[phlo]

> The country runs on cheap debt. Everything from houses, education, cars all the way to TVs and dresses is financed with long-term payments and low single digit interest rates.

Can you point to a few examples of TVs or dresses being financed in the low single digits? I'm genuinely curious -- as an outsider, my impression of US credit was always one of a system that charged predatory interest. That impression is mostly based on seeing credit cards advertised at 15-25% APR, and hearing stories of student loans with interest rates that approached the double digits (for debt that's not dis-chargeable in bankruptcy, no less).

My point of reference are Switzerland and Germany, which have legal caps on interest rates around 10-13%. Credit agreements with higher interest rates are nullified, voiding all interest claims. As a result, the growing rate for unsecured debt is somewhere in the 8-10% region. (And, of course, significantly lower for secured debt, like mortgages or car leases.)

[naturalauction]

This exists in the EU and Switzerland too, look at Klarna. They take 3% of a transaction from the merchant (depends on the country) and charge no interest fees at all for the end user. Even a financially responsible buyer might find it worth paying off later since there is no interest.

[phlo]

Oh, I have no doubt that there are situations where it may make sense to buy things on credit. Houses and cars can often be financed at good conditions. I've yet to see an example where this applies to small purchases.

Klarna offers a variety of payment methods. The 30-day factoring looks fine (3% charged to the merchant, no interest to buyers). But as far as I can tell, any financing they offer beyond 30 days comes with significant interest. Their product page for Ratenkauf [1] says "Es fallen Zinsen an." ("Interest is charged"). When I look at their demo store [2], they indicate a 10.43% APR for a €400 purchase paid over 12 months. This, of course, falls on the right side of the law and has a pretty small risk of ruining people -- still, I don't think there are many scenarios where you'll end up better off after paying 10% interest on anything.

[1] https://www.klarna.com/de/verkaeufer/produkte/ratenkauf/ [2] https://www.klarna.com/demo/de/de-DE/kp/p-sunglasses-de/. You'll have to add the sunglasses to your cart and proceed to checkout.

[xwdv]

Certainly. There’s many cards that provide promotional 0% interest rates for 12 months. The idea is every 12 months you sign up for one of these cards and you can make minimum payments with no interest, when the card is reaching the end of its promotional period you just pay it off in full and don’t use it anymore unless there’s good rewards.

[phlo]

Ah. I hadn't considered credit card churning. Thanks!

(I do have some reservations -- I'm guessing that only a small minority of cardholders attempt to churn their balance from card to card or pay it off before the end of the promotional period. 12-month lines of credit don't come for free, and if the expected average payoff wasn't worth it, credit card companies would probably stop running these promotions.)

[xwdv]

It is 100% free money. The catch is you will be charged all the interest in some cases if you reach the end of the promotional period and haven’t paid off the card in full, or something like that.