Over at Make Money Your Way, Troy continues the series on investing for beginners by explaining the two types of options: Call options and Put options.
Ever wondered if people around the world take on as much debt as you do? Do they have as many credit cards, student loans, or consumer loans? When I first started reading personal finance blogs from the US, I was blown away by how much debt people had. I thought it might be like overweight people starting a weight loss diary—just because some do, doesn’t mean everyone is overweight. But then I read studies showing that having a car loan, a student loan, and multiple credit card balances was pretty common in the US.
Things are different in France. Maybe it’s because our grandparents lived through WWII and taught us to be cautious with money, or because it’s hard to borrow unless you have a good job.
Student loans? Very rare.
In my business school, only a few students took out loans. I managed to live on $400 a month in college and graduated with $25,000 in savings, without borrowing money or paying tuition for five years. If you can’t afford to study, scholarships cover you. Public universities cost about $2,000 a year, and top business schools can go up to $20,000. Some students take loans to experience “full college life” or study abroad, not realizing they can travel after college with the money they save.
Car loans? Hardly ever.
I didn’t own a car until I was 29, and most of my friends don’t own one either. Outside big cities with reliable public transportation, people in their 20s might have cars, but they typically buy old, affordable cars with money from summer jobs. Only a few people I know have financed their cars.
Credit/Debit Cards
In France, most people have a “carte de crédit.” It functions like a debit card with an overdraft. If I spend €100, it’s deducted from my account in a few days. We don’t carry balances; some cards pool purchases until month-end and then deduct them. Despite this, we pay about €40 per year for the card.
Account Overdrafts
Due to the “carte de crédit,” most people get an overdraft authorization on their accounts. Mine is around 8% interest with ING, calculated daily with no minimum. This is better compared to my old bank, which had a fee even for minor overdrafts. Overdraft rates are usually lower than credit card rates, and anything over 16% is considered usury.
Store Cards
Only a few stores offer high-interest revolving credit cards, sometimes with a 0% balance on a big first purchase. Most people avoid these because they prefer to buy only what they can afford.
Our Credit Cards Are Basic
Since we rarely go into debt or pay high APRs on credit cards, there are no travel rewards, hotel points, or cashback offers. Just a yearly fee that usually includes purchase protection and identity theft cover.
Loan Affordability
When taking a mortgage, loan, or line of credit, the bank checks your income. You must earn at least three times the loan repayment amount net. If you earn €1,000, you can take a €333 mortgage. If you’re already paying €350 in rent, you can’t borrow anything. This strict criteria helps limit bankruptcies but also makes getting a mortgage difficult, especially in expensive cities like Paris.
No Credit Scores
I didn’t have a credit score until I moved to the UK. In France, there’s only a list of bad debtors at the central bank.
Our Only Debt: The Mortgage
Since borrowing is complex and not routine, our main debt is usually a mortgage. Banks try to make money from fees and strict mortgage terms because they don’t profit much from credit cards and loans. Sometimes we might take out a consumer loan for house renovations, planning to pay it off quickly.
As a result, we typically graduate debt-free, and you don’t hear about people being hundreds of thousands of dollars in debt.
Have you noticed any other differences in how debt and finances are handled around the world?
