vania-janet/multiturn-rag-retrieval-data huggingface dataset:
Because even if you won the lottery, without at least some credit history you will have trouble renting cars and hotel rooms. I learned about the importance, and limitations of credit history when, in the 90's, I switched from using credit cards to doing everything with a debit card and checks purely for convenience. Eventually, my unused credit cards were not renewed. At that point in my life I had saved a lot and had high liquidity. I even bought new autos every 5 years with cash. Then, last decade, I found it increasingly hard to rent cars and sometimes even a hotel rooms with a debit card even though I would say they could precharge whatever they thought necessary to cover any expenses I might run. I started investigating why and found out that hotels and car rentals saw having a credit card as a proxy for low risk that you would damage the car or hotel room and not pay. So then I researched credit cards, credit reports, and how they worked. They have nothing about any savings, investments, or bank accounts you have. I had no idea this was the case. And, since I hadn't had cards or bought anything on credit in over 10 years there were no records in my credit files. Old, closed accounts had fallen off after 10 years. So, I opened a couple of secured credit cards with the highest security deposit allowed. They unsecured after a year or so. Then, I added several rewards cards. I use them instead of a debit card and always pay in full and they provide some cash back so I save money compared to just using a debit card. After 4 years my credit score has gone to 800+ even though I have never carried any debt and use the cards as if they were debit cards. I was very foolish to have stopped using credit cards 20 years ago but just had no idea of the importance of an established credit history. And note that establishing a great credit history does not require that you borrow money or take out loans for anything. just get credit cards and pay them in full each month.
They foolishly chose to pay the credit card first, and were going to pay the house payment last (if there was anything left over). There wasn't, and they are risking eviction (renters). People finding themselves in crisis, generally do a poor job of paying the most important things first. Basic food first, housing and utilities second, etc... Let the credit card slip if need be no matter how often one is threatened by creditors. They do this to maintain their credit score, how foolish. I feel like you have a sense of bondage associated with debt. It is there and real despite many people noticing it. There is also the fact that compounding interest is working against you and with your labor you are enriching the bank. This is a great reason to have the goal of living a debt free life. I can tell you it is quite liberating.
But it's easy to get into trouble doing things like this. It's easy to say to yourself, Well, I don't need to put ALL the money toward that other debt, I could keep a thousand or so to buy that big screen TV I really need. Or to fail to pay back the low-interest loan on schedule because other things keep coming up that you spend your money on instead, whether frivolous luxuries or true emergencies. And there's always the possibility that something will happen to mess up your finances, from a big car repair bill to losing your job. You don't want to paint yourself into a corner. Finally, maxing out your credit cards hurts your credit rating. The formulas are secret, but I understand that if you use more than half your available credit, that's a minus. How much it hurts you depends on lots of factors."
"I also feel it's important to NOT get a credit card. I'm in my mid 30's and have had credit cards since I was 20, as has everyone I know. Every single one of those people, with the exception of my dad, is currently carrying some amount of credit card debt - almost always in the thousands of dollars.  Here is the essential problem with credit cards. Everyone sets out with good intentions, to use the credit card like a debit card, and pay charges off before interest accrues. However, almost no-one has the discipline to remember to do this, and a balance quickly builds up on the card. Also, it's extremely easy to prioritize other bill payments before credit card payments, resulting in a balance building up on the card.  It's almost magical how quickly a balance will build up on a credit card. Ultimately, they are simply too convenient, too tempting for most human beings. The world, and especially the North American world, is in a massive debt crisis. It is very easy to borrow money these days, and our culture is at the point where ""buy now pay later"" is an accepted practice.  Now that I have young children, I will be teaching them the golden rule of ""don't buy something until you have cash to pay for it in full!"" It sounds like an over simplification but this one rule will save you an incredible amount of financial grief over time."
Credit is very important even if you are wealthy. One thing you may not realize is that rich people typically have comparatively little cash on hand.  If they're smart, most of their assets are not liquid - they're tied up in safe, long-term investments.  They use credit for their day-to-day expenses and pay it off from the dividends on their investments (which might only come in once a quarter). There are also tax advantages to using credit.  If a rich person wanted a new car, he'd be smarter leasing it for his business (immediate write-off of the lease payments on taxes) versus buying it (depreciation over several years plus property tax liability in some states).  There are more elaborate tax dodges but the point is that buying a car outright is the worst option in terms of tax avoidance. Another way the rich (mis) use credit is so that they don't risk their own money on business ventures.  Let's say I have $1,000,000 in my personal bank account, and I want to buy a business that costs $1M.  If I am dumb, I clean out my bank account and put all my money in the business.  I get 100% of the profits, but I also bear 100% of the risk.  If I'm smart, I loan 200K of my own money in the business and put the rest someplace safe, and get a loan from a bank for the other 800K.  If the business succeeds, the bank gets their money back plus interest.  If it fails, the business declares bankruptcy and the bank eats the 800k loss. If I structured the debt right, my personal loan to the failed business gets paid back first when the company is liquidated, and the bank gets whatever is left over (if anything).  The most of my own money I can possibly lose is 200k, and probably it's closer to zero if I have a good accountant.
It's important because it shows that the amount you owe does not decrease linearly with each payment, and you gain equity as a correspondingly slower rate at the beginning of the loan and faster at the end. This has to be figured in when considering refinancing, or when you sell the place and pay off the mortgage. It also shows why making extra payments toward principal (if your loan permits doing so) is so advantageous -- unlike a normal payment that lowers the whole curve by a notch, reducing the length of time over which interest is due and thus saving you money in the long run. (Modulo possible lost-opportnity costs, of course.)
"So you work, and give a small irregular amount to you parents.  You live with very low expenses.  Assuming you make a bit below the average salary in the UK, you should be able to save around £1000.  If you found a part time job could you save double?  I bet you could. So why do you need credit?  Why do you need a credit score? Having poor or no credit can be remedied by having a large down payment.  Essentially the bank asks, if this person could afford the payment of this loan why have they not been saving the money?  You could save the money and either buy the thing(s) you desire with cash (the smartest), or put 50% down.  Putting 50% or more down turns you into a good credit risk despite having no credit history.   In case you missed it:  why not just save the money and buy it for cash?  Why have compounding interest working against you?  Why do you want to work for the bank? Making the interest payments on loans in order to build a credit score is just silly.  It is an instance of a ""tail wagging the dog""."
It is much simpler than any of that.  People who make money have a greater capacity to pay their bills.  Credit card companies make money off of people who can afford to pay several hundred dollars a month in interest charges.  If you only make 500 a month you can not afford to pay 200 in interest.  So their cost of doing business with you is higher.  These cards are issued to make money.  And they make their money off of people paying 12-29% interest on their 5k+ credit limits they have nearly maxed.
I'll read between the lines: you're (justifiably) feeling smart about how you manage your money: debt-free, smart about your spending, saving for retirement, etc. But you're looking at all those fancy cars and feeling a little left out. And Americans especially have a love for automobiles -- it's not just transportation, a car is a status symbol. Yes, some of those people afford their cars just fine. But a lot of people out there are AWFUL about saving and spend recklessly. Americans are notoriously bad at saving for retirement, for example.  So if they aren't saving, where does that money go? They buy stuff they don't need. They live paycheck-to-paycheck. They run up debt. They buy cars. Overspending on cars is so easy to do: leases have low payments, or you can get a 6 year loan. There are many financial tricks for people that think only in terms of monthly payments. So instead of lamenting that the grass is greener as all those BMWs whiz by, smile deeply and enjoy that feeling of sleeping well at night instead of stressing out about the next credit card bill and car payment waiting for you in the mailbox. (And at the same time, if you really want a luxury car and want that to be a priority, you can make it happen and not go broke. Get a late model year certified pre-owned vehicle just out of lease, for example. Saves a ton of money, is still under warranty, and satisfies the lust for luxury.)
They have a minimum to discourage applications for that particular card. Every application costs them money because they have to pay the credit agencies to pull the applicant's credit history. So one way they save money and reduce their cost of business is to discourage people from applying if they're not creditworthy enough for that product. Credit card companies tailor their products into different income/credit brackets. Those who have less creditworthiness would be better suited for a different product than what you're referring, similar to those with greater creditworthiness.
"In general, all forms of debt are bad, as they keep you tied to a financial institution and can be an emotional burden for many. In the book Payback (by Margaret Atwood), debt is even described as a sin. However some forms of debt are necessary and some can help create wealth. ""Good"" debt: a mortgage - to purchase a home, which is an asset that usually appreciates in value.  Necessary debt: car loan or lease - only when there is no other mode of transportation to get to work. Really bad debt: unpaid credit cards - for dinners out."
What makes a credit card risky is that it requires discipline. It is very easy to buy things that you cannot afford with a credit card. Credit cards usually require a minimum payment every month if you owe them money, but if you pay only the minimum amount, your debt will grow quickly. And since the interest rates are usually very high, you can easily get into a state where you are overwhelmed by your debt. The correct way to use a credit card is to pay the complete bill every month. If you can't afford to pay the complete bill because you spent too much, cut up your credit card.  On the positive side, there are many situations where paying by credit card will give you protection if you don't get the goods that you paid for, because the credit card company is fully responsible for those goods, just like the seller. So if you pay for a $5,000 holiday with a credit card and the company you paid to goes bankrupt, the credit card company will refund your money.  Do not ever look at cash back on purchases. You only get cash back if you spend money. Getting $50 cash back is of no use if you had to get $2,500 deeper in debt to get that cash back. (Some people might contradict this. But if you ask for advice on money.stackexchange then this is the correct advice for you that you should follow).
I find myself doing well until I compare myself to someone else I think is doing well or better. I just bought a car on credit for the first time in 16 years. As a household we are making more than we ever have.  With the exception of the car, we have no debt.  If I don't listen to the news, I am happy.  It's when I start listening to how dire things are, or when I start second-guessing my decisions, or when I wonder whether I will lose my job (for no other reason that anything is possible), that I begin to feel like the world is going to end.  So, avoid Reddit and TV, stick to reading early 19th century novels, and we'll all be fine.
"If human beings were Homo Economicus, i.e. textbook rational and self-interested economic-minded beings, as opposed to simply human, then yes, simple advice like ""just stay out of debt and your credit score will take care of itself"" could work.  Your simplification would be very persuasive to such a being. However, people are not perfectly rational.  We buy something we shouldn't have, we charge it on a credit card, we can't afford to pay it off at the end of the month.  We lose our job.  Our furnace breaks down, or our roof leaks, and we didn't anticipate the replacement cost.  Some of this is our fault, some of it isn't – basically, shit happens .. and we get into debt...  maybe even knowing all the while we shouldn't have. Our credit history and score takes a hit.  Only then do we find out there are consequences! Our interest rates go up, our insurance companies raise premiums, our prospective new employers or landlords run credit checks and either deny us the job or the apartment. Telling a person who asks for help about their credit history/score that they shouldn't have taken on debt in the first place is like telling the farmer he should have kept the barn door shut so the horse wouldn't run out.  While it is not ""bad"" advice, it's not the only kind of advice to offer when somebody finds themselves in such a situation. Adding advice about corrective actions is more helpful.  The person probably already know that they shouldn't have overspent in the first place and got into debt.  Yes, remind them of the value of being sensible about debt in the first place – it's good reinforcement – but add some helpful advice to the mix.  e.g. ""So you're in debt.  You shouldn't have lived beyond your means.  But now that you are in this mess, here's what you can do to improve the situation."""
"Good debt is very close to an oxymoron.  People say student loans are ""good debt,"" but I beg to differ.  The very same ""good debt"" that allowed me to get an education is the very same ""bad debt"" that doesn't allow me to take chances in my career - meaning, I would prefer to have a 'steady' job over starting a business.  (That's my perogative, of course, but I am not willing to take that 'risk.' /endtangent @Harmanjd provided the two really good reason for using cash over borrowing.  We have a tendency in this culture to find reasons to borrow.  It is better for you to make a budget, based on what you want, and save up for it.  Make a ""dream list"" for what you want, then add up the costs for everything.  If that number makes your head hurt, start paring down on things you 'want.'  Maybe you install just a wine cooler instead of a wine cooler and a beer tap, or vice-versa.  And besides, if something comes up - you can always stop saving money for this project and deal with whatever came up and then resume saving when you're done. Or in the case of the kitchen, maybe you do it in stages: cabinets one year, countertops the next, flooring the year after that, and then the appliances last.  You don't have to do it all at once. As someone who is working toward debt freedom, it feels nice whenever we have one less payment to budget for every month.  Don't burden yourself to impress other people.  Take your time, get bids for the things you can't (or won't) do yourself, and then make a decision that's best for your money."
The biggest reason to protect your credit card number is for your personal convenience. Replacing cards, even if there is no immediate dollar-consequence, is time consuming, so there IS a cost unless you do not assign value to your time. Additionally, repeated fraud may cause your financial institution to decide you're an above-average fraud risk and close your account. This costs more time and credit checks, etc., to apply for a new card.
Using the card(s) for daily ops, there is a play on building up the credit history as well: while we don't really need the loans to get from month to month, it helps build an image in the face of credit organizations, which can help secure e.g. favorable mortgage rates (and other contract conditions) which are out of pocket money range :) I'd say it is not only a ""we against the system"" sort of game though, as it sort of trains our own financial discipline - every month we have (a chance) to go over our spendings to see what we did, and so we more regularly think about it in the end - so the bank probably benefits from dealing with more-educated less-random customers when it comes to the bigger loans. Regarding internet, we tend to trust more to a debit card which we populate with pocket money sufficient for upcoming or already placed (blocked) transactions. After all, a malicious shop can not sip off thousands of credit money - but only as much as you've pre-allocated there on debit."
This is a slightly different reason to any other answer I have seen here about irrationality and how being rationally aware of one's irrationality (in the future or in different circumstances) can lead you to make decisions which on the face of it seem wrong. First of all, why do people sometimes maintain balances on high-interest debt when they have savings? Standard advice on many money-management sites and forums is to withdraw the savings to pay down the debt. However, I think there is a problem with this. Suppose you have $5,000 in a savings account, and a $2,000 credit card balance. You are paying more interest on the credit card than you get from the savings account, and it seems that you should withdraw some money from the savings account, and pay off the cc. However, the difference between the two scenarios, other than the interest you lose by keeping the cc balance, is your motivation for saving. If you have a credit card balance of $2,000, you might be obliged to pay a minimum payment of $100 each month. If you have any extra money, you will be rewarded if you pay more in to the credit card, by seeing the balance go down and understanding that you will soon be free from receiving this awful bill each month. To maintain your savings goal, it's enough to agree with yourself that you won't do any new spending on the cc, or withdraw any savings. Now suppose that you decide to pay off the cc with the savings. There is now nothing 'forcing' you to save $100 each month. When you get to the end of the month, you have to motivate yourself that you will be adding spare cash to your $3,000 savings balance, rather than that you 'have to' pay down your cc. Yes, if you spend the spare cash instead of saving it, you get something in return for it. But it is possible that spending $140 on small-scale discretionary spending (things you don't need) actually gets you less for your money than paying the credit card company $40 interest and saving $100? You might even be tempted to start spending on your credit card again, knowing that you have a 0 balance, and that you 'can always pay it off out of savings'.
"I think you're thinking that ""in debt"" doesn't just mean ""owes a debt"" but somehow means ""owes more debt in total than the assets"". That condition, owing money without offsetting assets, is ""having a negative net worth"". If you have a mortgage then you have a debt and you are in debt. You may have a positive net worth, if you have equity in the house and your car and such like, and have cash in the bank. You may have a negative net worth if you owe more than you own. But either way you are technically in debt. Knowing that, it's not surprising that 75% of Americans are in debt. It's surprising that 25% are not. They have no credit card, no car loan, no mortgage, no line of credit, no student loans. Is it because they've paid all that off? Or because they are deadly poor and own nothing and can't be lent anything? You can't just say it's bad to have debt. It's bad to have too much debt, to have a negative net worth, to be in the habit of borrowing to finance a lifestyle you can't actually afford, and so on. But it's perfectly normal to have a debt or two. That's how our system mostly works."
"All very good answers for the most part, but I have a definition for Good and Bad debt which is a little bit different from those mentioned here so far. The definitions come from Robert Kiyosaki in his book ""Rich Dad Poor Dad"", which I have applied to all my debts. Good Debt - Good Debt is debt used to fund a money making asset, an asset which puts money into your pockets (or bank account) each month. In other words the income produced by that asset is more than all the expenses (including the interest repayments on the debt) associated with the asset. Bad Debt - Bad Debt is debt used to fund both money losing assets and non-assets, where the interest repayments on the debt are more than any income (if any at all) produced by the goods or services the debt was used to purchase, so that you need to take money out of your pockets (or bank account) each month to sustain the debt. Based on this definition a mortgage used to purchase the house you live in would be classed as bad debt. Why? Because you are making interest repayments on the mortgage and you have other expenses related to the house like rates and maintenance, but you have no income being produced by the house. Even a mortgage on an investment (or rental) property where the rent is not enough to cover all the expenses is considered to be bad debt. For the debt on an investment property to be considered as good debt, the rent would have to cover the full interest payments and all other expenses. In other words it would need to be a positively geared (or a cashflow positive) asset. Why is this definition important in distinguishing between good and bad debt? Because it looks at the cashflow associated with the debt and not the profit. The main reason why most investors and businesses end up selling up or closing down is due to insufficient cashflow. It may be a profitable business, or the value of the property may have increased since you bought it, but if you don't have enough cash every month to pay the bills associated with the asset you will need to sell it. If the asset produces enough cashflow to pay for all the expenses associated with the asset, then you don't have to fund the asset through other sources of income or savings. This is important in two ways.