Thursday, October 23, 2008

Is Credit Credible?



In the wake of the ongoing financial disaster that has washed up on both sides of the Atlantic, people have been talking a lot about credit, and the culture thereof. Before I go too far, I would like to point out that I understand virtually nothing about high finance, or even low finance, and the reason that I am not rushing to find out so that I can protect my assets is that I don’t have any.

But one thing I do understand is credit cards, and it has recently come to my attention that a French credit card is really only a distant cousin to an American credit card, and that it is much more closely related to the American debit card. In other words, American-style credit cards, where you basically take out a loan from a bank (and not necessarily the one where you have your account) and pay it back with interest, do not exist here. This came as a shock to me. Somehow, after living here for eight years, I never fully absorbed this information. “You mean, people here actually save up their money before they spend it?!” We red-blooded American types charge out and spend on our credit cards and then worry about saving up to pay off the bill. Then the race is on to see if we can pay off the bill before we end up paying horrendous amounts of interest. This behavior, which seems utterly normal to me, strikes my French friends as irresponsible and reckless. “Who, me?” I ask, dumbfounded. Here I always thought I was a pretty prudent spender who was very careful with what little money I possessed.

Suddenly, I was forced to face the fact that I am indeed a willing participant in the very Culture of Credit that it seems is menacing the financial planet with death and destruction. Don’t get me wrong: I don’t run up huge credit card bills (yes, I kept my US cards when I moved here) and then pay tons of interest. But I do rely on them for buying things I can’t exactly afford and then paying them back when I can. I usually pay them off within six months, often much sooner. Does that mean I am afflicted with that dreaded Credit Mentality that the European press says affects 99.9% of Americans? I never thought so, but when you look at French people (and Europeans in general), I have to admit that unlike them, I look at credit as a Friendly Helper, and not as the Dark Lord of Financial Instability, like they do.

From what I’ve gathered, credit is considered unseemly here, something that only fools and scoundrels engage in. French people may have cards marked Visa or MasterCard, but when they use those cards, the money is debited directly from their bank accounts. At most, you can get a 30-day deferral. You can find some American-style cards that offer credit in an alliance of stores, but these cards are frowned upon by the general public. I was discussing this phenomenon with my dad, who is over 80, and he remarked that when he was young, in the pre-Visa/MasterCard era, the very same anti-credit attitude existed in the States.

Upon reflection, I have to admit that there is something to be said for actually taking responsibility for your bank account and buying things according to your present reality, rather than your misty future. On the other hand, if I think of all the things I couldn’t have done without one, I still feel grateful to my credit card for giving me a chance to take that Flamenco workshop in Spain, or having that holiday in the Greek islands. I know it’s not responsible, and I know it’s not sensible. But it’s just so much fun. I’m beginning to think I’m a lot more American than I ever realized…

11 comments:

David said...

Actually, credit cards exist in France, but they're not issued by banks, they are by "credit companies" such as Cofinoga.
But apart from that everything else said is true: only fools and scoundrels use them.

Margie Rynn said...

I know, those are the cards I was talking about that work at selected stores. I'm under the impression that they don't work everywhere.

Polly-Vous Francais said...

So *that's* why I always got funny looks from sales clerks in French stores, when I first moved here, when I asked if they accepted "les cartes de credit" (my poor but literal translation) which of course isn't correct. Now I understand why they are called cartes bancaires...les CB. I took a while to catch on to the subtle difference.

Thanks for the enlightening info.

P.S. This week I discovered Grist through a completely different source -- it's brilliant and funny, and I immediately put it in my linkroll. How cool that your brother writes for it.

Kelli said...

I was suprised as well when I lived in Paris for 4 years. But I have to say that I am proud of the French for not using the "American" type of credit card. It is a mess here and I wish I didn't have as many as I do. I love the "old" idea of saving up to buy something we really want. Can I please order a little more of France and French thought for the US?

Starman said...

I use one credit card with which I pay my cable bill, my cell phone and miscellaneous other things. I get one to five percent back, depending on where I use it, and I pay it off each month.

Joe Chin said...

Actually, credit cards do exist and through your bank. They won't exactly approach you about it. I think you have to have a good relationship with the account manager before they will offer you one. I was approached (basically approved) for one last summer but turned it down.

Also, the french aren't averse to credit, just credit cards. If we need to do a large purchase we take out a personal loan of 1000-2000€. The payment is structured and the interest rate is much lower.

Daniel said...

Isn't it true that the French cards are somewhere between a debit card and a credit card? I was told that you do not have to have the funds in your account at the time you buy something, but you must pay off the balance each month. Man, I wish US cards were like that. I know too many people who have gone too far into to debt with credit cards. Maybe as we enter a new era of regulations, we should regulate the behavior of individuals as well as Wall Street firms, and adopt this sort of system for the US.

Margie Rynn said...

Daniel - The way I understand it is this: with a French card, you can ask for a payment deferral for 30 days, but then you have to have the funds in your bank account to pay the bill. So it really is like a debit card with the possibility of a 30-day deferral (I'm not sure if there is an extra fee for paying later).

Joe - it seems like there is a trend towards American-style credit cards..I didn't know the banks did them too. I hope in the light of recent global events, people will think twice about getting one!

Joanne said...

Wow! I thought only people in China save before spending. I have some Chinese friends who are still in University and their school actually gives them credit cards to encourage spending. They have at least 3 but they seldom use it. They use debit cards instead.

Lisa said...

When I moved to Presidio TX, a small predominantly Mexican village boasting of pre-Columbian history, I immediately asked my new neighbors why there were so many incomplete houses that looked like their construction had been abandoned. Abandoned? No. The owners continued to build as they had the money. It may take a house twenty years to be finished, but the owner owns all ownership. What's more, one could live in a completed portion of a house indefinitely under-construction, thus keeping one's property taxes at a minimum. I found that lifestyle to be much less about having, and much more about doing. Towns with the kind codes and ordinances that permit that kind of lifestyle, however, are rare in the U.S.

Anonymous said...

My husband, a French man, confirmed that one either had to have money in the account to back up credit card purchases or use a line of credit.

We live in Canada and use debit cards. Only rarely, do we use a credit card, & then its paid off at the end of the month.

I did the credit card route in my late 20's (late 70's or so). Finally said no more & have never paid a cent in credit card interest since then. Freedom from credit is great.