When a Chinese person buys a wallet, he/she looks to see how much cash it will hold; when an American buys a wallet, he/she looks at how many credit cards it will hold. (Useless fact: Chinese wallets are actually larger than most American wallets because 100 RMB bills are larger than US dollar bills) The entire concept of money seems to be different between the two cultures.
As soon we came back to the states, I started building my husband’s credit. I found a credit card with a terribly low limit but no fees, and we bought a car with a high interest rate even though we had enough to buy the car in cash. Sadly, the bank representative told us this was very common. As she explained, even though immigrants often have plenty in cash to buy a house or a car in full, without credit, they can’t get a loan. I’m sure there is logic in there somewhere. So we paid interest to have a credit score because credit is king.
It’s amazing how often companies check your credit score. Your credit is checked when you apply for a job or apartment or even a cellphone. My Internet provider wanted to run a credit check! (I refused so I have to have payments auto-billed…) You need credit in America because cash will only get you so far.
Having this conversation with our Chinese friends in the US is interesting. We are not alone among our friends in preparing to buy a house. The difference is that we plan to get a mortgage. It is hard to explain that we are willing to pay interest on a mortgage in order to improve our credit. Why would anyone be willing to take on debt and pay extra for something that you can already afford? Credit is this mystical number that you have to maintain so you look like a reliable person. The conversation also goes into a comparison of the return on investments – mortgage interest rates are so low right now that putting less down on a house and investing the remaining money can bring a bigger and faster return, but from the Chinese perspective, the Chinese stock markets are still very unregulated and banks charge more than you make in interest. Then there is the security of having funds available in a bank as opposed to all tied up in an illiquid asset, but the Chinese real estate market has been great in the past and it’s normal for Chinese people to put their money into physical, less liquid assets (gold, real estate, etc). All of our Chinese friends pay cash for everything and yet can’t qualify for a credit credit.
When my husband’s parents bought our wedding house, they brought a shoe box of money over to the owners house and that was it. It took one morning and money exchanging hands and the house was theirs. My mortgage company hates cash; it is a vehicle for money laundering. When they talk about paying cash for a house, they don’t literally mean opening a briefcase full of $100 bills; the terms on our contract specify that the seller will only accept a certified bank check or bank wire, no cash. We ran out of checks so we just used cash for our “earnest money deposit.” Big mistake. There is no paper trail with cash and it caused a headache for me with my bank. In the end I just had my realtor write me a check for the deposit and then I wrote them a check so the mortgage company would have their paper trail. Even worse, my husband’s parents sent us money for the house. (No use fighting with the in laws, we just accepted the gift.) The mortgage company does not understand how the money was never in a bank. His parents had the money sitting in their house and then they sent it to us. The Chinese banks all charged a rather large fee for international bank wires and several of the US banks charged to receive them so they just sent cash via Western Union. Cash is still legal tender, but I feel we are being treated like criminals because we have no way of proving where the money came from without a bank statement.
I tend to believe that money does not exist in the US. I never see my paycheck, it deposits automatically into my bank account and then from there moves over electronically to pay my bills or goes into savings. I never physically handle money anymore. I much prefer it this way. I love earning points or cash back on my credit cards and knowing that if I lose my wallet, I can recover any money lost because it’s all on credit cards and not cash. I love that we can have a mortgage to build equity on a house for less a month than renting a small apartment. I even love that I don’t have to worry about fake currency or dirty cash. For as much as a pain as it is, credit is great. Though I don’t know why cash is so unwelcome these days. You would think that it is no longer legal tender because I’ve seen more and more businesses in the US stop accepting cash.
Cash is King in China, but credit rules in the US.