Could You Live Without Your Credit Card?

by Kristina on December 15, 2010 · 8 comments

eiffel towerAs a financial planner for a leading international financial institution, I am learning about the financial systems in other countries.

France doesn’t have a credit system.  The credit system doesn’t exist in France. If you had to, could you live without your credit card?

Some of us charge everything to our credit cards all month long to earn travel or reward points. Then we pay off the bill in full at the end of the month to avoid any interest charges. If you didn’t need to and you didn’t earn any points, would you still use your credit cards for daily purchases? We may not use our credit cards out of necessity; we may only use them out of convenience.

However, some of us couldn’t survive without credit. In an idealistic world we would never use credit as a form of payment, because we should never spend money that we don’t have. That’s exactly how it works in France. French people do not spend money that they don’t have.

Financial institutions do have VISA and MasterCard in France; however it is linked to guaranteed money from their client’s bank account.  I very often have newly immigrated clients call me when they get their first credit card bill because they don’t understand why there is a balance owing on their credit card.  I have to explain to them that their spending is not automatically debited from their bank account each month.  However, clients do always have the option to set up a pre authorized payment plan.

France does offer regular loans to their clients, but they do not have revolving credit. There are home loans, fixed rate loans, and variable rate loans; they are a lump sum of money that is repaid over time, and very often the loan is secured by an asset.  Revolving credit such as credit cards, overdraft protection, and lines of credit do not exist in France.

Although the “Credit Cards” in France work almost the exact opposite as our system here in North America, there are some similarities.  “Credit Cards” in France have a limit just as our credit cards do in North America.  However, the difference is that the limit in France is a spending limit, and the limit in North America is a credit limit.  This means that the client has a maximum of $1000 they can spend each month; and at the end of every month the $1000 is debited from the client’s bank account. There is no carrying a balance from month to month, because the money is not borrowed.  People in France spend as much on their credit cards as they wish to pay, whereas in North America we charge as much as our credit limit.

In North America, our Credit Card limit is based (among other things) on our credit history and our employment.  In France, the spending limit is based on client’s assets.

If you lived in France could you live without your credit card?

Photo By Eustaquio



{ 8 comments… read them below or add one }

1 Janet December 15, 2010 at 12:16 pm

A lot of people are migrating to living off the credit grid. People are paying down debt, and fewer are using credit cards (at least according to some articles I read). The only problem is — unlike France — we obviously don’t have a system in place to build credit outside of credit. I have friends, though, who are paying cash for a home. A life free of monthly payments (for the most part) sounds fabulous to me. It’s a goal to strive for. :)

2 Honey December 15, 2010 at 12:57 pm

I make less than half what my boyfriend does but do the grocery shopping for both of us because my job has less demanding hours. There’s no way I could meet my other obligations and pay for 2 people’s groceries with cash, he and I track how much each of us owes the other and pay back. I guess in France I’d have to get however much I was going to spend in advance, which seems like a lot more of a hassle.

3 Matthew Denos December 15, 2010 at 2:39 pm

Hi Kristina,

It’s interesting what is happening in France and in other European countries. After living and working in the US for 6 years, I now live in Greece. Credit cards are rarely used here! In fact, since last July, I have not used mine at all. In the States, I wouldn’t dare get out of my house without my credit card in my pocket.

4 Migdalia December 16, 2010 at 11:53 pm

I could easily do that, certainly I would miss the benefits that my card gives me but I pay it in full each month so if its necessary I can switch to cash anytime.

5 Wealthy Immigrant December 17, 2010 at 4:36 pm

I was “forced” into getting a credit card. When I came to the US several years ago, it was quite a hassle because I didn’t have credit history. Even cell phone companies turned me down because I didn’t have a co-signer. Now I use credit cards solely for their reward programs.

6 Melissa January 13, 2011 at 10:30 pm

I don’t have a credit card, never have, and will try to avoid them for my whole life. I believe in living inside my means.

7 Juan Cadavid February 15, 2011 at 5:21 am

I arrived to live in France 15 months ago; before that I’ve lived in the US and Colombia (where we have the same system as in the US). I always wanted to live in the ideal world you describe, but never got around the discipline of spending only what I have. A big financially cultural shock was waiting for me here!

My bank here allows me to have a negative balance of 500€, and I used (and exceeded) that so many times they ended up blocking my card; even now after paying my debt and with a high positive balance they still won’t fix it. They mention I have to give proof of “bonne foi”, this is to say 3 months without negative balance to reactivate my card again.

8 ALFA November 12, 2011 at 9:55 am

Where have you read or seen that Revolving loans doesn’t exist in France ? Your last trip here was iun 1930 ? Revolving credits are widely spreaded in France. At least 50 % of French homes are overfull of revolving loans. And 80 % of the French own at minimum 1 credit card, if not several. Once again, US total ignorance of foreign habits.

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