Is there a single resource that I can read to get an undertanding of the USian "money culture"?
April 9, 2009 11:36 PM   Subscribe

Is there a single resource that I can read to get an undertanding of the USian "money culture"? As a European, I am puzzled by many things I read aroung the Internets about the way personal finance appears to be handled in the US.

(Examples: Why would anyone still be using checks in the twenty-first century? ATM fees still exist? People use credit cards to borrow money? One constantly has to worry about a magically calculated "credit score" that seems to rely an absurd criteria?)

Since I don't want to pepper AskMe with scattershot questions about this and I feel that reading plenty of disconnected detail pieces only heightens my confusion, I'm hoping that you can recommend a single resource (ideally a book) that I can read to find out how things really work, and how they came to be this way (bonus points for an explanation of what caused differences to Europe).
posted by themel to Work & Money (46 answers total) 7 users marked this as a favorite
I doubt there's a good book, actually. Since it all seems natural to us (US), the books we have that weave them all together tend to be ideological rather than reportorial.
posted by grobstein at 11:53 PM on April 9, 2009

I read this question and felt I had to reply. Finding resources on the development of the US ways of "personal" finance (We will capitalism well out of this), isn't that difficult.

First, it is a bit of a jump to suggest using cheques is related only to the Americans. Great Britain as one example still does have a tradition of utilising them, however it is a dying breed. For much of Europe and Scandinavia cheques are no longer accepted and one wouldn't even dream of wasting the time to write one.

Second, you question the idea of credit and credit scores. I assume you are based in Europe from the phrasing of your post, so let me put it simply. America is the land of credit and buying what you can pay off in time, not what you can afford to buy at the time. Also, in the USA your credit, and more to the point, the magical credit score number is an aggregate of different scoring algorithms related to one's payment history, debt to credit available, bad debt, etc..

The main point here is that magical credit score number is utilised from everything to approving a loan, renting an apartment (bad score no flat), gaining employment (bad score = not trustworthy) and much more. Hence it is very important to manage one's credit extremely carefully in the US. In essence your credit worthiness determines to a large degree what caste of society you will live in. It is quite scary to the outsider.

To answer about fees and banks. Well, I have lived in many countries and what you see is what you get. Banks wouldn't be the banks we love to hate unless they developed business models designed to pocket as much of our money as possible. Banking as a concept has been stable for a long time, but each country and/or region has found different ways of taking your cash. That simple. As each model evolves, so does the complexity and volume of fees applied.

In regards to a good book, I am sure someone will point out an expats guide to the US or something of the sort.
posted by Funmonkey1 at 12:02 AM on April 10, 2009 [3 favorites]

As a former student there, I can safely say that in the UK, it is harder to get a bank account than it is in the US. That said, checks are a very efficient way of paying someone without access to a credit card scanner or the capability of transferring money from one account to another easily.
posted by christhelongtimelurker at 12:11 AM on April 10, 2009

Most people don't write checks for basic transactions at the store anymore. But if you want to give a lot of money to another person, usually people write checks to each other though, to transfer large amounts of money.

I think checks are often used to pay bills through the mail as well. I actually pay my bills online, but the way it works is that I enter a mailing address and then my bank prints and mails a check to the person. For some billers, though, the bank will have electronic transfer information, and so the payment will be electronic. It's the same from my end, though.
posted by delmoi at 12:12 AM on April 10, 2009 [2 favorites]

For your info: forms of credit scoring (registrations of large debts / registrations of large unpaid debts which may keep people from entering into new large financial commitments) exist in Europe as well. The Netherlands and the UK definitely have them, and I would be surprised if there weren't more European examples.
posted by rjs at 12:16 AM on April 10, 2009

I don't know about a specific book that would help with this but I believe most of your questions can be answered with the idea of the "American Dream". Not sure if this common knowledge in Europe but the American Dream is typically described as a family owning a nice house (with a white picket fence), two cars in the garage, a big screen TV, etc. Somehow this has been decided to be the ideal for many people, even if they don't have the jobs to afford it.

Since so many people are in this rat race for a bigger and better American Dream, the financial institutions have grown ways to exploit it. Credit scores are important to get a good mortgage rate so you can get an even bigger house that you can't afford. Get a small house or live in a bad neighborhood and you will be looked down upon (or at least many fear that).

This too drives Americans spend above their means, so they need credit cards. There are so many credit card companies that they have to be competitive, so some offer 0% APR money transfers for set amounts of time, knowing that most won't be able to pay it back when the interest is due. ATM fees exist because banks learned they can tack on little fees here and there because we're so impatient that we need our money now (although I'm surprised that ATM fees appear not to be common in Europe).

As for checks-- I don't use them very much, except to pay my rent. My apartment company doesn't offer any other way to pay, except cash. Checks aren't used in Europe?

My guess is that with so many countries close together-- and the freedom to move between them-- banks have been forced to develop faster for electronic services, as a paper check written in France from a tourist visiting from England could too easily be fraudulent.
posted by sharkfu at 12:16 AM on April 10, 2009

ATM fees still exist?

ATM fees only went away in England.... what, last year? I remember the little posted notes on the machines...
posted by rokusan at 12:22 AM on April 10, 2009

Checks aren't used in Europe?

Europe, Latin America and Japan (limits of my experience) are all big fans of bank transfers.
posted by rokusan at 12:23 AM on April 10, 2009

How would I pay rent without a checkbook? Or when I owe a friend money, or when sending someone holiday money...

ATM fees vary from bank to bank, and depend on whether you use their ATM or some other bank's ATM (or an unaffiliated one that is in a gas station and charges $2.00 on each transaction or suchlike). I don't think they make a big deal to most people's lives; as Funmonkey1 says, banks try to make money too.

Credit score only matters because almost everyone in the US gets a mortgage on a house or financing on a car, where they pay it off over time (so that you can get to your job even if you don't start out with $10-15k disposable income). It's a metric of how well you've handled having credit in the past... which is why you don't have a credit score unless you've had credit in the past, ideally a long-standing line of credit.

I think the core of things is probably that people buy things as long as they think they can pay the bill when it arrives, and lately in particular people have forgotten that you can lose your job, have your house lose value, etc. That's one way to borrow money with a credit card - you think you can pay it off and then that changes. The other way is that if you're so poor that you can't buy groceries/pay your bills/etc, but your credit card still works, it's a way to get groceries or keep the electricity on. It's a bad idea, but people get in a certain habit of paying for things with their credit card and maybe don't realize that this month they're not going to be able to pay the credit card bill. Or don't know what to do about it.

Sorry, I don't actually know about particular books, I'm just trying to sketch out an overall picture. Sometimes that helps for getting an idea what you're looking for. I think the idea of an expat's guide is probably a good idea; or an immigrant's guide, something similar. College students' guides are also useful - there are a lot of websites with information on managing your credit / building a credit score.
posted by Lady Li at 12:25 AM on April 10, 2009

"How would I pay rent without a checkbook? Or when I owe a friend money, or when sending someone holiday money..."

For what it's worth, in alot of other countries, this is done by way of direct bank to bank transfer, which anyone can initiate to any other bank account through internet banking, or a direct debit on your account (in the case of rent).
posted by ryanbryan at 12:35 AM on April 10, 2009

How would I pay rent without a checkbook?

Automatic payment.

Or when I owe a friend money

Direct transfer via internet banking.
posted by rodgerd at 1:32 AM on April 10, 2009

USian is a nonsense word that solves a nonexistent problem for the geographically literate, so it makes you sound both very silly, and as if you have an axe to grind on a scale that would make it worth using such a silly-sounding word. i.e. it looks like a giant blinking sign saying "bad faith question about Americans." Free heads-up in case that isn't your intention.

(Examples: Why would anyone still be using checks in the twenty-first century? ATM fees still exist? People use credit cards to borrow money? One constantly has to worry about a magically calculated "credit score" that seems to rely an absurd criteria?)

I'm not sure where in Europe you live, but I live in Germany, a social democracy spang in the middle of Europe, and we have ATM fees, magically-calculated credit scores, and people in crushing credit card debt (I also have some German bank checks hiding in my desk drawer, but I'll grant you they are a pure formality and have never been used).

Your question is maybe "why are Americans' magically-calculated credit scores such a bigger part of their lives than that of the people in (my country), and why do they misuse their credit cards more than the people in (my country)?" One answer, depending on where you are asking from, might be that American individual's lives are more expensive and risky than those of Europeans who live in social democracies. It's also a very consumeristic society, and while the level of financial ignorance on an individual level is about the same in the US as it is here in Germany, in the US the ignorance is more dangerous due to the combination of higher individual risk and more consumer bombardment.

Checks are weird. I enjoyed switching over to the wire transfer system, although I also get a kick out of how old-timey checks are. The best is taking them to the German banks and watching the tellers goggle at the weirdness. Oh, you asked why they still use them. Checks work differently than wire transfers – you can validate them with your signature without having to go in to the bank. You can check the signatures later to make sure it was really written by the person in question. But I will agree that the wire transfers are more practical.
posted by Your Time Machine Sucks at 2:08 AM on April 10, 2009 [24 favorites]

The credit rating is less a caste thing and more of an answer to, "how much should you want to loan money to this guy?" To see the difference, consider that a good person to loan money to is someone who borrows a lot of money but pays if off quickly, but the best guy to loan money to is someone who has long term debts (i.e. pays them off slowly) and so pays out a nice big chunk of interest. You'd rather have $10 a month for four years than $20 a month for one year.

So you can be a Kennedy but if you miss some payments and just don't borrow much, your credit score won't be great. On the other hand there are a lot of people with awesome credit scores who are living pretty hand to mouth on their credit payments. You don't have to be extremely careful to have a decent credit score -- don't spend too much, pay shit off on time -- but if you get pretty blatantly irresponsible you can hose your credit rating. But then, if your credit rating is hosed, you probably have bigger financial problems you need to deal with before your credit rating really matters again.

The real reason most people care about the credit score is for getting big loans, like a mortgage, where having a good score saves you money.

(I recently went in with my gf for a loan. I don't have a credit card and don't otherwise borrow much money, so my credit score is meh, while my gf who was a credit card junkie for years has a great rating. With my name on the loan the loan would have been $40 more a month, so we left just hers on it and somehow that made us more reliable customers by halving the pool of visible income! Then the loan agent actually suggested that I keep my name on as a way to build up my credit rating. Now that's a racket... pay me $40/mo, and I'll slowly increase your credit rating. I want to start that business. So... I'm not saying credit ratings aren't absurd, just trying to make them explicable.)

In general I would say that the American money culture centers around a (possibly somewhat imaginary!) well-informed and responsible majority who do the right things and check for bargains vs. an exploited/careless minority without recourse. The business sector bends over backwards for tiny competitive advantage with the first group of people, but really screws it to those less aware/responsible with fees and so forth. As long as most people are avoiding screwage by demonstrating some minor responsibility, no one's probably going to try to push you around with any legislation. In reality, all those caveat emptors add up, and sooner or later you end up on the wrong side of one of those Things You Should Have Known Better about. You suffer alone, and it all seems ridiculously retarded and unfair as the evil robot side of the business bureaucracy turns to face you, and it makes you want to march into the bank guns blazing.

So underlying all of it are still some sort of frontier-like assumptions. 1) Savvy or sucker, which one are you? 2) Don't like it? Build your own house / live with family / try the guy down the street 3) I'm just some dude offering you a deal, I'm not like "defining society", jeez.

I suppose this is a bit more bloggy than answer-y. A flip side to what I've been saying above is probably just that some things that look archaic are still working pretty much just fine. Developing countries, or countries retooling themselves into big economic unions with brand new currencies, are wise to buy the newest tech off the rack. But the guy with last century's hot new model may decide it's working well enough for him, for now.
posted by fleacircus at 2:11 AM on April 10, 2009 [1 favorite]

Here in the UK we're not so different from the US.

We still write checks (cheques) occasionally, but only where a card payment, direct debit, standing order, or bank transfer isn't possible - and there are plenty of circumstances, particularly for people without Internet access, where that's the case.

Credit scores are very much part of our lives here too; they're mainly used for loans, but sometimes also by utility companies. How else can they determine whether you're likely to make your agreed payments? I suppose there may be alternatives in other European countries, but I'm pretty sure credit scoring is widespread, if not so immediately present in peoples' lives.

ATM fees are a funny one. Banks here have tried a couple of times to reintroduce fees, saying that the cost of running ATMs and allowing customers of Bank A to use an ATM belonging to Bank B necessitates charges, but the general public and the regulators kick up a big fuss whenever the question arises. There are however ATMs owned by third parties who make money specifically by charging heavy fees (as much at 20% on smaller amounts) for the use of their ATMs; the companies who own these tend to place them in pubs and at tourist attractions where people are more likely to pay for the convenience.

While there are certainly quirks in various countries' ways of dealing with the day-to-day trivia of personal finance, I don't think you're going to find anything that specifically addresses your question, because differences are mostly practical and not necessarily signs of a great cultural divide.
posted by le morte de bea arthur at 3:10 AM on April 10, 2009

Employers and landlords tend to check your credit rating, so it matters even if you are not going to get a credit card or a mortgage.

Just over a year ago, I checked my balance at another bank's ATM while out of town. The balance printed up as just over one dollar. The two dollar fee the machine charged for showing my remaining balance was not included on that statement. A month later, I came back to town, and found a stack of letters, the most recent telling me that I owed my bank $200 in daily compounding negative balance fees. It took over a week before I got them to close the account ("our policy is not to close accounts with a negative balance"), all the while fees were still accumulating daily, and I did not have the money to pay them even if I wanted to. I stubbornly have not paid the fees, and I have seen consequences from this. No bank will let me open an account, I have to live with room-mates because landlords reject my rental applications, and from what I hear this will also keep some employers from hiring me. Even if I pay the fees, the consequences will likely stick around for about five years.
posted by idiopath at 3:20 AM on April 10, 2009 [1 favorite]

You often can't do bank transfers in the US in a convenient, cheap, clear way. So you use checks.

Credit rating is to weed out people who take up banks on their offers of cheap credit, then fail to pay back things quickly enough. There's lots more financial risk-taking and living outside your means. This is especially so when people are young and for example, attend college, but can't get any support from the state (this is the most common case).
posted by beerbajay at 3:57 AM on April 10, 2009

I'm from the U.S. I don't have a book to recommend, but I'll answer what I can...

- Why would anyone still be using checks in the twenty-first century?

For the most part, people don't write many checks. I haven't written a check, I think, in... five years or more? My husband probably only writes a couple per year.

So, why do we write checks the times we still do it? From reading the other comments it sounds like at least some places in Europe have very easy to use online banking that (apparently) works well regardless of whether the people involved in the transaction use different banks. In the U.S., we do have online banking but it can be a real pain in the ass if the people have separate banks.

Also, online banking is a perk that banks use to advertise themselves here, not something every bank offers (although it's becoming more and more common). The bank I use, Bank of America, has decent online banking. It's fairly easy to transfer money to another Bank of America customer online, and I do this all the time with my family. However, setting this up the first time can be kind of annoying; you need their routing number, which is tortuously long, and some other information I forget right now. I don't know what you guys need to do that in other countries. Writing a check can sometimes be easier than this process, and it is definitely easier to write a check than try to transfer money to someone using another bank. In fact, I've never even seriously attempted the latter for just that reason. When you write a check, you already know all the information that you need to put on it; when you transfer money here, you have to ask someone a bunch of questions.

When a person pays rent, checks are also used frequently. My guesses as for why this is:

- We typically write what apartment it is for on the check, which helps keep everything straight. My experience with online banking transfers is that it shows up as "from account 23850958049571430957340957etc" which is not helpful if you're a landlord trying to figure out who has paid you. It's also not helpful if someone else is paying the rent for you.

- People sometimes have to provide payment for their rent on the same day as, or the day before, they actually get paid. (Many jobs are paid on the first of the month, and most rent is due the first of the month.) If you give a check, you know it won't be cashed until a few days later, but your landlord essentially has the payment and can't charge you late fees.

- Many places I've rented from have had a system available that, if you want them to automatically debit your rent from your bank account on a given date at a given time, they will do that. A lot of people don't do this, though, because they lose some control over the process; they worry their account might be overdrafted and they'll have to pay a fee, for example. Or if some dispute comes up and they want to refuse to pay until the landlord fixes it, they can't be set up for automated transfer.

- ATM fees still exist?

Eh.. yes and no. Most of the large banks don't charge people who hold accounts with them if you use one of their ATMs, and this is something people look for when they consider what bank to use. If you're an average American using a large bank, there are ATMs for your bank all over the place so you rarely pay any fees. You'll generally only worry about fees when you have to use another bank's ATM.

But that's not what keeps people from paying ATM fees, anyway. Many (perhaps most?) banks have debit cards that you can use anywhere you use credit cards. I haven't used an ATM in years because everyone accepts my debit card. Also, you can usually get what we call "cash back" when you use your debit card at some establishment. So if I can't find an atm for my bank, I can go into a nearby store, buy a pack of gum, and ask for $20 cash back. The merchant charges me for the gum plus $20, and hands me a $20 bill.

- People use credit cards to borrow money?

Ah, well... yes. I don't know how common this is, but most people avoid using credit cards for cash advances because the interest rates are usually HUGE (higher than the card normally is). The situations in which you would not be able to pay for something with a credit card (for the credit card's typical interest rate) and would need cash instead are pretty limited.

- One constantly has to worry about a magically calculated "credit score" that seems to rely an absurd criteria?

I'm not sure which criteria you find absurd? There are some silly things about how credit scores are calculated, but the things considered generally make sense. Your credit report -- which is used to calculate the credit score -- has the following information: how much debt you owe and to whom, and how often you pay you debts down or are delinquent with payments. That's important information for anyone who is considering lending you money; aside from the simple "yes" or "no" of deciding to lend to someone, it also helps them determine at what interest rate they should lend you money. Other commenters have covered this much better than I can.

As for the importance of the credit score... well. Like anything financial anywhere in the world, some people flip out and obsess over their credit score. Practically speaking, though, it doesn't seem to stop people from getting more credit, or getting loans or mortgages if they try hard enough. Standards for this sort of thing are just now tightening up, and part of what caused the problem was that these have been so lax. It had been way too easy for people in the U.S. to live outside their means with little consequences, and now the consequences caught up with us.

For example, people were getting mortgages with terrible credit, no verification of income or assets, etc. Why? Because we thought the value of houses would keep going up. Basically, the banks thought they could make money off giving pretty much anyone a pricey mortgage, because the "worst case scenario" was that the people they lent to would default on their loan, and the bank would get and sell a house that was worth at least as much or more than the initial value of the loan. As we all know, the actual worst case scenario was, well, worse than that.

Then you have the situation of people who were at least managing to pay their credit card debt alright, had good credit scores... then the economy snowballs and they lose their job and can't afford it anymore. What happened to my mom, for example, is that she had great credit but a lot of debt, but she'd never had a problem paying it. Then her overtime got taken away, then her pay got cut in half and suddenly she can only afford to pay for rent, utilities, and groceries. She's having to file bankruptcy now. So when the economy gets bad, everyone's debt starts to catch up with them and things just get worse.
posted by Nattie at 3:57 AM on April 10, 2009 [3 favorites]

I just want to point out, contra to what was posted upthread, that the "American Dream" actually refers to the ideal that you can come to the US with nothing and through hard work make a better life for your children than you had, without regard to caste or religion or whatnot. The immigrant busboy who scrimps to send his son to Harvard - like that. The two car garage in the suburbs is more of a cynical use of the term.

Interesting meditation on the subject - and great photos - here.
posted by CunningLinguist at 4:29 AM on April 10, 2009 [2 favorites]

I think there's actually a simple reason for American "money culture"...e.g. why cheques remain popular in the US: there are a LOT more banks (in both per capita and absolute numbers) in the US than, say, Europe.

In most European countries, you have a handful of large banks that dominate the market, and perhaps a dozen or so much smaller co-operatives or credit unions. The US banking industry is HUGE and incredibly diverse. There are literally thousands of small and mid-sized banks serving local different locales and specializing in different market sectors (industrial, personal, etc).

Precisely because of this, it's been difficult to get a majority of American banks to adopt a common standard for electronic transfers between individuals. Well, it exists now, but in the area of "electronic" payments for retail transactions, the credit card industry moved in a long time ago and is now firmly entrenched. Having lived on both continents, it seems to me that Europeans use their "debit" cards exactly as Americans use their "credit" cards. Quite frankly, it's very difficult to pay for many things in America without a credit card.

So, if everyone needs a credit card to function in American society, and it comes with pre-arranged credit, it's no surprise that everyone has a bit of debt. It's just human nature, unleashed and ininhibited due to structural/circumstancial differences.
posted by randomstriker at 4:53 AM on April 10, 2009 [5 favorites]

The Consumer Reports Money Book may be what you are looking for. It is comprehensive, easy to understand, and even-handed. I have an earlier edition, and find it to be very good. From the review at the link:

"Beginning with banking and including money management, taxes, insurance, investing, and retirement planning, the six sections of Money Book detail almost every conceivable aspect of personal finance. Background information such as "how credit ratings are built" and "how insurance premiums are established" provides insight that can help readers become more informed consumers. The extensive explanations and descriptions are supplemented by lists, charts, worksheets, and examples, which help readers personalize the information to their specific situations."
posted by Houstonian at 4:58 AM on April 10, 2009

Nattie has the best answer. Beware of generalizations; american culture is more/different than what it might appear from watching the news.

Checks- yes, people still use them. Part of it is cultural, writing checks for things is what mom and dad did, and so when I grow up that's what I'll do too. Part of it is structural, the US is very big and has a LOT of banks, and the check processing system is large, expensive and entrenched. So it is difficult to make changes to the system. The whole US electronic fund transfer system is just an add-on to the older check processing system. Every night, banks would sort the checks like mail, by the institution they were drawn on. They'd send the checks to the banks they were drawn on, and a few days later, their account at the federal reserve bank would be credited with the amount. The electronic fund transfers do the same thing, basically creating a virtual check than then gets processed exactly the same way.

And, writing checks is just the easiest way to do a lot of things. It's just writing a note telling the receiver to do an electronic fund transfer. Why go through the trouble of finding a computer or calling your bank when you can just hand someone a piece of paper?

ATM fees certainly exist, but only if you use an ATM that's owned by someone that's not your own bank. It's a convenience charge- if you planned ahead and got your cash from your own bank, you wouldn't have to pay it. There is no reason beyond convenience that anyone has to ever pay this fee.

Credit cards- yes, there is a spend now pay later culture going on. But it's hardly an American only thing. Credit (in some form or another) has been around for a long time, and you don't need a plastic card to get into trouble with debt. On the other hand, credit cards are a fabulous tool for keeping oneself out of trouble via cash flow management. In a perfect world, everyone would have savings to buffer the ebb and tide of cash flow. But the world isn't perfect, and paying 19% for a few months is a lot cheaper than suffering the consequences of not fixing the hole in the roof. And maintaining savings has a cost too- that's money that could be doing something else more productive. Just speaking for myself, I'm ahead of the game by diverting as much of my income as I can to long-term illiquid savings and using my credit cards to buffer the short term ups and downs.

Credit score- this is something people irrationally obsess over, and more is made of it than is probably necessary. It's a service provided to allow a lender to determine the relative risk of potential borrowers, instead of doing their own investigations of every potential customer. The obsession over the score is just a little game theory being played out. Working to improve ones credit score is just an abstraction for working to be a better credit risk. And being a credit risk means credit is cheaper.

The US money culture as I imagine it is seen by others is just one way our very basic human foibles happen to manifest in the US. Freely available credit can be looked at the same way as socialized medicine- it has costs and benefits. There will be abuses of the system, realities can shift causing bubbles and troughs, etc. But the benefits are that if it is responsibly managed, people are freed up to be at their best. I *could* live like a hermit and save up for 30 years and buy a house outright. Or I can pay 6% and borrow the money and have the house now. It costs more money, but now I have a home. My life is more than 6% better by having that stability.
posted by gjc at 5:04 AM on April 10, 2009 [1 favorite]

Canada has five big banks, and a handful of smaller banks with a national reach, but people still use checks there. (They even have checks in U.S. dollars, which puzzles me, because those checks are almost completely useless in the U.S. itself.)
posted by oaf at 5:12 AM on April 10, 2009

I'd also like to add, I can see why you are confused. Even some of the answers here reflect a misunderstanding of sorts (I'm not saying they are wrong, just misunderstanding or assuming you have a basic understanding).

CunningLinguist pointed out the one about the American Dream. He's right: The American Dream was the idea that people can come here and have an opportunity to make it. Earlier in the thread, someone said the American Dream is a house with a white picket fence and big-screen TV... I understand what was meant, but for you to understand it means you already understand the true American Dream.

Another example is randomstriker. His comment made me smile, because it never occurred to me how this looks. We used to only have checks, then we got debit cards (cards that worked exactly like checks). You can still ask your bank for a debit-only check, but most people get a "debit card with the Visa/MasterCard logo". The way this card works, you can use it anywhere and it automatically drafts from your checking account. It is a debit card. However, you have the option, at the register, to use it as a credit card (you select "debit" or "credit" and enter a PIN for debit or sign for credit). In places (such as restaurants) where the register is not set up to take a PIN, it is run through as a credit card, but withdraws from your checking account as an automatic debit. If you don't have money in your checking account to cover the debit, and you have overdraft protection (an expensive line of credit that covers overdrafts), it goes to that... which is credit, but via overdraft protection. Standing outside of the system, I can see that it looks like everyone is paying for everything with credit, but a lot of us are just automatically debiting from checking accounts.
posted by Houstonian at 5:13 AM on April 10, 2009

I think randomstriker's answer is good. The interac system in Canada was way ahead of the American debit system, and I think it's largely because of the smaller banking system.

Lately I've used a lot of checks. I pay my therapist with a check (she's in private practice alone and doesn't have credit processing). I gave a check to the cable guy when they installed my internet (future payments I'll be able to do electronically, but I think they didn't want to have to trace cash). I pay rent with a check. It's often convenient to use a check for distance purchases that don't accept credit b/c otherwise you might have to provide a debit card number and pin, which might be (perceived) as less secure.

Finally, a cultural reason why we use more credit - independence.

It's not only immigrants who arrive here with little and need to borrow to start out. In Europe and other places, kids live with their families for a much longer time, making it easier for them to save their own money, even if the family can't help them with a down payment or deposit or the first month's living expenses until the first paycheck comes in. In the states it's much more common for kids to move out at 18 or 21, often far away from their families.
posted by Salamandrous at 5:30 AM on April 10, 2009

Yeah, I think that randomstriker was correct that there is a miserable cat-herding problem to getting the >8000 commercial banks in the US all on the same page with a new system. Especially without someone trying to find some kind of "lock-in" that looks like it's providing more consumer features but functions as a spoiler to the standardization effort. In my experience, anything infrastructure-like is slower to be standardized in the US than in any given Western European country, due to geographical and population size and corporate interests.
posted by Your Time Machine Sucks at 6:07 AM on April 10, 2009

Back when the idea of paying bills and such on-line was shiny and new, there were a lot of companies that wanted to charge you a service change for the privilege. Given the choice between paying a few cents for a paper check and a stamp or $10 for, well, nothing, I chose the stamp and check route. I assume these companies are now keeping cumbersome systems in place for people like me and kicking themselves for their lack of foresight.

Usually you only pay ATM fees if you are using an ATM from a bank other than your own.

I, personally, haven't worried about my credit score since I bought my house, and wasn't particularly worried then. Basically, if you're living a hand to mouth existence, or worse still, someone else's hand to your mouth and then habitually not paying their hand back, yes, you have to worry about your credit score, but you probably already have bigger things to worry about.
posted by Kid Charlemagne at 6:08 AM on April 10, 2009

Funmonke1 said: In essence your credit worthiness determines to a large degree what caste of society you will live in.

I think it's the opposite. Usually it's your caste which determines your credit score. I could be wrong, but either way I don't see one's credit score as an especially vivid indication of class, nor the efforts to maintain or change it as a parallel to class mobility.
posted by trotter at 6:13 AM on April 10, 2009 [1 favorite]

Nobody knows your credit score unless you tell them. It is never, ever obvious who has a good credit score and who doesn't. Your credit score determines your creditworthiness, and for jobs involving money, it can have a role in hiring.

I would rather write a check for rent than do a wire transfer. My landlord would, too, otherwise he could have set up an online payment system. Checks make it easier for him to see what properties he's been paid for.

You only pay ATM fees if you use an ATM from a bank other than your own, and there are banks that don't charge them and refund their customers' fees from other banks. I never pay ATM fees because I just go to a store and get cash back using my debit card, which is better for me, because I can ask for smaller bills.
posted by fructose at 6:28 AM on April 10, 2009

Why not use a check? If I give you a credit card number, you can transfer as much as you like, whenever you like, over and over again, and if I do not like it, I have to fight it out. A check is a one-time authorization where I have control. Maybe if credit cards allowed me the same control, I'd do that, but right now, they do not.
posted by adipocere at 6:46 AM on April 10, 2009 [1 favorite]

To comment on the "number of banks" idea -- I live in a town of about 8,000 people in central Massachusetts. We have three banks and a credit union. None of those are nationals, or even state-wide banks -- in fact, the largest of them only has branches in six towns!
posted by bitterpants at 6:57 AM on April 10, 2009

I agree with the above that it's tough to find books written from the comparative perspective - most will have some embedded assumptions based on the (geographical) perspective they're written from. That said, here's something that might be helpful (albeit perhaps a bit drier than you were looking for: A Comparative Analysis of the US and EU Retail Banking Markets.

Also, to go off on another tangent from the above, there most certainly are class-based divisions in the ways people access financial services in the US. Credit scores are one example (and much discussed in the whole discussion of the subprime lending sector that was the first domino in the current financial mess), but lower income folks and certain demographic groups are way less likely to be using mainstream financial services, ie banks. There is a whole alternative sector of check cashers and payday loans that is generally way more expensive per transaction but is used by folks who are shut out of the mainstream for one reason or another. "Underbanked" is a good search term for this, if you're interested.
posted by yarrow at 7:01 AM on April 10, 2009

"Quite frankly, it's very difficult to pay for many things in America without a credit card." Eh, I wouldn't agree with that. It is very difficult to pay for many things unless you have _a_ card, but a debit card that draws from money you actually have in your account will work just fine.

As you can see, the American online banking system sucks. For example, adipocere says:
"Why not use a check? If I give you a credit card number, you can transfer as much as you like, whenever you like, over and over again, and if I do not like it, I have to fight it out. A check is a one-time authorization where I have control. Maybe if credit cards allowed me the same control, I'd do that, but right now, they do not."
And in the US, those questions make some sense (although checks are almost that insecure.) My American bank, for example, only has some sort of rather dubious 3rd party "online billing" system, and if you want to do a wire transfer, you have to physically fill out and fax, mail, or hand it to them. Thus, for most interactions, I use cash or a debit card (which looks like a credit card and even has a MasterCard logo, but withdraws from my checking account), but for certain large transactions, like rent or payments to doctors with small practices, I'm stuck with checks. My German bank, on the other hand, gave me my online account info and a sheet of TAN numbers as soon as I signed up. Online transactions show more than just the account number: you get all the info you'd get on a check, include a notes section. Furthermore, I need my password and a correct TAN number to make online payments, making those online payments more secure. Finally, I can make online payments to anyone (my landlord, an online store, whatever), no matter which bank they're with.

Personally, I'd take the German system any day (except for their ATMs. Really, guys, viewing account info onscreen or printing out your basic balances on your receipt is awesome and way easier than printing it out at a separate machine.) Online billing is more secure, and I don't have to worry about hunting someone down or sending a check via post; I can pay at my leisure while I'm at my computer.

Credit I know less about, because I've tried very hard to avoid using credit cards at all. Beyond everything said by everything else, I'd like to posit that it may be connected with the lack of a social safety net in America. Jobs, healthcare, etc. are much more precarious, and it's not that hard to end up in a situation where you're paying off one bill with a credit card so that you can manage an unexpected healthcare fee or something. There's also the sort of credit mentioned by yarrow, which is very predatory and limited primarily to the poor and to illegal immigrants.
posted by ubersturm at 7:52 AM on April 10, 2009

To highlight a point some other commenters have made: Part of our reliance on credit is due to the fact that we have weak safety net. Yes, many Americans buy more stuff than they need or can really afford. However, when any American loses their job, they can quickly burn through savings just paying their health insurance premiums. Then, when they can't afford to pay those anymore, they rely on credit cards to pay for medical care, food, and other basics.

I began working at 12. I left home at 18. I worked while I went to college. I have had to scramble to pay for medical care, and I'm afraid of losing my health insurance. I have a close European friend to whom those very common and very American facts are strange and harsh. We do have a gluttonous and over-pampered society in many ways, but the trip to poverty is short and fast.
posted by PatoPata at 7:54 AM on April 10, 2009 [3 favorites]

Americans are actually getting worked over in the conversion to credit cards and away from paper checks. When everything was paid for by check, there was virtually no charge to either party for the transaction. Some merchants paid very small per transaction fees to their bank, but most were able to negotiate deals so that check processing was completely free. There was some float, but there were no charges. Now that everyone pays for transactions with credit cards, the merchants are charged from 1% to 2.5% of the transaction to process the credit card. This despite the fact that the credit transactions were cheaper for all concerned. Now our system of exchange is costing everyone money because those fees are passed on to all of us in the form of higher prices.
posted by Lame_username at 8:39 AM on April 10, 2009

There is an education for me in this thread, but if you wanted non-fiction which gives you a sense of American banking "culture", you could read Liar's Poker, by Michael Lewis, about 1980s Wall Street. He's also written a new book, Panic: The Story of Modern Financial Insanity.
posted by Tufa at 9:56 AM on April 10, 2009


You can still ask your bank for a debit-only check, but most people get a "debit card with the Visa/MasterCard logo".

Well this only underscores my point which was that, while you can get debit cards now, the credit card companies moved in a long time ago and are now firmly entrenched. The problem is the integrated transaction system, which is still administered by Visa/Mastercard. They obviously have a vested interest in getting you to use credit cards instead of debit cards.

Standing outside of the system, I can see that it looks like everyone is paying for everything with credit, but a lot of us are just automatically debiting from checking accounts.

I work in retail and I was basing my comments on actual data. About 30% of our sales are paid for in cash. The rest largely using credit card. At most 5% are paid for using debit cards.
posted by randomstriker at 9:57 AM on April 10, 2009

Ok, I stand corrected. I don't work in retail, so I had no idea that in 65% of transactions people are choosing credit over debit. Although, I've done that -- simply because I don't care which the cashier chooses (although it's better for their company, cheaper, if they choose to swipe the card as debit). Either way, the amounts are automatically debited from my account.

Yes, I agree that the cards have a Visa/MasterCard logo, and that it helped the debit card system that the banks provided. I don't live with debt, though, so I assumed that most people are not racking up debt when using their card at the grocery store and whatever. Guess I learned something. Sixty-five percent of people pay for groceries and the like with borrowed money? Wow.

Were you able to tell from the register how many of those people were like me (choosing either debit or credit, but either choice results in an automatic debit from the account)?

posted by Houstonian at 10:26 AM on April 10, 2009

I work in retail and I was basing my comments on actual data. About 30% of our sales are paid for in cash. The rest largely using credit card. At most 5% are paid for using debit cards.

I can believe that, although use of a credit card isn't necessarily indicative of debt. There are consumer protections (and benefits such as miles) that come with using a credit card, plus using a cc and paying it off every month shows a pattern of managing credit well (and thereby boosts credit score, or so I'm told).
posted by JenMarie at 10:39 AM on April 10, 2009 [1 favorite]

I can believe that, although use of a credit card isn't necessarily indicative of debt.

Agreed. I pay for almost everything with my CC, but always settle the balance in full. I, and most of my circle friends, use CCs to earn air miles.

one of the quickest ways to get piegon-holed as a European Douchebag is to continue using the term USian.

Funny...the group that I find most consistently object to citzens of the USA being called Americans isn't "European Douchebags" (how that's not explicitly inflammatory in itself, I don't know) but Latin Americans. Somewhat understandably.

In a past life, I was involved in various international non-profit organizations. I travelled a lot. I also lived in Europe for a long time. At large international meetings, attending by representatives from practically every country in the world, Latin American delegates would almost always correct anyone who referred to the USA as "America". I don't remember them being so militant about "American", maybe because "USian" is just too cumbersome of a phrase. Perhaps the 2nd most anal group is Canadians, with their insistence on being included as part of "North America" in discussions of economy, politics and culture.

Every European I've met in person, except those wise to the ways of MeFi and the liberal-half of internet, refers to America as America. They really couldn't give a shit about the geography of the Americas, except in conversations about the beaches of Curacao or Florida. So I think your assumption that someone using the term "USian" is a European Douchebag says more about your attittude toward Europeans than it does about actual Europeans.
posted by randomstriker at 11:16 AM on April 10, 2009 [1 favorite]

I've also noticed that Americans seem to physically visit their bank much more frequently (like monthly or even weekly) than people here (where it's possible to go for years without visiting and some banks don't even have physical branches).

Anybody know why this is? I mean, I imagine it's a combination of factors, but which ones? The fees for withdrawing money from ATMS other than the ones at your bank? That Americans are more likely to be paid by check and don't want the delay/risk of depositing these through the mail? That phone and internet banking aren't routine, so you need to show up in person to arrange loans, etc? Maybe even that American banks keep more convenient hours than British ones? (It'd be difficult to keep less convenient hours, frankly.)
posted by the latin mouse at 12:20 PM on April 10, 2009

When I lived in the US I never felt comfortable depositing my checks via any other method than in person with the teller, or in the deposit box in the bank. Deposit via ATM just always felt deeply wrong and unlikely to work out (seems superstitious in hindsight, but my vague theory was something along the lines that the ATM was a machine for emitting paper of a calculable thickness, not a machine for taking in paper of variable thickness). And given that both the bank and the post office are bureaucracies with terrible customer communication, as a freelancer I never felt comfortable putting it in the mail either, since you'd be sitting there 10 days later wondering if the check was lost en route or if the bank was sitting on it or the client was overdrawn or what.
posted by Your Time Machine Sucks at 12:35 PM on April 10, 2009

I've also noticed that Americans seem to physically visit their bank much more frequently (like monthly or even weekly) than people here (where it's possible to go for years without visiting and some banks don't even have physical branches).

I visit my bank, but rarely go inside the branch. I deposit checks via the ATM at my bank, or withdraw cash. My bank charges a hefty fee if I use another bank ATM, but fortunately my bank is pretty ubiquitous. The few times I have gone in to the teller were to deposit cash (my mom taught me not to trust cash deposits to the ATM), to get a safety deposit box, and when the ATM has been on the fritz. I manage payments for a couple of soccer teams, so I usually deal with dozens of personal checks each year.

Oh, and about check-writing: it may seem antiquated but I actually do end up writing quite a few checks. Mainly, as others have said, to make a payment to an individual, but also for rent and at salons where checks are preferred to avoid cc fees. An esthetician I used to visit said she tallied up her cc fees, and realized she was paying thousands per year to visa and mc, so she started requesting personal checks when possible.
posted by JenMarie at 2:12 PM on April 10, 2009

Response by poster: Thanks, everyone who has chimed in to give me some more perspective... I still feel a bit confused and assume that I probably won't find an easy and concentraded explanation of my original question, but I've learned a lot on this thread, and some of it has helped me integrate the many pieces I've gleaned from other AskMe threads. Thanks again!
posted by themel at 7:12 PM on April 10, 2009

Response by poster: And, addressing the "USian" thing - I didn't intend to offend anyone. The post actually said "American" at one point in time, but I didn't feel like I knew enough about the similarities of systems outside the US to generalize. My "geographic insecurity" might stem from knowing way more Canadians than people from the US, and consequently having a more geographical understanding of the term "America" than the average US resident.
posted by themel at 7:20 PM on April 10, 2009

Try "US resident/resident of the US/US citizen/citizen of the US/people in the US". Harms no Canadians who describe themselves as living in The Americas or who live on the continent of America, while remaining correct and non-insulting to the people you're ostensibly talking to. Slightly unwieldy, but we've established that the concise option isn't your cup of tea.
posted by Your Time Machine Sucks at 6:45 AM on April 11, 2009

I just came across an elegant solution from the unlikiest of sources: this hilarious clip of a dimwitted beauty pagent contestant. She uses the term "US Americans".
posted by randomstriker at 12:34 PM on April 11, 2009 [2 favorites]

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