Money is a complicated topic in this country. Today I attended a session called “Financial Planning For New Hires”. Google had invited some personal finance expert that talked for almost two hours about how you should manage your personal economy. And man, there are a lot of things to think about.
In good old Sweden all you needed was a decent income and no record of not paying your bills (betalningsanmärkningar) and you would be fine. In USA, not so easy. Here you need a credit history and good credit score. You need to over time prove that you can owe money and pay it back. If you have a bad credit score you may get worse deals on loans (car, house etc), if you get them at all. If you lease an apartment you may have to deposit extra security. You may get higher interest, lower credit limits etc.
In Sweden I have always had my SEB debit card with Visa. When I bought something it was immediately deducted from my account. Easy, hassle free and safe. It took care of itself.
For those not sure what the difference between a debit card and a credit card is: A debit card is what I just described. You can’t spend money you don’t have in your account. With a credit card on the other hand whenever you buy something it is the bank that at first pays for it. At the end of the month you get a bill for all charges to the card. If you pay the full amount of the bill you don’t have to pay any interest. You don’t have to pay the full amount though. You have the option of only paying a minimum amount and owe the rest to the bank. Then you will start paying (pretty high) interest on the money you owe. The next month’s bill will include everything you still owe.
But if you pay the full amount of the bill you don’t have to pay anything extra. So what is then the point of having a credit card instead of a debit card when you get the extra job of paying bills once a month? First there are some places that won’t accept a debit card, only a credit card. E.g. when you rent a car you need a credit card. If you wreck the car the rental company will want to charge your card, even if you don’t have money in the account. But more importantly, using a credit card builds credit score. So the advice in today’s session was to get at least two different credit cards and start using them. (And of course pay the bills for the full amount on time.)
Another annoyance is that you pretty much have to become member of different clubs and reward programs if you don’t want to pay a lot of extra money. E.g. a big package of orange juice at the Safeway around the corner costs $3.99 if you are not a member. For members the price is $2.50. That’s 37% cheaper!