alt Hacker News> 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.
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> They're a tool to be used responsibly.
I used to hate to take the position that government should save people from themselves, but I've moderated a lot on it. Some people clearly cannot use credit responsibly.
> > 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.
There's no contradiction with GP here.
Financing a car or buying a house on mortgage might well save somebody money in the long term (e.g. by allowing them to take on a job to which they have to commute by car, or saving on future rent payments).
If that's the case (and that highly depends on individual circumstances), this still counts as "making more money" – via spending less money.
The real question is: How do you feel about borrowing money used to buy depreciating assets or consumables?
> You use credit to buy a car or buy a house when you don't have the cash to buy them up-front.
Still the same principle - you buy long-term asset that makes rent-equivalent money if you rented that otherwise. That is different than borrowing for immediate consumption.
Both transportation and shelter are important to earn money
You can't deny the strong ability to make money using credit or debt though.
No it's not the only way you can use it, but it's a pretty big way that a lot of people do successfully use it.
This ignores the fundamental equation
T = kM
Let’s say you finance $40,000 in auto debt over 5 years. With a low interest rate of 6% paying $6,300 in interest. That’s over 15% of the amount borrowed! Many people have lager rates over longer periods.
Now consider what would happen if you invested that $6,300 for 30 years instead of spent it on interest. You’re losing out on tens of thousands of dollars in total lifetime wealth.
When you borrow money to “enjoy life” it can quickly end up costing 2x what it would if you spent the money outright, even if you borrowed at low rates.
If you're using credit to buy a car, most people do so in order to get to and from their place of work for the majority of their driving time. In that way, using credit to buy a car still fits into their theoretical model. For example I know plenty of people who completely got rid of their cars when remote work became more common, or at the very least consolidated to smaller cars or to less cars for a family.
Similar thinking for a house. A lot of people when buying a house go into it with the assumption that it is an appreciating asset that will gain value over time. Yes there are other factors of course like wanting to live closer to schools or in the suburbs/good areas, etc. But regardless this is commonly to facilitate a life that lends itself to you continuing to be able to make money comfortably.
Regarding vacations, no financial expert recommends using a card without the intention of not paying for it. If your plan is to book the vacation on credit for anything other than the benefits of your credit card points systems you might as well not use it at all. And all recommend not using credit cards and instead an emergency fund if you lose your job.