> the average person is using

The "average person" is told from birth to consume as many things and experiences as possible as it if was the only thing that could give their life a meaning. The entire system is based on growth and consumption, I have a hard time blaming "the average person"

Do you also think that way about buying a house with a mortgage (credit)? I don't.

A mortgage isn't used to make more money. It's used so people can own a house after saving for a few years, rather than waiting until they've saved for a few decades.

> Theoretically, credit should be used for one thing: to make more money.

I disagree.

You use credit to buy a car or buy a house when you don't have the cash to buy them up-front.

It's not so you can use them to make money, it's so you can use them to enjoy life.

> At some point, you run out of hours available and the house of cards collapses.

Only if you go too far. The point is to buy things knowing what they'll cost monthly and for how long, and to budget those as part of your monthly expenses. As long as you can always handle those, you will never run out of hours available and it's not a house of cards. Nothing collapses. You pay off your car; you pay off your mortgage.

You seem to be treating this as something black-and-white when it's not. It's an incredibly useful tool when used with budgeting. Not "to make more money" but to have a better life for you and your family for when it matters the most. Nobody wants to wait until the kids have graduated from college to be able to buy their first house.

And even with credit cards -- yes you generally want to be paying them off in full monthly. But if you want to take a vacation a couple months before you could otherwise fully pay for it, it's really nice to have that convenience too. Not to mention covering some expenses for a few months if you lose your job. They're a tool to be used responsibly.

For a lot of folks, credit is the only way they're surviving on something close to minimum wage. Or credit was the only "safety net" they had during a rough time. Almost none of these people have the kind of collateral needed to use credit to truly transform their lives, and the government assistance for that is seriously lacking in the US (SBA loans are terrible, and you need enough money to cover your own salary until your business gets up and running).

Not sure what you mean by the “average person” here but the biggest kinds of debt are mortgages ($12T) and cc debt, student loans, and car loans (roughly 4T total).

Is your position that taking debt to buy a house is bad unless you can sell it for a profit? Is working for the mortgage lender to accomplish that not worth it?

You can avoid it by renting, but then you’re just working for the landlord, so there’s no avoiding it.

I tried using one of these offering a 0% intro APR to finance an upgrade to the boat I eventually moved into (saving me 10s of thousands in rent.) They wouldn't let me do it despite having an upper 700s credit score.

It's not clear to me how they pick people to lend to.

Only the bourgeoisie can be trusted to handle credit responsibly.

The proletariat is too illiterate and short-term-focused to be trusted with it.

> Theoretically, credit should be used

There are at least as many ways that this can be finished accurately (for some theory) as there are theories of what should guide human behavior, generally. But this one:

> to make more money.

Is really more apt to theories of appropriate behavior for arms-length business organizations whose only shared interest among their owners is profits than the common ones for individual people.

One flaw with this reasoning is that ignores the time value of money. A dollar today is worth more than a dollar a hundred years from now, if only because we’ll all be dead a hundred years from now. From that perspective and with favorable terms it can make sense to sell the future to buy the present, if someone is willing to take that trade.

People living paycheck to paycheck need (in your "franchise" language) food and basic clothing as opex for their human capital, and possibly even entertainment, something that is provided to our troops. Trust me the military would not allow for leisure time if they did not think it had a purpose. Eating enough food and wearing a shirt without holes in it does let people make more at work.

> Theoretically, credit should be used for one thing: to make more money. (not less)

Credit moves money across time. That’s it. (Analogous to paying a shipper to move stuff across space.)

Not all consumptive debt is bad.(And not all consumptive loans are wealth destroying. I opted to borrow when I bought my car because the rate was so much lower than what I figured I could earn with the money.) And not all cash-flow positive wealth is good.

We should be more scrutinising about how debt is used. But especially for folks with volatile incomes, accumulating debt for consumption is fine as long as it doesn’t snowball.

No, an average person uses it to improve liquidity atop overall solid fundamentals. Literally hundreds of million people worldwide do it with no adverse effects and improved quality of life. Irresponsible people are relatively a minority (although they tend to make the news). And aversion to financing is in itself a poverty marker more often than not.

> the average person is using it to delay having to work that hour at all, in exchange for having to work an hour and six minutes sometime later.

As long as inflation is higher than the interest rate, it means having to work less than an hour in total.

(But it's unsustainable in the long run ...)

Buy now pay later at 0% is what these programs offer which does not align with what you are saying at all.

Used properly these provide liquidity by spacing out payments.

Certainly there are economic concerns about not being able to afford groceries today but liquidity (especially free liquidity) isn't fundamentally worthless.

sometimes you make money in lumps

debt allows people smooth that out and lending companies take a fee for that service

nothing evil or wrong about it

In some states, your FICO score is used to determine how much your electric utility charges you. Or whether you can be permitted to rent an apartment.

Sample: https://www.wsj.com/articles/SB109469015834513166?gaa_at=eaf...

Credit cards however, can be used to get free stuff from rewards.

Credit loans or payment plans can also be used to get a higher credit score, making the first item easier.

Conversely to your example of credit making cash, Cash can make you money through investing, so Credit can also be used to keep higher amounts of cash on hand when purchases are made. , e.g., buying a car on credit and using the car money to invest. But we're saying the same thing there.

I like to think of it as "debt productivity" - for every $1 of debt, the result of utilizing that should be more that $1 + interest.

Consumer debt, obviously, almost never follows that logic.

Since no one has done so yet, I'll link to (without necessarily endorsing) patio11's defense of BNPLs: https://www.bitsaboutmoney.com/archive/buy-now-pay-later/

> It'd have been nice had they taught me this in school.

Yeah, even at a basic level, it should be made clear that cars depreciate and real estate, by and large, appreciates in value.

One of those is "good money" and the other is "bad money". Kids should learn coming out of school to be able to distinguish which of the two they are throwing "good money" at.

I think that's a bit disingenuous. It's not always delaying work. There's only so much time and there are some people who cannot afford to live with the time in the day, the skillset they have, and the market conditions (both income and expenses). Your tone and word choice shows you don't understand the problem at all.

If somebody can BNPL or otherwise credit lifesaving medicine (such as the many people in the USA who die from inability to afford healthcare), that's not play money because they don't want to work.

You are conflating what actions would maximize the long term returns to the individual with the status quo which is that credit increases liquidity of the average family, who has most of their wealth tied up in home equity.

I'm really sick of this sort of look down your nose at a huge fraction of consumers type behavior. It's the same sort of stupidity that underpins the famous "surely everyone else is wrong" behavior that is exemplified by principal skinner[1].

I eat garbage by the standards of anyone who gives a crap about food and you don't see me going around looking down on everyone for wasting resources on fancy food ingredients and fancy cookware and whatnot. At the end of the day these unnecessary things bring enough perceived benefit to people's lives that they seem worth it, whether that's you overpriced LeDouchebag brand enameled dutch oven or a financing service for consumer garbage doesn't really matter. It's all a "needless" expenditure at the end of the day that people find worth it.

I've never used these services and probably never will, nor am I saying the prevalence of these things is optimal at scale, it's probably not, but I'm not gonna sit there and act like 1 in N consumers, probably hundreds of millions of people, is wrong or ignorant for using them or that I know better for not.

-shitposted from my 8yo phone while driving my $500 car through traffic on bald tires

[1] https://knowyourmeme.com/memes/am-i-so-out-of-touch

And this has nothing to do with buy now pay later since you aren’t charged interest

Are you familiar with the boots theory of socioeconomic unfairness?

You forget that you don’t pay taxes on debt.

This is so wildly qrong I dont know how to start. Im assuming this person is not in America, where a lot of the population (unfortunately) uses these practices to buy things that are needed/non-essential) its a shell game the creditors were willing to pay. But now its a lot so its going to affect credit (which is should have to start).

the goal is to die before you run out of hours

OK, we'll tell the average worker who can't afford a house or a car by paying cash not to responsibly use a mortgage or a car loan, because some person on the internet said so.

And yes, I'm aware cars are depreciating assets, so spare me the lecture on financing one. I don't currently have a car loan.

> the average person

I’m pretty sure the median American does NOT carry a monthly CC balance. They pay it off in full every month.

But it’s very close to 50%. And may swing one side or the other depending on how fubar the economy is at that moment in time.

So what you said is true for roughly half of Americans. But not true at all for the other ~half.

I think.

>Theoretically, credit should be used for one thing: to make more money. (not less)

This is prima fascia false. Credit, especially artificially low interest rate credit like this, can be used for a ton of reasons, including 'beating inflation.'

I bring this up because so many diligent savers in 2019/2020 got screwed by waiting to buy big tickets items.

This is all true if you have enough for the basics and are looking above the minimum survival costs.

Just to make the money you are making now, you need some stuff, be it a phone or a car, home AC, oven or even a washing machine at home (you can't go to work hungry in dirty clothes).

If you don't have the money to pay with cash, you'll be buying that oven/stove with whatever delayed/monthly payment option is available.

Yes, if you're buying franchises you can do the "make more money" calculations, but if your kids are going to be hungry soon, you often have no choice.

For the average consumer, debt is selling its future self as slave.

This is what happens when interest rates are artificially suppressed. "Buy-now-pay-later" would not exist if the market were able to properly price the time value of money and wasn't backstopped by the Fed and nil reserve requirements.

I think my understanding has come to the fact that loans and interest can smooth out your financial situation: When I was single especially I had a lot of savings building, I was making interest and making money. Then when I had a kid, I end up paying that interest back, because expenses for a kid are way above what I can healthily operate in this economy, and I needed more financial products to cover that. But that's also not forever: As soon as a kid's in school and you aren't sending an entire paycheck a month to the daycare, you can establish a upward financial pattern again.

It'd be nice if kids were an affordable choice for anyone expect Elon Musk, but you know, here we are. \o/

I'm currently living off of investment gains from high interest consumer loans.

When I was in my 20s it would take me 20 hours work to earn 100 units

15 years later it takes 3 hours work to earn the same amount

If I borrow 100 units in my 20s at 4%, it cost 4 units per year

I save 20 hours work, and it costs me 4 units a year. That's 48 minutes work in year one, reducing to 8 minute after 15 years. Overall it costs an average 20 minutes a year for 15 years, or 5 hours of work, then I repay the capital which is 3 hours.

I've spent 8 hours of work rather than 20 hours.

I like to occasionally use BNPL to spread out big purchases for things even if I can already afford it.

I bought a boat on credit. It was the dumbest financial thing I could ever do. It was the best thing spiritually/emotionally I ever did. All of those weekends/vacations boat camping with my kids when they were young. All those times going out after work. So many experiences I would not have gotten to enjoy if I waited until I was 60 to buy in a smart way.

There is such a thing as opportunity cost. Putting dinner on a credit card is dumb. Putting a dinner on credit that ends up being a first date creating a memory and connection with your future spouse is life making. Or dinner with grandparents and kids that might not be around long.

You have completely ignored opportunity cost in your factoring. And it is probably the most important 'human' factor and is just as tied to your 'time' argument. We have 60 some rotations around a star, and stages in life during that time. That needs to go into your 'optimization' as well.

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