3 per month tax free net profit on the credit you took on your CC limit.
Visa isn't a party to your contract with your card issuing bank. Your bank is responsible for filing a dispute, representing it properly, and (according to applicable law and/or as a good business practice for somebody that wants to retain your business) potentially reimbursing you out of pocket if a given transaction has issuing bank fraud liability.
Sure, but the fees I pay for go to Visa for, among others, combatting fraud and credit card cloning. I filled up my bank’s paperwork, I don’t know the inner details of their relationship with Visa.
Unfortunately, the reality is that rather than your card being directly misused by a "shady" company, it's more likely that most companies you transact with do not have perfect security and will suffer a data breach that may expose your payment information.
Pretty much all of the EU had Visa- and Mastercard-branded debit cards since the turn of the millennium, so one has been able to buy stuff from the net and travel abroad without use of a credit card for decades now.
As an outsider: which countries lean which way? I'm curious how things trend where and I didn't even really know that debit was used by a majority in certain places (Countries? Regions? Historical based delimiters?).
Germany is very debit-card oriented (with no interest of switching). The Netherlands seems similar. Eastern Europe and the Balkans are also mostly debit-card oriented, but people seem more open to switching to credit cards (if they can get one - especially the younger generation).
Ireland and the U.K. seem much more credit-card oriented than rest of Europe. Turkey is also very CC oriented (kinda strange - was not expecting that).
In the UK people predominantly use debit cards but credit cards are widely available. Everyone gets a debit card with any current account (i.e. non-savings account). In March this year there were 2.3 billion debit card transactions vs 400 million credit card transactions according to this:
The preferential treatment of credit cards for certain transactions influences how they're used in the UK.
Suppose in January two people Carol and Dave bought a £250 August flight to Paris from some outfit that didn't do a great job hedging their fuel prices. Carol used her credit card, Dave used his Debit card. UK law says Carol's flight was bought by her bank, after all her bank handed over the money, Carol is on the hook to pay them back but didn't directly pay. But Dave bought his ticket, the bank isn't responsible.
Today the airline fails because their fuel costs blew up. UK law says Carol should be able to get her money back from the bank because they bought this ticket and now it won't work -- this is called "Section 75". Dave may have some protections via other consumer protection rules, but he's more likely to end up losing out.
The best chance for Dave might be "Chargeback" which is a card scheme which might let Dave tell his bank that he now wishes he didn't pay for the ticket. It's not very likely to work because January is a long time ago and so the bank will probably argue that Dave should have realised earlier that he didn't want to make this transaction. Because this flight touches the EU there are a bunch of extra protections which might help, none of them is as simple as Section 75.
The Section 75 protections mean Brits who are credit-worthy tend to pay for large purchases on a [credit] card even if they intend to pay it off immediately.
For what is worth, a few years ago, I was able to chargeback a significant furniture order after the company collapsed. It is indeed at the bank's discretion and my bank didn't really advertise the process, but the people in branch pointed me to the right place and the process was no fuss.
So, no, you do not have the same legal protection as Section 75, but it is always worth a try.
> The Section 75 protections mean Brits who are credit-worthy tend to pay for large purchases on a [credit] card even if they intend to pay it off immediately.
And Visa and Mastercard's global zero liability provisions protect everybody with a debit card, so de facto the difference is no longer relevant.
That said, some banks are pretty bad at making use of their dispute rights with the networks. I've seen several German issuers actually refuse to file "service not provided" disputes in case of a large airline bankruptcy a few years ago. (German bankruptcy managers can be somewhat intimidating rhetorically, but fortunately their personal opinions have no bearing on banking/payment laws.)
There's no reason Section 75 protections couldn't be extended to debit cards, except that in the mid-1970s banks were lobbying very hard for credit cards to become more legitimised and S75 was the successful result.
The banks took on a little bit of risk and in return unlocked a free money generator.
On the contrary debit cards are revenue-neutral or even loss-making for them
It used to be like that in Germany, it changed quite a bit. My debit card now is refused more often than my master card when I’m in Germany. I do tend to stay in large cities and not in the country side though, so my perspective is not a statistic.
But it definitely changed massively during Covid. Before Covid shops refusing _any_ card where still common (again, large cities is my spectrum) and debit card were accepted vastly more often than credit card.
Italy is also super oriented on debit cards. People call them "credit card" because they don't know the difference, or even "Bancomat" which is the brand name of the most used Italian debit card network.
Italians don't really care about credit cards, they just want to pay with their "Bancomat" card.
Debit cards would still be used a lot more commonly than credit cards in Ireland. The UK is, I think, slightly different, due to a slightly unusual situation with disputes.
Some providers in the UK issue debit cards with limited interest-free overdraft and charge back features. So they are basically credit cards if you squint your eyes enough.
India has about a billion debit cards, but people mostly use them for ATM cash withdrawals, if that (banks used to give them by default during account opening, but have stopped this since UPI came into the picture). Only a single-digit percentage of people use credit cards, but they use them often and for relatively high-value transactions. The rewards game in the credit card space is slowly but surely reaching US levels, and they are associated more with stability and credit-worthiness since banks don't hand them out like candy, and India is, until recently, a debt-averse nation to revolve balances.
Mostly people use UPI, which is equivalent to debit cards given that amounts go directly from one bank to another. But UPI also supports some credit cards and lines, so there's that.
You are of course free to extrapolate your experience from a single European country to the whole continent, but it's still not a coherent argument for or against anything.
I don't think anywhere does. In general, cards in Europe don't really give significant rewards (because interchange, paid ultimately by the merchant, is capped at 0.3%, whereas in the US it can be upwards of 3% for certain high-end cards). The only reason that people who don't need the credit line use them in the US is the rewards schemes.
One should also bear in mind that the technical difference between Debit and Credit cards is quite blurry in the EU. Like, a card can officially be of the Debit kind, but have all the features of a Credit card enabled. Which is actually and typically the case.
And for example in Ukraine the situation is exactly the opposite: cards issued are typically Credit cards, but with all features of credit cards turned off which effectively makes them debit cards.
Americans use credit cards and rarely debit cards because here the terms on debit cards are so much worse (for contesting charges, etc), so debit cards never really caught on for anything more than withdrawing cash.
In the US, users of debit cards are assumed to be uncreditworthy, because debit cards in the US have such bad T&C's that poor credit score is the main reason folks use them here.
The article uses the term credit card for apparently no reason, because Visa and Mastercard also support debit cards. The EU is probably more concerned about Visa and Mastercard payment networks being under the control of American leaders.
Not everyone. We use both and mostly credit card for online payments that we pay off at the end of the month. It has a limit and it is easier deal with potential fraud vs a debit card where your own money goes. But does it matter? All my debit cards are Visa and Mastercard anyway.
And even when you have a credit card, it might act like a debit card (every payment shows as debit in your banking app, even if you really pay on the 10th of the month or something).
The problem as I see it is that you pay your credit card bill only once a month which gives you no bearing on your effective balance. This is mostly a problem for lower and middle income people who live from paycheck to paycheck.
> makes no sense to pay right away when you can pay with no interest 15 days later on average.
Why in a pray tell would you favor late payment? Why would I create myself a chore for an end of a month if I can just pop a card, pay and see the transaction in e-banking right away? If it is auto-charge by the end of month, why not charge it right away?
You are gaining absolutely nothing.
> In an inflationary fiat currency system it's always better to defer payment assuming you can manage your cashflow and you're living hand to mouth
What are you talking about here. We are talking about people paying with euros.
Say you spend €1000 per month. If you use a credit card, you can earn interest on that for an month and only need the money in your current account on the day you pay.
So at 5% annual interest that’s about €4. So yes it’s not huge, but that’s every month for your whole life and it compounds over time.
The benefit is small (it won’t make or break your finances) but real.
That’s what I mean by “inflationary fiat currency” - you are paying in something that constantly loses value. Therefore rationally, it makes sense to pay as late as possible.
In some sense everything is actually slightly cheaper if you buy it on a credit card and pay it off a month later
> Why would I create myself a chore for an end of a month
Do they not have direct debit where you live?
>If it is auto-charge by the end of month, why not charge it right away?
Because there's no way I'm going to keep anywhere close to that much money on my debit card? Because the credit card won't get randomly locked while I'm trying to pay a 40k euro hotel room bill in Asia? Or if it does, I can switch to another credit card or deal with reasonable customer service.
If you're only making small payments, of course it doesn't matter. If you're regularly spending significant amounts of money, doing so with a debit card will be a huge pain in the ass and an unnecessary risk.
Notably, the IRS refused COVID relief applications using a debit card for identity. Stupid as fuck policy considering they're all connected to the main two credit processors.
Some Europeans meaning people in Germany? Most people have debit cards from our normal banks here, credit cards are generally associated with companies like Revolut or Klarna, as they push ads for getting credit cards.
The legislation has been in the works for years now (not fully approved just yet). It’s why many US banks all are trying to get around issuers any way possible now.
I am admittedly having trouble finding where I’ve seen it brought up, but some online forums I lurk on for finance have had stories of people being denied from using specifically Visa Infinite branded credit cards. There’s also been stories of businesses not accepting Chase cards flat out, which I assume is to also curb the higher costs they incur from the premium Chase cards.
Europe has long had laws in place that have hard caps set at 0.3% and 0.2% respectively for credit or debit cards. The US has been milking this with uncapped 3.0%+ fees, which is why the credit cards there drive so much profit - at the expense of every business owner.
In the US, having debt is seen as a good thing, as long as you stay current on payments. Not having debt gives you a lower credit score than having debt, which send kind of fucked up to me.
That's a common misconception. Credit score is positively correlated with paying on time, having high available credit relative to usage, and the age of your oldest credit account.
However, using more of your cards' limit (a high debt utilization ratio) actually reduces your score.
On-time payments are only one factor in your score. Depending on the model it may only account for 20-30% of the score. Using your cards a few times a year may satisfy the criteria. You don't have to take on any debt to have a high credit score.
can 100% confirm this on a personal level, outside of mortgage I have no credit card balances (I use CC extensively but always pay the full balance) and have had 835+ score for years now.
Yes. They want you to have the mortgage and the cards, and the record of paying them on time. If you had no mortgage and never had the credit cards, your score would be much lower.
which is in fact a massive pain in the ass, because car rentals and hotels often require credit cards to make reservations (at least in my experience...)
I've heard stories like "fine, we'll take your debit card, but only if you also pay a non-reimboursable $$$ deposit in cash" for car rental. (Mostly in central/eastern Europe.)
(From what I was told, the thing in favor of a credit card is that the rental agency can put a hold on the security deposit for much longer than on a debit card: a few weeks vs a few days).
I only use CC, to earn airline points (based in Sweden). But I always pay the entire amount due at the end of the interest-free period, so I never pay interest.
I also like the fact that using a CC comes with better buyer protection than debit cards.
Rest of the world: most of us figured out how to use credit as a tool without tumbling into a spending pit. Takes a bit of discipline, sure but not impossible.
"I use debit because I can manage my finances" reads as "I don't trust myself with credit." If credit is a trap you have to avoid, that's not the flex you think it is.
It's a tool. Some people use it. Some people are scared of it.
Credit Cards improve your working capital position, interest free. Most people do not understand finance which is why debit cards are the "safer" choice.
If one is capable of managing one's finances (and paying the card off in full every month), credit cards are a useful tool. They're a problem if one can't manage one's finances.
It is interesting that both options of either not using CC entirely or using CC but paying it off by the end of the month are equivalent, but you’ve somehow reframe the second ine as some virtuous skill one have to master (I’m not just buying bread, I’m also managing my finances by repaying the value of it in full by the end of the month to avoid being charged for interest and simultaneously improving my credit score).
Business model of banks in regard to CC are preying on people not paying it all in full for various reasons.
Financially, they're not equivalent. If you buy your bread on credit, you get an interest-free loan, and benefit from the time value of the money that you otherwise would have paid immediately. As you correctly point out, this value comes from those fleeced by the arrangement. If my comment attributed any moral valence to the two options, that was unintentional.
That only works if you keep less money than your monthly spend in high interest accounts. I always have a cushion on the account linked to the card. The only benefit of credit in the US is rewards cards that transfer wealth from those with poor discipline and financial illiteracy.
If you can manage your finances then delaying all purchase payments by 30 days for 0% interest is a no brainer. And then all the other perks that come with some cards, like accruing some small percentage of your transactions as points, extended warranty protection, ability to request charge backs if necessary, etc.
And most Europeans that have a credit-card need to pay them off at the end of the month. Technically they are charge cards. Unlike a traditional credit card, a charge card does not allow you to carry a revolving balance.
> The main difference between credit cards in Europe and in the US is that poor people can't get them here.
Nah, really the main difference is that the EU caps interchange (paid ultimately by the merchant) at 0.3%, whereas it can be upwards of 3% in the US for high-end cards. Without big interchange earnings, there's little reason for issuers to push credit cards, and they're less attractive to consumers (interchange pays for 'reward' schemes).
I was denied credit card after changing jobs. I did have some student debt, but small amount on small payment and rates were low. Also had other credit card but not high limit. Nothing in negative credit history.
Did get the same card a few months later after probationary period. But yeah even without significant existing debt you can get denied in Europe.
Let's not pretend that predatory lending is not a thing in at least some EU countries as well, just because it takes other forms (installment payments, buy now pay later etc.), but as a general trend, I'd agree that it's much less common.
I have to pay it off each month unless I want the high interest rates (20%? Not sure, a direct debit clears it monthly after payday and the 1% cashback is credited each year
Credit Card in Europe is very much associated with Debt.