Credit cards are used because they allow for global money transactions in much the same way debit cards do locally in your home country. For example, it's practically impossible to fly into USA, rent a car, and book a hotel for a week unless you have a credit card that has several thousand dollars of credit. Even if you have the very same money on your bank account. The system just works that way.
But credit card debt is way overrated. You basically have to have that money anyway (roughly in a month) so that you can pay off the credit card bill. In the average, you can use a credit card to spend your next salary beforehand but that leaves you with nothing to live on the following month. So what you can do with a credit card is rather limited, as if you do not pay off the debt in one month, you're in for some serious interest rates until the balance comes back close to zero again.
Debt is useful when you invest in something that will produce better yield than the interest on the debt. For example, buying an apartment generally will immediately lower your cost of living (in comparison to rent) and subsequently frees more money to pay back the debt and interest. Thus, taking a mortgage makes sense if you can pay it back in a reasonable time so that the proportion of interest won't accumulate into too high in the grand totals.
Then again, buying a new car with a loan makes no sense whatsoever. The value of the car will only degrade and it might actually degrade faster than the rate you're paying off the debt.
> For example, it's practically impossible to fly into USA, rent a car, and book a hotel for a week unless you have a credit card that has several thousand dollars of credit. Even
I pay for stuff all the time in the US using a debit card. I've never been declined because it's a debit card.
But credit card debt is way overrated. You basically have to have that money anyway (roughly in a month) so that you can pay off the credit card bill. In the average, you can use a credit card to spend your next salary beforehand but that leaves you with nothing to live on the following month. So what you can do with a credit card is rather limited, as if you do not pay off the debt in one month, you're in for some serious interest rates until the balance comes back close to zero again.
Debt is useful when you invest in something that will produce better yield than the interest on the debt. For example, buying an apartment generally will immediately lower your cost of living (in comparison to rent) and subsequently frees more money to pay back the debt and interest. Thus, taking a mortgage makes sense if you can pay it back in a reasonable time so that the proportion of interest won't accumulate into too high in the grand totals.
Then again, buying a new car with a loan makes no sense whatsoever. The value of the car will only degrade and it might actually degrade faster than the rate you're paying off the debt.