Where is the US economy headed?

By the way, a Trillion Dollars is a HUNDRED THOUSAND MILLION DOLLARS.

What's a trillion dollars?

A trillion dollars = $1,000,000,000,000.

That's 12 zeroes to the left of the decimal point. A trillion is a million million dollars.

Are you as good at finding evidence to show that someone is in error philosophically?

This bites. I have a credit card for my business. Many of my small suppliers prefer to be paid upon shipment with a card. Cash flow and bad debt issues. Fine with me. It costs about $1.50 to write and mail a check and this card offered a 1% rebate each month on my purchases - which averaged about $8000/month. The card has a $25000 limit, which was more than ample. We always paid the full balance on time. Never a late fee or interest.
Today (5/26) I get a "Dear customer" letter that says (in essence): The institution that funds outstanding balances (i.e. "buys" the credit card debt) has suspended operations. Your card is canceled as of 5/31. You have made $X in purchases since your last statement. We will allow an additional $500 of charges. Any charge made later will be declined. Have a nice day.
It matters little to me. I was in it for the rebate and the savings vs writing checks. My cash flow is fine.
The timing of this -just a week or so after Congress passed credit card reform- suggest to me that the bean counters looked at my history and decided they were not making any money off of me and people like me.

Tuesday, May 19, 2009 at 12:01 pm
If I'm such an unprofitable customer, Citi should feel free to take back my credit card at any time

. . . .Every time I buy something with my credit card, the store I buy it from pays an interchange fee to"in my case"Citigroup (via Mastercard). This makes perfect sense. There is a value to the store in accepting credit cards; I am more likely to shop there. Interchange fees tend to run about 2% to 3% of what you spend. That might seem like a hefty cut. In fact, businesses really complain about how high interchange fees have become. It doesn't look like that's changing anytime soon, though.

How valuable are interchange fees"and, by extension, customers who don't funnel card companies money by carrying balances month-to-month? Well, according to a 2006 report from the U.S. Government Accountability Office, for every $100 in credit-card balances outstanding, card companies make $10.45 in profit from interest and $2.87 in revenue from interchange fees. Yes, interest accounts for a bigger slice. But there's a risk that comes from that revenue stream"card companies never know when balance-carrying customers will stop paying their bills. That's hardly a minor issue: default rates at many card companies are approaching 10%. Interchange fees, by comparison, are essentially risk-free.

Another interesting comparison from the GAO report: revenue from penalty fees accounts for $1.40 for every $100 charged"half of what the firms make from people simply using their credit cards. The next time someone tries to tell you that legislating a fairer system for assessing penalty fees will make card companies stick it to their good customers, you might bring that up.

Now, it is possible that at $2.87 for every $100 charged, I'm not a profitable customer. It is possible that Citi has extended me credit in the hopes that some day, some glorious day, I'll rack up $8,000 in charges and then spend years to pay them off. But again, I'm dubious. I've been with Citi for a long time. They're pretty used to my spending"and bill-paying"habits. If they were losing so much money on me, why would they send me a new credit card, under the same terms, when my old one expired? More to the point, why would credit-card companies, in the aggregate, do business with the 42% of American households that pay off their balance each month? . . . .

More here:
http://curiouscapitalist.blogs.time.com/2009/05/19/if-im-such-an-unprofitable-customer-citi-should-feel-free-to-take-back-my-credit-card-at-any-time/

If they were losing so much money on me, why would they send me a new credit card, under the same terms, when my old one expired? More to the point, why would credit-card companies, in the aggregate, do business with the 42% of American households that pay off their balance each month? . . . .

I don't think so. As did the writer of the piece I excerpted, we have a track record spanning years now and the credit card companies have access to our credit score and are familiar with our spending habits. It isn't like a life insurance company that gambles that you'll pay more in premiums before you die than you will collect when you die or they can make up any difference through investments.

Yes if we paid interest we would be more profitable. But we are more profitable than those who pay late fees

and are a lot more profitable than those who default.

So that does seem to blow a hole in the theory that the credit card companies want bad customers more than good customers.

Hawkeye 10 wrote:

The federal budget deficit is projected to approach $1.3 trillion next year, the highest ever except for this year, when the deficit is forecast to exceed $1.8 trillion. The Treasury is borrowing 46 cents of every dollar it spends, largely from China and other foreign creditors, who are growing increasingly uneasy about the security of their investments.
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This, of course, means that Obama is the most spendthrift President in History

Does he really want to understand the USA or is he just Economically challenged?

So how about it, cyclops, if you are cheerleading on the government making credit card companies quit pillaging the poor, how about the governments quit pillaging the poor with lotteries? Just wonder if you want to be consistent? After all, they both offer a "something for nothing" philosophy.