Could We Learn From A Land Where Almost Nobody Swims In Debt?
August 22, 2016

Could We Learn From A Land Where Almost Nobody Swims In Debt?

“That will be 450 euros please,” said the young German woman behind the counter. I was buying a GPS and a couple of bicycle saddlebags. I pulled out my credit card. It cost $505 USD. But the woman shook her head. “We only accept cash.”

A restaurant declined my credit card later that afternoon. “Sorry,” said the server, “Cash only sir.” If my credit card had feelings, it might have jumped off a bridge. Nobody wanted my card. Even our small hotel said no.

In Germany, credit cards are a lot like dirty socks. Shops that accept them are about as common as Laundromats. That’s why my wife and I are traveling with wads of euro bills. We’re cycling through Germany on our bicycle built for two.

Andrew and Pele in Germany

No country is perfect. But there’s much we could learn from Germany’s anti-credit card culture. According to­­­ ­­­the Federal Reserve Bank of Boston, roughly half of Americans carry revolving credit card debt. They pay high interest every month. publishes credit card debt figures using data from the Federal Reserve. The average U.S. household that pays credit card interest owed $16,048 in March 2016.

Each day, I’ve been speaking to different Germans. Some of them own credit cards. But none admit to carrying debt. It’s as if they’re nationally programed to say the same thing. “If we can’t afford it with cash, it’s part of our culture not to buy it.”

That might explain, in part, Germany’s low home ownership. According to, just 52 percent of Germans own their own homes. That’s one of the lowest percentages in Europe. That compares to 64 percent of Americans who own homes.

But most Germans can afford to buy a home. The Economist publishes an interactive global home price comparison. German homes are among the cheapest in Europe compared to household income. They’re also cheaper than homes in the United States. In the chart below, I entered comparisons for Belgium, Britain, France, Ireland, Italy, the United States and Germany. The U.S. is in blue. The dark orange line represents German home prices compared to income levels.

Perhaps many Germans rent because they dislike debt.

The Economist House Price Index

Source: The Economist

A Federal Reserve Bank of Boston research paper says Germans pay cash for almost 80 percent of their purchases. That’s supposed to include big-ticket items.

I wanted to see if that was true. I pulled our tandem into a car dealership in the town of Oberwesel. I met Viktor Schonberger. He sells cars for the Autohaus Becker dealership. “Up to 40 percent of Germans don’t borrow money to buy new cars,” he said. “They pay with a card. But it comes directly out of their bank accounts.” That compares with about 15 percent of Americans who do the same.

Writing for BBC News, Simon Jack and Krissy Clark interviewed Professor Marcel Fratzscher. He’s the head of Germany's leading Economic Research Institute.

"The German word for debt - 'schuld' - is the same as the German word for 'guilt',” he says. “ To get into debt you have done something bad and that describes the German people's attitude quite well."

A German published Bundesbank study reported that even among young people (aged 14 to 24 years of age) two thirds say they would prefer to buy things with cash. That figure is even higher for older Germans.

But this could soon change. The German government recently announced a proposal to limit cash transactions to about 5000 euros ($5,589 USD). This would allow the government to better track the flow of money. Some anonymous transactions, they say, could be aiding terrorism.

Getting public approval, however, might be tougher than it looks. Germans love their cash. They don’t seem to like my credit card–nor anyone else’s.

That’s tough to get used to, as we cycle along the Rhine. But some debt phobia could be a good thing. It might keep consumers out of trouble.

Related Articles

This article contains the opinions of the author but not necessarily the opinions of AssetBuilder Inc. The opinion of the author is subject to change without notice. All materials presented are compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.

Performance data shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown.

AssetBuilder Inc. is an investment advisor registered with the Securities and Exchange Commission. Consider the investment objectives, risks, and expenses carefully before investing.