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by mockery 3386 days ago
(I don't really agree with the simplification of debt = risk. Despite that...)

> What's risky about using a credit card to buy a kayak? If you unexpectedly lose your job or are otherwise unable to pay off the card on the schedule you expected, you'll incur significant interest on the debt and end up having to pay far more than you originally planned. Compared with saving up money and paying in cash, there are clearly additional risks incurred when using the card.

(If you had the money to pay off the card already and are just using the CC as a convenient method of payment, the risk is obviously far lower.)
1 comments
hueving 3386 days ago
>If you had the money to pay off the card already and are just using the CC as a convenient method of payment, the risk is obviously far lower

Right, but you're still taking on debt for the month and then paying it in full. What is the risk?

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mseebach 3386 days ago
As with risks, so with debts. There are large ones and small ones. Paying down a balance on a credit card every month is pretty low risk, but not as low as paying with a debit card in the first place.

Also, a credit card you're paying down monthly isn't really 'debt', isn't it usually something you do for the air miles or cashback?

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hueving 3386 days ago
>Paying down a balance on a credit card every month is pretty low risk, but not as low as paying with a debit card in the first place.

Not when you account for the stolen card scenario. When someone steals your debit card and racks up charges, it locks up real money (your bank account balance) that you can't use until it's resolved. A stolen credit card just locks up a credit-line.

However, even if you ignore that, I'm still missing what risk you see with a credit card that results in it being higher risk than a debit card. What is the risk I'm missing?

>Also, a credit card you're paying down monthly isn't really 'debt', isn't it usually something you do for the air miles or cashback?

It's very short term debt. I do it for two reasons, air miles/cashback, and for better protection when things go south. In addition to the stolen card scenario above, some credit cards (e.g. an amex I have) will provide additional protection for things like rental cars (additional insurance) or even stolen goods (refunds for electronics stolen from your vehicle).

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