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Credit Card Industry Aims to Profit From Sterling Payers

 
 
engineer
 
  2  
Reply Tue 19 May, 2009 06:26 pm
@ebrown p,
I agree that credit card companies make the majority of their money by taking advantage of the weakest end of the credit market. I don't have any issue with that nor with the proposed legislation that tries to limit it.

My comment was more to the effect that those using "free" credit are not necessarily the free loaders you depict. I don't have any hard numbers, so this is just my opinion. Yes, retailers pay a fee to the banks for credit card transactions, but they also benefit by having instant receipt of funds, freedom from trying to collect from bounced checks and no overhead associated with clearing other forms of payment. Of course, cash is free, but those paying with credit cards today were paying with checks in yesteryear. The 2% fee does get added to the bill everyone pays, but all those other savings come out of the bill as well. Is it a wash? Don't know, but I think it could be. Electronic funds transfer might even be cheaper. (I did a very quick and non-exhaustive search to see what the rate of bounced checks is and found one article saying 1-2%. Add in collection costs and I think most businesses would rather pay the 2% to the bank.) And while I agree that the grace period on credit cards amounts to a no cost short term loan, the banks get the money to make that loan from the same people paying their bills inside the grace period since those funds are in the banks receiving almost no interest in their "interest checking" accounts.

I think the real argument comes up now that debit cards are widely available. Are debit cards better than credit cards? Personally, I think it is a wash since the bank still charges large fees and now the money is paid from your account immediately so the bank can't use it instead of the bank offering you a short term loan with your own money. For those on the financial brink, their is a much greater risk of bouncing checks, allowing the bank to hammer you with fees.
engineer
 
  2  
Reply Wed 20 May, 2009 07:41 am
@engineer,
The NY Times put out a summary of the Senate bill for those interested.
JPB
 
  2  
Reply Wed 20 May, 2009 07:56 am
@engineer,
Quote:
For months now, the card companies have been threatening to cut rewards programs sharply to make up for revenue lost because of the new restrictions.

My guess, however, is that this talk is just so much saber-rattling.


I agree. They made a bunch of noise to try to minimize the impact of the bill. The lobbying effort failed and now they'll regroup and find creative ways to get those who pay their bills in full each month spend more than ever on their cards.
0 Replies
 
Phoenix32890
 
  1  
Reply Wed 20 May, 2009 08:39 am
@boomerang,
Although I would not care to have a charge for my credit purchases, (which are paid on time, automatically)the credit card companies do have a point. After all I am getting my money for free from the time that I purchase something, and the time that the money is withdrawn from my checking account.

If the fees became too obnoxious, I would look around for a better deal. Hey, that's business!

I used to use a debit card at the supermarket. At the time I had heard a lot of stories about how debit cards are more vulnerable to theft, so I stopped.
BumbleBeeBoogie
 
  1  
Reply Wed 20 May, 2009 09:35 am
@Phoenix32890,
Phoenix, your opinion about the risk of using debit cards is why I don't use one.

Last year, someone got my credit card number via random scanning and had a spending free in Europe. My bank notified me that they spotted ID fraud and all the charges were deleted.

It would be so easy for them to have cleaned out my checking account if I'd had a debit card.

BBB

gungasnake
 
  1  
Reply Wed 20 May, 2009 09:54 am
@JPB,
One problem is car rental agencies: they don't take checks or debit cards. The only other possibility is carring several hundred dollars in cash when traveling and that could get you busted as a drug dealer these days and the cash impounded.

I'd be all ears regarding any reasonable plan for living without the damned things in the near future.
Phoenix32890
 
  1  
Reply Wed 20 May, 2009 09:58 am
@BumbleBeeBoogie,
I was once in Mexico, on a cruise, and I bought some jewelry. I got a call from the credit card company, asking me if the sale was on the up and up. Now, whenever we go away on a long trip, we call the credit card company, and tell them.
0 Replies
 
JPB
 
  2  
Reply Wed 20 May, 2009 10:19 am
@gungasnake,
Again, I don't think the fees will be imposed. If they are then, yes, I'll probably start carrying a lot more cash or go back to traveler's checks for the very few things that "require" a credit card. But I will not pay a bank $$$ for the honor of carrying their card. Years ago they tried the same thing with ATM cards; charged $1-2/month plus transaction fees. I got rid of the card and started making bi-weekly cash withdrawals at the bank by writing a check for cash as part of our family budgeting process. All other purchases go on credit cards. Apparently they've done away with monthly charges to have an ATM card and most of them waive transaction fees at their own machines. I had the same mindset then. Why would a pay a bank to carry one of their cards that gets me access to my own money? I wouldn't.
0 Replies
 
gungasnake
 
  1  
Reply Wed 20 May, 2009 10:30 am
@engineer,
Quote:
I agree that credit card companies make the majority of their money by taking advantage of the weakest end of the credit market. I don't have any issue with that nor with the proposed legislation that tries to limit it.


You're mistaken if you think that the manner in which these companies prey on the weak in our society does not affect you.

On Saturdays on WMAL in the DC region there is sometimes a program which amounts to financial advice for the non-rich and I recently heard a conversation on this program which went sort of like this:

A lady caller stated that she had owed a credit card company something like $2200 around three years back; the company went under and disappeared, she made several efforts to figure out what to do with the debt and then had to move and totally lost touch with them and now was being dunned by the holder in due course of that debt which, with time and interest now stood around 6000. The host asked if she could afford that, the answer was no; she had a household income of around 40K and figured she might could pay something like the original 2200 or whatever without major grief but that was about all of it.

The host told her to make them a starting offer of around 1800 and be ready to pay 23 or 24 but stop at that point and let them know she was prepared to declare bankruptcy in which case they'd get nothing. He told her, and this is the kicker, that debt buyers like the company she was now dealing with buy debts like hers in bulk quantity at something like 5 - 10 cents on the dollar and are simply trying to get whatever they can in each individual case, no emotion or sentiment one way or another involved at all, just business.


That of course made my hair stand up. Correct me if I'm missing anything here but what that tells me is that every time I ever go out to buy any sort of thing below some level of value beyond which credit cards do not apply i.e. less than a new car or some such, then my money is competing with money which is worth no more than ten cents on the dollar, bottom line. That has to raise the price of everything I ever buy.

In other words, don't send to know for whom this particular bell tolls, it tolls for all of us. These companies are charging interest rates which would have gotten them burned at the stake a few centuries ago and have created a new form of slavery.

Again it would be very good if people could start coming up with schemes for living in the modern world without credit cards.
0 Replies
 
Mame
 
  1  
Reply Wed 20 May, 2009 02:25 pm
On a lighter note, Edward Yingling and Austan Goolsbee? lol

I agree with the women - if they start to penalize me for being a deadbeat, I'm paying cash. I'll use my card to reserve rooms or cars, but I'll pay in cash.
0 Replies
 
JPB
 
  3  
Reply Fri 29 May, 2009 10:00 am
Quote:
U.S. online shoppers hit with ‘foreign’ fee
Posted: Friday, May 29 2009 at 08:00 am CT by Bob Sullivan

In case you had any doubts that credit card firms would find ways to make up for revenue lost through recent reforms passed by Congress, let me put them to rest. Online shoppers take note: It's now possible that you'll be charged a foreign transaction fee on some purchases without ever leaving the U.S.

Bil Corry of Indiana spotted the new fee while carefully reading mail from Bank of America recently. Corry is an Internet Age consumer. He shops online and doesn't limit himself to U.S. companies. By shopping around the planet, he can save a little money. He buys Web- hosting services from a company in Amsterdam and registers domains with a company in France. But soon, Bank of America will be eating into those discounts. Corry recently received a letter saying the bank would help itself to 2 percent of each transaction he had with a foreign company -- even if he never leaves the U.S. and even if the transaction is completed in U.S. dollars. more...


It's time to make sure you read the fine print on anything you receive from your cc company.
0 Replies
 
 

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