American Financial Norms That Are Very Different From the Rest of the World

Krystal Smith

The U.S. boasts the world’s biggest economy by GDP due to the range of financial practices they put in place. We take a look at 18 financial norms in the U.S. that are different from the rest of the world:

Reliance on Credit Cards

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Credit card usage in the United States is significantly higher than in other countries. According to the Federal Reserve Bank of New York, the average American household will have 10.8 credit cards in 2022. This differs from several European countries, which adopt a more cash-based society and have stricter regulations on credit card usage. With credit cards widely used in the U.S. for everyday purchases, there are worries that this behavior is fueling a debt culture.

High Credit Card Interest Rates

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A limited number of large issuers dominate the U.S. credit card market. While competition exists, it might not be as intense as in other countries, leading to less pressure to lower interest rates. Due to the prevalence of credit cards, companies offer lucrative rewards programs, such as cashback and travel points, which are factored into the high-interest rates. 

Student Loan Debt

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University tuition fees in the U.S. have skyrocketed in recent decades, outpacing inflation and median household income. This forces students to rely heavily on loans to finance their education.

Individual Investment Accounts

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Individual Investment Accounts (IRAs) are popular financial tools in the United States that allow individuals to save and invest for retirement with significant tax benefits. Contributions to a Traditional IRA are typically tax-deductible, meaning you can deduct the amount you contribute from your taxable income in the year you contribute. However, withdrawals during retirement are taxed as ordinary income.

Focus on the Stock Market

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The U.S. has a strong history of entrepreneurship and innovation. Publicly traded companies offer the opportunity to invest in the growth of these businesses, potentially leading to significant returns for Americans looking to boost their retirement funds. 

High Cost of Healthcare

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The U.S. healthcare system is largely privatized, leading to high medical costs and complex insurance plans. Compared to other developed nations, the U.S. allows pharmaceutical companies significant control over drug pricing, often leading to higher medication costs.

Social Security

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While Social Security offers crucial support for American retirees, its long-term stability faces significant challenges, predominantly due to a low birth rate and higher life expectancy. This leads to less money going into the pot. The Social Security trust fund, accumulated from past surpluses, is projected to be depleted by 2033. This means the program will solely rely on ongoing tax revenue, which may need to be increased to cover all promised benefits.

Limited Paid Leave

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Compared to developed countries like the U.K. and Germany, the U.S. offers minimal mandated paid leave for parental or medical reasons. Employers may perceive mandated paid leave as an economic burden, potentially impacting operational costs and competitiveness.

Tipping

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Unlike many countries where service industry positions have built-in living wages, the U.S. relies heavily on tips to supplement the often low base wages of servers, bartenders, and other service staff.

Focus on Building Credit Score

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The American economy heavily relies on consumer credit. Individuals use credit cards, mortgages, auto loans, and other credit products to finance various aspects of their lives, from everyday purchases to significant expenses like houses and cars. A good credit score is a gateway to multiple financial opportunities, as lenders use credit scores to assess an individual’s creditworthiness. 

Student Loan Repayment

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While there are people with high levels of student debt worldwide, the U.S. has a debt exceeding $1.5 trillion. This staggering amount translates to an average of $28,400 per borrower and significantly strains people’s finances. 

Personal Responsibility

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The U.S. financial system encourages individuals to be individually responsible for managing their finances, which means there is less government intervention than in some countries. While this outlook is good for some, people with poor credit scores can be vulnerable to high interest rates and enter a cycle of debt. 

Bankruptcy Laws

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The U.S. has a robust bankruptcy system, allowing individuals options when they get into debt. The strong system explores options like debt consolidation or negotiating with creditors, which might be suitable solutions for people struggling financially. 

Limited Universal Basic Income

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Some countries have a universal basic income program that guarantees a minimum income to all citizens. However, this does not exist in the U.S. Basic Income is a handout in the U.S., reducing the emphasis on individual responsibility to work and secure a solid financial future. 

Means-Tested Benefits

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The United States has a significant number of means-tested benefits. These programs offer financial assistance to individuals and families whose income and assets fall below a specific threshold. However, claiming long-term welfare benefits in the U.S. is much more challenging than in some countries. 

Progressive Tax System

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Top earners pay a larger share of the total income tax collected. For instance, the top 1% of earners contribute a significantly higher income tax percentage than the bottom 50%.

Sales Tax

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Most countries have some form of consumption tax, such as VAT, but the U.S. has a robust sales tax system. Sales tax varies significantly by state, ranging from around 2.5% to over 11%, adding an extra layer of complexity to the tax system.

Property Tax

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Property taxes are a significant source of revenue for local governments in the U.S. and significantly impact homeowners. Since property taxes are based on assessed value, homeowners might be motivated to maintain and improve their property to avoid tax hikes due to declining value.

American Customs That Confuse the Rest of the World

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Non-Americans are pointing out puzzling aspects of American culture, such as the obsession with sugary foods, complex tipping customs, and the prevalence of guns and violence in media. These observations highlight the cultural nuances that can confuse outsiders.

American Customs That Confuse the Rest of the World

What Does the World Really Thinks of Americans

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It’s obvious that every part of the world has something to say about Americans or knows something about this glorious country. To identify what foreigners think about Americans by leveraging general news articles and social media surveys, we bring you what we found.

What Does the World Really Thinks of Americans

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