[Oof Arted]

kenrexford, on May 20 2009, 06:52 PM, said:

Maybe we use checks again?

You can't do that because you can't spell either it is 'Cheques' in English

[hotShot]

What percentage does the Federal Reserve Bank take from a bank for the money, this bank takes as a credit?
I think it's 0.25%. If the credit card company charges you with 18%, they intend to make a profit of 17.75%.
Do you think that is fair?

[mike777]

hotShot, on May 22 2009, 02:28 AM, said:

What percentage does the Federal Reserve Bank take from a bank for the money, this bank takes as a credit?
I think it's 0.25%. If the credit card company charges you with 18%, they intend to make a profit of 17.75%.
Do you think that is fair?

profit 17% after tax cool..pls provide proof so I can invest

based on your stats i see negative.

[Gerben42]

Quote

   What percentage does the Federal Reserve Bank take from a bank for the money, this bank takes as a credit?
I think it's 0.25%. If the credit card company charges you with 18%, they intend to make a profit of 17.75%.
Do you think that is fair?

Yes that's fair for those who do not pay in time. But it won't apply to you if you just pay every month, right?

I have a credit card also because it's more flexible in internet payment and because it allows me to withdraw money from my debit account without charge also abroad. Bigger purchases (cars, kitchens, etc.) almost always come with payment schemes with a much lower interest rate, so no reason to use a credit card there.

[mike777]

Gerben42, on May 22 2009, 02:38 AM, said:

Quote

   What percentage does the Federal Reserve Bank take from a bank for the money, this bank takes as a credit?
I think it's 0.25%. If the credit card company charges you with 18%, they intend to make a profit of 17.75%.
Do you think that is fair?

Yes that's fair for those who do not pay in time. But it won't apply to you if you do just pay every month, right?

again I see poor profit///////




If you do not want free capital markets to invest ok.....pls say so........

[hotShot]

mike777, on May 22 2009, 08:36 AM, said:

hotShot, on May 22 2009, 02:28 AM, said:

What percentage does the Federal Reserve Bank take from a bank for the money, this bank takes as a credit?
I think it's 0.25%. If the credit card company charges you with 18%, they intend to make a profit of 17.75%.
Do you think that is fair?

profit 17% after tax cool..pls provide proof so I can invest

based on your stats i see negative.

Based on this source the rate was more than 5% 2 years ago.
Did the credit card companies take 23% from you than, or did they optimize their profit.

Obviously the banks could reduce their costs. My question is, did the free market forces work resulting in better conditions for the customers or did the banks just keep the extra profit.

[cherdanno]

Credit card companies optimized their profits??? I AM SHOCKED!!!!!!!

[barmar]

helene_t, on May 22 2009, 03:03 AM, said:

JoAnneM, on May 22 2009, 04:49 AM, said:

We have never had debit cards because I have read that they are very dangerous (suseptible to fraud), and we have two credit cards that we pay off every month.

This must apply to off-line debit cards which can be used like credit cards. I don't see why they would be more fraud-prone than credit cards but maybe in case of fraud you have less coverage than you have with a credit card.

I believe the difference has to do with disputing a charge.

With a debit card, the money is deducted from your account immediately. It's gone, and at least in the US, I don't think banks are required to recoup your loss if you claim it was fraudulent, unless you've notified them already that your card was lost or stolen.

With a credit card, you're not out any money until you pay your bill. Until then, you can dispute the charge. And if the credit card issuer believes you, they have to eat the charge. They have insurance to cover this, so they usually believe the cardholder's claim.

[blackshoe]

Some years ago, back when I was still working, somebody hijacked my boss' Platinum Visa card number. He found out about it when his attempt to charge something or other was denied. Called Visa, found out that somebody had charged $7500 worth of computer on the card - in Zurich, Switzerland. He told 'em he'd never been to Zurich, and certainly not on the date in question. They took the charge off the card. A couple months later, they put it back. It took him a year to finally get them to quit doing that.

[kenberg]

barmar, on May 21 2009, 03:02 PM, said:

Winstonm, on May 21 2009, 10:52 AM, said:

This sense of entitlement which the financial industry exudes is repugnant to me.  I say let the beggars try to get by by issuing nothing but credit cards to sub-prime holders.
If they want me to pay my part by fee, I'll cancel their card and get another.

Isn't that a "sense of entitlement" on your part? Why do you think you're entitled to use a credit card for free?

No one claims an entitlement to use a credit card for free, or at least I don't. The credit card company offers me a credit card under whatever conditions it chooses and I do or do not accept. If I accept the offered conditions, I get pissed if they then suggest that I am some sort of deadbeat (I heard they have a specialized pejorative name that they use in house but I don't recall it) if I use the card in accordance with the terms offered.

They offer the terms that they offer because they believe them to be advantageous to them. Partly they get some cash from the retailer when I use it, partly they hope I'll lose my mind and run up debts that require me to carry a balance at a substantial interest rate. Even better they hoe that I will do something, almost anything qualifies, that will allow them to charge a truly impressive interest rate.

I'll cope of course. I am not on the edge and I am not expecting to lose my mind. I am retired so I cannot lose my job. I am not shocked that the card companies hope to make a buck, as do producers of cigarettes and Twinkies. I do think that the economics of credit cards is such that once again the poor and the dumb get the shaft, and I think as a large scale enterprise it is a threat to financial stability. The portion of society most likely to be in over their heads even with their job intact is largely the portion most in danger of job loss during the recession. A large number of people with large debt and absolutely no means of paying it off is ominous. I am sure the bankers will do fine. The taxpayers will bail them out.

[barmar]

From what I've heard, the credit card bill is designed to help the "poor and dumb". Usurious interest rates and surprise charges are going to be curtailed, but to make up for this the credit card companies are probably going to do away with no-fee cards.

[barmar]

blackshoe, on May 23 2009, 01:13 AM, said:

Some years ago, back when I was still working, somebody hijacked my boss' Platinum Visa card number. He found out about it when his attempt to charge something or other was denied. Called Visa, found out that somebody had charged $7500 worth of computer on the card - in Zurich, Switzerland. He told 'em he'd never been to Zurich, and certainly not on the date in question. They took the charge off the card. A couple months later, they put it back. It took him a year to finally get them to quit doing that.

A few years ago, a couple of my credit cards were stolen. I found out about this a few days later when one of the credit card companies called me to ask about some unusual charges they received. They took the charges off, cancelled the card, and sent me a replacement. I called the other credit card issuer, told them the card had been stolen, and had them check for recent charges, which I told them to cancel as well.

About 20 years ago I was working for Thinking Machines Corp., a supercomputer company that was targeting AI applications. One of our biggest customers was American Express, which was developing the first generation of software that tried to recognize customers' purchase patterns and detect when they deviated, to catch possible fraud.

[y66]

From How credit card companies want to debit you, by Dean Baker

Quote

One of the provisions of the Dodd-Frank bill passed last year instructed the Federal Reserve Board to determine the actual cost of carrying through a debit card transfer and to regulate fees accordingly. The Fed determined that a fee of 10-12 cents per transaction should be sufficient to cover the industry's costs and provide a normal profit. The Fed plans to limit the amount that the credit card companies can charge retailers to this level.

This would save retailers approximately $12bn a year... The prospect of losing $12bn in annual profits has sent the industry lobbyists into high gear. They have developed a range of bad things that will happen...

The credit card industry and the banks really don't have a case here; they are just hoping that they can rely on their enormous political power to overturn this part of the financial reform bill. ... Brushing away their rationalizations, their argument here is that they want larger profits and they have political power to get them. That may turn out to be true.

[kenberg]

Some of this, no doubt, falls into the "A fool and his money are soon parted" category. It's perhaps impossible to stop a willing lamb from being fleeced but some effort to slow down the process might be helpful.

Here is a case I am close enough to so that I know some of the details. A middle class couple have a perpetual credit card balance that runs somewhere between 10K and 20K. I suppose a conservative estimate of the yearly interest is around a thousand dollars. The wife tries to pay it down, the husband runs it up. Recently the wife's father (no, not me) gave her $1,300 to pay off one of the cards, which she did. This upset the husband who felt he would have been consulted, he wanted to use the cash to buy a new TV. They have three TVs now, I believe.

Absolutely nuts, of course. From what I have seen, not so rare as you might think/hope.

It is sometimes said that there should be a class in high school teaching youngsters how to handle money. A short class, imo. Lesson one: If you don't have the cash, don't buy it. Lesson two: See lesson one. You can run up a debt, as small as possible, for education. You can have a mortgage, but not a second mortgage, for a house. Possibly you can buy a car on payments but that's less clear. Starting from when I was very young and very broke, I have avoided this. And of course there can be a true crisis, but a crisis is something you get past as soon as you can and then return to normalcy, meaning no debt.


People of my generation almost universally regard the above paragraph as totally obvious, like 2+2=4. Somehow this is no longer the case. A pity. Maybe nothing can be done but we should try. Partly we should try because people are ruining their lives, partly it is because sooner or later there will be massive default and guess who will get stuck with the bail-out tab.

[Winstonm]

Quote

It is sometimes said that there should be a class in high school teaching youngsters how to handle money. A short class, imo. Lesson one: If you don't have the cash, don't buy it. Lesson two: See lesson one.

The problem with your idea, Ken, is that it flies in the face of modern economic theory. Just look at what Ben Bernanke and the Fed are doing now with QE I and QE II. The entire purpose of quantitative easing, i.e., buying bonds, i.e., printing money is to foster inflation to fight deflation and spur the economy by encouraging more borrowing and making holding dollars in savings a losing proposition.

When the economy is based primarily on consumption and inflation it is difficult to sell a depression-era idea like saving for a rainy day when tomorrow it may cost twice as much to buy that t.v.

And of course the banks should keep their extra 12 billion in profit - we can't afford to bail them out again if they lose that, too.

[kenberg]

Whether it makes sense to put money in a savings account is another issue, but it can't be good personal economics to run a revolving cc debt. A friend recently bought a new car (one of these hybrids). He could very well afford to pay cash but he has very good (very very good, actually) credit scores and is buying the car on payments at low rates. He believes, probably correctly, he can do better investing the money. This approach isn't for me because I find the whole investment thing boring. But for him it works. However this is a completely different ballgame. A sophisticated investor makes a business decision on where to place his cash, that's one thing. A couple supports the cc industry by buying crap they don't need, paying 8% or more on a loan they cannot pay off, that's quite another.

[blackshoe]

I was taught that one should never buy a depreciating asset (such as a car, or a TV) on credit. Of course, it took me a long time to realize that just knowing that isn't enough, you have to put it into practice.

[Chas_P]

kenberg, on 2011-March-31, 17:41, said:

A couple supports the cc industry by buying crap they don't need, paying 8% or more on a loan they cannot pay off, that's quite another.

And apparently neither member of this couple ever made a passing grade in arithmetic. I can't see condemning the credit card companies for the financial illiteracy of a large portion of the American people. The "BUY NOW - PAY LATER" pitch has been around for at least 50 years and consumers have succumbed to it more and more. Look at the furniture retailers. They don't advertise furniture; they advertise the DEAL..."No payments for two years, No interest for three years" etc. Same with the automobile retailers. They do advertise features to some degree, but a lot of it is stuff like, "$0 down, sign and drive, no payments for 6 months." The credit card issuers are no different. "Transfer balances. Only 4.9% for the first 60 days." In other words, "Pay off your Visa with your new Mastercard." And people fall for it. I don't blame it on the credit card companies. I blame it on a lack of education.

[Echognome]

I always thought people were just misapplying the Permanent Income Hypothesis and had grand notions of their "permanent income."

It's not just some crackpot economic theory. It was developed by Milton Friedman.

[kenberg]

Even as a mathematician I find that reference a tough slog, but I will give it some attention. However I think the answer is not to be found in rational economic theory. There needs to be an economic theory based on the irrational man.

Probably most people want their lives to go well, I do, and most people can be a bit lazy, I am. The trick for lazy people is to keep things simple, and this is getting harder all the time. When I was young and financially strapped, it was easy to see what I could afford. I looked in my wallet. If I bought a this, I couldn't buy a that. Now you can buy both, and then go out for dinner. You shouldn't, but you can. We all fall short on occasion and use bad judgment. It's just a lot easier now, and it is epidemic.

It's of course best if people take responsibility for themselves and so yes, the people who run up their cards need to take a lesson from Pogo; we have met the enemy and he is us. But
society makes efforts to protect the foolish and gullible. At least somewhat, sometime. I think that many could use a little help with the cc industry.