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[JGS]

STFU.

Our transaction fees are already the highest in the industrialized world. Your really swallowing that it takes 44 cents to process a single electronic transaction fee?

The fee is not a covering costs one any more than an overdraft fee is. Many banks use the money to cover fraud losses and to pad their profits. Banks handle the bulk of fraud losses, I don't care what merchants say on the issue. I know they don't because of the sloppiness of their sales transactions. As a customer of the bank, who cares?

Chase is a big bank (Not the whole 14 billion btw), one of the biggest, so of course it is a major revenue stream for them and it cost the consumer nothing that weren't goung to pay anyway. However, smaller banks, like the one I work at, are impacted more. I couldn't care less what it cost the merchant since there is no way on God's Green Earth that the merchant is cutting prices as a result and that's a cost of doing business anyway. They have other options they can take.

With the law change, you are possibly going to see a monthly fee (Like I said, doubtful there will be a limit) which is stupid. You may also see higher upfront fees for the merchants to setup card processing which is fair though. The people who write regulations remain stupid in thinking that the banks are actually going to give up a dime of revenue over this plan.

Banks in other countries manage to do this for under 10 cents a transaction and they dont say a peep. I call absolute bullshit on this until they give a solid figure on how much it costs them on average to process a transaction. The silence on that pivotal question should speak volumes given their history and especially Chase's historical business practices.

Banks in other countries aren't what we're talking about. Those are the rates that are negotiated unless there is a law in the books. Reading on Gaf, it seems to me that they many countries have their own set up of rules altogether with the entiriety of banking so the American banking system (That is heavily relied upon internationally) is apples and oranges.

It also doesn't matter what the cost is since it's a service. All software would be 50 cents if you factored only the costs into it. I would much rather see a guarentee from the retailer that their prioce drops when they don't have to worry about the fee since that is what concerns me more as the consumer.

If the law passes- fine. If you had actually read instead of being outraged, I said it's one of the better ones which it is when comparing it to monthly fees, O/D fees, annual fees, & etc... I'll keep my opinion the same on that.

 

[FlashFlooder]

If I am poor and in an unstable employment situation, or worse I lose my job half way into the month - if Im already barely treading water and have no ability to save due to low income. If I purchased my goods knowing my income would have been "" at the end of the month or week but now am unemployed, i am late on my credit card, debt piles up because I cant pay it off, my rating plummets. Or hll maybe I messed up earlier in life and now cant get anything but a secured credit card with money down.

In this shaky life situation, why the fuck would I not rather have the option of just using a debit card so I know I only spend what I have?

Especially when the only reason I cant do that is because some millionaire bankers are pissed they cant charge a higher transaction fee to small business to fund the down payments on their 4 story Viking Yachts?

Well, I'm not at all arguing in favor of this move by the banks (to charge fees for debit card use, or cap it). All I'm saying is you're always better off using a credit card, unless you are a hazard to yourself.

And why are people even talking about cash advances in this thread? Never, ever do a cash advance on a CC. Ever.

 

[Zoe]

Suggestions?

Read up here for general info: http://www.bankrate.com/finance/cre...s-before-getting-a-secured-credit-card-1.aspx

Looks like Capital One is at the top of their list. I know some people don't like them, but I've never had an issue with them. I keep meaning to open a checking account with them cause they always have good introductory promotions, but switching direct deposit at my work is such a pain >_<

I have no credit card, I'm 20 is this bad?

Have you ever had a car loan under your name? It will make it hard to get any other kind of loans on your own if you don't.

Do you already have rental history? Corporate-owned apartments tend to require you to get a guarantor if you have no rental or credit history.

 

[Jonm1010]

Suggestions?

Try Orchard bank. They are by far the easiest to get into in my opinion. They do a soft credit inquiry first(which wont knock your credit score) to determine if you qualify for a unsecured or secured card. They are pretty lenient but arent going to dole out a high credit limit. $320 dollars wouldn't surprise me as its there introductory limit. They also report to the bureaus every month so credit builds fast. Just make sure you pay off every month and keep your spending under 40% of the allotted limit and in about 4 -6 months you should have built some solid credit and can either get a limit increase or a better card. However I do think they charge an annual fee so after you get some credit you might want to get a better card, take the temporary hit and close the Orchard card.

Ive seen people with a score of barely 500 get an unsecured card with them.

As a side note, get a creditkarma account and monitor your score. Its a free site that has a forums and reviews of credit cards and FAQs on how to manage your credit. Its not like that freecreditreport.com crap.

 

[FlashFlooder]

^^even a car loan won't do much for your credit. I think at 20 you should at least be looking to get started at building credit. I really jumped in when I was 21 and have great credit and lots of free stuff as a result.

I would recommend a Student card, as those are usually targeted at people with no/short credit histories. The Capital One MTV card is a good example (even though I don't do business with Capital One).

 

[Zoe]

I have set my overdraft on my debit to 0 if I go over all I got to pay with is my embarrassment. On a CC if I am not mistaken they give you the money but charge a penalty and impose a higher interest rate.

Credit cards fall under the same legislation that bank accounts do concerning that. If you want your CC to be able to overdraft, you had to opt into it last year.

 

[Jonm1010]

The fee is not a covering costs one any more than an overdraft fee is. Many banks use the money to cover fraud losses and to pad their profits. Banks handle the bulk of fraud losses, I don't care what merchants say on the issue. I know they don't because of the sloppiness of their sales transactions. As a customer of the bank, who cares?

Chase is a big bank (Not the whole 14 billion btw), one of the biggest, so of course it is a major revenue stream for them and it cost the consumer nothing that weren't goung to pay anyway. However, smaller banks, like the one I work at, are impacted more. I couldn't care less what it cost the merchant since there is no way on God's Green Earth that the merchant is cutting prices as a result and that's a cost of doing business anyway. They have other options they can take.

With the law change, you are possibly going to see a monthly fee (Like I said, doubtful there will be a limit) which is stupid. You may also see higher upfront fees for the merchants to setup card processing which is fair though. The people who write regulations remain stupid in thinking that the banks are actually going to give up a dime of revenue over this plan.

Banks in other countries aren't what we're talking about. Those are the rates that are negotiated unless there is a law in the books. Reading on Gaf, it seems to me that they many countries have their own set up of rules altogether with the entiriety of banking so the American banking system (That is heavily relied upon internationally) is apples and oranges.

It also doesn't matter what the cost is since it's a service. All software would be 50 cents if you factored only the costs into it. I would much rather see a guarentee from the retailer that their prioce drops when they don't have to worry about the fee since that is what concerns me more as the consumer.

If the law passes- fine. If you had actually read instead of being outraged, I said it's one of the better ones which it is when comparing it to monthly fees, O/D fees, annual fees, & etc... I'll keep my opinion the same on that.

All I hear is a lot of excuses. Tell me how much it costs to transact a payment and provide fraud protection. The fact that Chase is deafeningly silent on that question should give you, me and everyone pause as to the real motivations behind the fees. Im not sure why you are so quick to jump to the defense of a bank that has in the past and even now shown to be a shady, deceiving and unethical institution.

 

[empty vessel]

The fee is not a covering costs one any more than an overdraft fee is. Many banks use the money to cover fraud losses and to pad their profits. Banks handle the bulk of fraud losses, I don't care what merchants say on the issue. I know they don't because of the sloppiness of their sales transactions. As a customer of the bank, who cares?

Chase is a big bank (Not the whole 14 billion btw), one of the biggest, so of course it is a major revenue stream for them and it cost the consumer nothing that weren't goung to pay anyway. However, smaller banks, like the one I work at, are impacted more. I couldn't care less what it cost the merchant since there is no way on God's Green Earth that the merchant is cutting prices as a result and that's a cost of doing business anyway. They have other options they can take.

With the law change, you are possibly going to see a monthly fee (Like I said, doubtful there will be a limit) which is stupid. You may also see higher upfront fees for the merchants to setup card processing which is fair though. The people who write regulations remain stupid in thinking that the banks are actually going to give up a dime of revenue over this plan.

I have no illusions that they will give up much, either. But at least this way the costs aren't hidden. They will be up front, and the customer (be it banking or retail) will understand the cost of what he or she is doing. That is actually very important for a healthy economy. When banks are so powerful (and have so little competition) that they actually have the power to shift costs between consumers (not even their own consumers) by their actions without anybody even picking up on it or being able to do anything about it, that is not healthy for an economy or for a society more broadly.

Banks must be made to charge reasonable fees for their products, and those fees should be directly connected with the services being performed. In this light, people should be paying a monthly fee, because that's the true cost of the service they are receiving. Like I said, they are already paying for it, it's just that the costs are hidden in price inflation of goods they are buying.

 

[FlashFlooder]

I think cable companies should be made to charge lower prices for internet, because I don't like paying as much as I currently am.

It is supposedly still a free market here in the U.S., right?

 

[Jonm1010]

I have no illusions that they will give up much, either. But at least this way the costs aren't hidden. They will be up front, and the customer (be it banking or retail) will understand the cost of what he or she is doing. That is actually very important for a healthy economy. When banks are so powerful (and have so little competition) that they actually have the power to shift costs between consumers (not even their own consumers) by their actions without anybody even picking up on it or being able to do anything about it, that is not healthy for an economy or for a society more broadly.

Banks must be made to charge reasonable fees for their products, and those fees should be directly connected with the services being performed. In this light, people should be paying a monthly fee, because that's the true cost of the service they are receiving. Like I said, they are already paying for it, it's just that the costs are hidden in price inflation of goods they are buying.

I'd have no problem with a monthly fee if the costs were more transparent and not hidden away like you mentioned.

To me banks, like healthcare is a pivotal function of a societies well being. And i think it is absolutely pivotal that it works in the interest of the whole first before it works to the interest of those seeking to make enormous profit from it.

Thats not saying to have the government run either of those things but it is saying that strict regulation and strict rules need to be enforced to make sure that society as a whole is getting the better end of the deal. Transparency in fees and regulating cost shifting should be amongst that imo.

 

[JGS]

I have no illusions that they will give up much, either. But at least this way the costs aren't hidden. They will be up front, and the customer (be it banking or retail) will understand the cost of what he or she is doing. That is actually very important for a healthy economy. When banks are so powerful (and have so little competition) that they actually have the power to shift costs between consumers (not even their own consumers) by their actions without anybody even picking up on it or being able to do anything about it, that is not healthy for an economy or for a society more broadly.

My primary problem with this is my lack in faith in the merchants. I don't believe this is going to lead to lower prices at all. I don't even think it will curb inflation. So what will happen is the bank charges a fee to offset the loss and the consumer is still spending the same amount for good, with a number of them being necessary.

You could technically find out the same upfront info by mandating receipts to seperate the cost in the transaction. Most registers & equipment are set to easily do this.

This law as is is simply going to setup a prcess that the consumer is going to be paying more, just like the credit card regulation does overwhelmingly & O/D opt-out tends to do.

Banks must be made to charge reasonable fees for their products, and those fees should be directly connected with the services being performed. In this light, people should be paying a monthly fee, because that's the true cost of the service they are receiving. Like I said, they are already paying for it, it's just that the costs are hidden in price inflation of goods they are buying.

Debt cards are too universal now. They are extremely close to cash now for most consumers including the poor. It's a charge that affect the poor far more than the rich who will likely never have to pay a fee to begin with. The banks aren't limited in charging of fees since they can manipulate it easily, just on where the fee goes.

Also, the law in place doesn't change the reasonable fee notion. It's not the true cost (Which is irrelevant since banks, like retailers, are entitled to profits), but a guestimate and a new revenue stream. It simply rewards the retailers, a big backer of the law. This law is based on 3 huge industry groups- banks, credit cards, & merchants. None of them are starving, so it's best to go with the one that aids the consumer more. 3 dollars to use something the banks actively encourage is not a reasonable fee imo.

 

[Sqrt_minus_one]

I think cable companies should be made to charge lower prices for internet, because I don't like paying as much as I currently am.

It is supposedly still a free market here in the U.S., right?

There comes a point where businesses are exploiting market power and making excessive profits. Free markets do not imply fair competition.

 

[Jonm1010]

I think cable companies should be made to charge lower prices for internet, because I don't like paying as much as I currently am.

It is supposedly still a free market here in the U.S., right?

First off we never were a by-the-definition free market and i hope we never will be.

How did that infrastructure they use and are guaranteed basically a monopoly get paid for? By the simple virtue that mine and your tax dollars have helped fund that infrastructure and given those companies a near monopoly to use it, they in my mind have an obligation to not price gouge customers or to perform collusion or unethical practices like tiering the internet.

 

[FlashFlooder]

Free markets do not imply fair competition.

actually, yes they 100% do.

^agreed about our market not being truly free, and while my example was bad (due to the reasons you pointed out), the reasoning behind it is the same. No one but Visa paid for their infrastructure to be installed. They were a private company that took the initiative to build it themselves at great risk and cost. Shouldn't they be allowed to reap the rewards without government interference?

I'd say the same about banks, but now that they've been bailed out by our government I guess there is no other solution but to police them.

 

[empty vessel]

^agreed about our market not being truly free, and while my example was bad (due to the reasons you pointed out), the reasoning behind it is the same. No one but Visa paid for their infrastructure to be installed. They were a private company that took the initiative to build it themselves at great risk and cost. Shouldn't they be allowed to reap the rewards without government interference?

No. They provide a critical infrastructural service like a utility and ought to be regulated like one. That doesn't mean being unfair, but it means allowing them a reasonable profit, i.e., much less than they currently make, which is unreasonable.

I'd say the same about banks, but now that they've been bailed out by our government I guess there is no other solution but to police them.

Banks are also public utilities.

 

[FlashFlooder]

They provide a critical infrastructural service

Paper money is still valid legal tender. So are checks, wire transfers, money orders, etc etc.

The service they provide is not critical. There is also plenty of competition in place.

 

[empty vessel]

Paper money is still valid legal tender. So are checks, wire transfers, money orders, etc etc.

The service they provide is not critical. There is also plenty of competition in place.

Both of these assertions are false. Commerce would be negatively affected without card transactions. Online sales, for example, would grind to a halt.

I mean, I'm fine with nationalizing it completely if you would prefer that to regulating credit card companies and banks.

 

[ReturnOfTheRAT]

I have credit cards for 3 stores. Everything else is debit all day.

 

[FlashFlooder]

I just don't think you can lump credit card processing in with utilities and try to call it a critical service. If people can't afford power or gas, they could potentially die. If people can't afford to use credit cards.... they buy less stuff? I think you might be overstating the importance of regulating transaction fees.

Anyway, we're going in circles now so I'll just keep using my cards in peace.

 

[David Incorporated Esq.]

Nope CC start charging you interest the day you draw if you take cash out of an ATM. Cash Advance, please check your card terms. I have never seen one which does not charge day one for cash advances. For a purchase on the other hand yes the billing period comes in.

Who the hell gets cash advances with their credit card? I have a debit card for when I need to pull money for the bank for something that only takes cash.

 

[SnakeswithLasers]

Wow at the ignorance in this thread.

 

[JGS]

No. They provide a critical infrastructural service like a utility and ought to be regulated like one. That doesn't mean being unfair, but it means allowing them a reasonable profit, i.e., much less than they currently make, which is unreasonable.



Banks are also public utilities.

It is impossible to curtail profit without capping revenue or hindering growth. It can't be done. Laws that try to backfire. With all the regulations added to banking, many big banks still made record profits because [business] nature finds a way...especially with the loopholes caused by people that don't know how to make a banking law.

 

[empty vessel]

It is impossible to curtail profit without capping revenue or hindering growth. It can't be done. Laws that try to backfire. With all the regulations added to banking, many big banks still made record profits because [business] nature finds a way...especially with the loopholes caused by people that don't know how to make a banking law.

As I said, I'm not at all opposed to nationalization.

But it's not really true that regulation will fail. You just don't know any better because you've lived through a rather extraordinary period in American history (last 30 years) in which private business interests have so thoroughly dominated Washington that laws became irrelevant. That's not really a failure of regulation, it's a failure of democracy in the US.

 

[Stat Flow]

This thread has gotten too big for me to keep up with :lol

Who the hell gets cash advances with their credit card? I have a debit card for when I need to pull money for the bank for something that only takes cash.

Yeah seriously.


Oh, and let me say this:

Yes, I am a strong believer in credit cards to help you out financially. And I believe they hold many advantages over debit cards.

But I know that they aren't for everyone. Not everyone is disciplined. I was simply giving GAF the benefit of the doubt by suggesting it. I assumed that most people here are able to have the self control of only putting on your card what you can pay for with your cash before the due date passes. I also figured that many people would want to reap the benefits that debit cards don't give you (Credit being the most important). At the same time I understand the whole standpoint of peace of mind, but I just don't see the harm in using the credit card like a debit card and paying the bill when it gets there. THat's all.

 

[Zoe]

I'll admit I took cash advances in the past. That was during a dark time in my finances which I'm still paying for.

I came close to having to do it on a business trip though (Canada doesn't like credit cards apparently), but since my corporate card isn't a revolving account it's just a one time fee.

 

[Calion]

Cash advances are financial heroin. Never do them.

 

[Sqrt_minus_one]

This thread has gotten too big for me to keep up with :lol



Yeah seriously.


Oh, and let me say this:

Yes, I am a strong believer in credit cards to help you out financially. And I believe they hold many advantages over debit cards.

But I know that they aren't for everyone. Not everyone is disciplined. I was simply giving GAF the benefit of the doubt by suggesting it. I assumed that most people here are able to have the self control of only putting on your card what you can pay for with your cash before the due date passes. I also figured that many people would want to reap the benefits that debit cards don't give you (Credit being the most important). At the same time I understand the whole standpoint of peace of mind, but I just don't see the harm in using the credit card like a debit card and paying the bill when it gets there. THat's all.

You would be surprised.

:lol smiley is gone? Could someone point me in the right direction as to why?


I think one of the problems with people running up excessive debt is too little self control. Seen it so many times it aint funny, but ya I agree. Short term balancing with CC is great but I think a lot of people don't have the self control to put it down. A number of people I know personally have screwed themselves over with CC debt, that they take years to dig themselves out of.

 

[Sqrt_minus_one]

actually, yes they 100% do.

I'm sorry but you are gonna have to run that by me cos I can't possibly fathom how you reach that conclusion. Company A enters a market before Company B attains monopoly status and then puts in place artificial barriers to entry to stifle B. Market is free of regulation so nothing is done, how does this represent a situation of fair competition?

 

[Vilam]

I use a debit card every day. Hate having cash in my wallet, it's a liability.

Now that I have a steady an guaranteed job/income, I've signed up for a few credit cards for the first time in my life. Spent about 3 grand on them already, but not without a solid plan for paying them off.

It's mostly a means of building my credit (my wife's is already great, mine is meh). Bought a TV with one card (no interest for 16 months, 1 grand / 16 months is $62 a month to pay it off with no interest but I throw $100-$150 at it so it'll be paid off fast), and a media PC and new recording computer on the other card (about 2 grand at 12 months no interest, $166 a month to get it paid off without having the interest hit. Pay around $200 on that a month).

I knew what I was getting into with the credit cards and planned well in advance. It wasn't a rush decision or impulse buy; I made certain through budgeting that I would be able to afford the purchases in the given time.

You're doing it wrong. Stop spending money you don't already have. Use a credit card when the money is already in the bank and you know you'll pay the bill in full at the end of the month.

 

[JGS]

As I said, I'm not at all opposed to nationalization.

But it's not really true that regulation will fail. You just don't know any better because you've lived through a rather extraordinary period in American history (last 30 years) in which private business interests have so thoroughly dominated Washington that laws became irrelevant. That's not really a failure of regulation, it's a failure of democracy in the US.

I'm not saying regulation will fail, but it has to be smart in order to succeed. It can't be a reaction to consumer outrage over a particular thing.

Instead of worrying about how much a bank makes, disclose how much a transaction costs so the consumer can decide to buy the product.

Instead of an Opt-out arrangement, simply enforce a percentage based overdraft fee.

Regulation that sets to punish the business simply makes the business create a new rule or hinders their right to operate.

 

[empty vessel]

I'm not saying regulation will fail, but it has to be smart in order to succeed. It can't be a reaction to consumer outrage over a particular thing.

Instead of worrying about how much a bank makes, disclose how much a transaction costs so the consumer can decide to buy the product.

Instead of an Opt-out arrangement, simply enforce a percentage based overdraft fee.

Regulation that sets to punish the business simply makes the business create a new rule or hinders their right to operate.

I agree, I don't think regulation should ever punish a business (although I do wish that businesses--more specifically, business executives--who violated the law would be punished). Regulation should be rational and intended to benefit the society as a whole. But it is not the case that just because a corporation can do X (e.g., charge a certain high fee) that it should be permitted to do X. Rational regulation includes protecting consumers from gouging and overreaching by very powerful corporate institutions with very little competition.

 

[Vilam]

Wow at the ignorance in this thread.

SnakeswithLasers
If I want to pay a black man $20 to suck him off in a public bathroom, by God and Country, I SHALL.
(Today, 10:14 AM)
Reply | Quote

Does the black man take credit?

 

[SapientWolf]

You would be surprised.

:lol smiley is gone? Could someone point me in the right direction as to why?


I think one of the problems with people running up excessive debt is too little self control. Seen it so many times it aint funny, but ya I agree. Short term balancing with CC is great but I think a lot of people don't have the self control to put it down. A number of people I know personally have screwed themselves over with CC debt, that they take years to dig themselves out of.

Management decided that it wasn't a good idea to give a bitter den of malcontents a smarmy blue laughing face.

I believe that everyone should have a credit card as soon as they get a job. The limit should be high enough to be useful but not high enough to dig themselves into a hole.

 

[ToxicAdam]

:lol smiley is gone? Could someone point me in the right direction as to why?

I think one of the problems with people running up excessive debt is too little self control. .

Ironically, that reason is probably the same thing that did in the little blue smiley face.

 

[empty vessel]

Management decided that it wasn't a good idea to give a bitter den of malcontents a smarmy blue laughing face.

I believe that everyone should have a credit card as soon as they get a job. The limit should be high enough to be useful but not high enough to dig themselves into a hole.

I don't think many people should have credit cards at all. I realize that businesses have imposed on us the necessity of having "good credit" which we are led to believe is obtained by having a credit card and using it to make trifling purchases, but credit cards are not good financial options for most people and they frankly shouldn't have them.

As for the rest, there's not really a need for them except for very large purchases. People who advocate getting a card and paying it off every month are advocating an entirely pointless system. They aren't actually even using credit. They are just responding to incentives put out by credit card companies that help them rack up fees.

Credit cards had some use for smaller purchases before the prevalence of debit cards, but now with debit cards there is no rational reason--besides responding to incentives--to use credit cards on items that you actually have the funds to cover. The only thing that makes it rational is the incentives, and those are to help the credit card company. They work to the detriment of the rest of consumers. So it's a scheme that is rational to participate in, but detrimental to the society.

 

[Rookje]

Why would anyone use a debit card, when you get CASH BACK from using a credit card? Not to mention you help your credit?

Btw, I feel like such a prick using a debit card when I pay for anything less than a few bucks.

 

[Speevy]

You know what beats both credit AND debit cards?

Having a good job.

Otherwise there's no point to your rewards, or loans, or any of it.

People need to stop pretending they understand everyone's financial situation.

 

[empty vessel]

Why would anyone use a debit card, when you get CASH BACK from using a credit card? Not to mention you help your credit?

Indeed, why? That's exactly why it works.

Of course, that comes at a cost that is imposed on others (higher prices of goods), an externality. That's what makes it ripe for regulation.

 

[Rookje]

Ironically, that reason is probably the same thing that did in the little blue smiley face.

Yea I'm curious too, bandwidth issues?

 

[Rookje]

Indeed, why? That's exactly why it works.

Of course, that comes at a cost that is imposed on others (higher prices of goods), an externality. That's what makes it ripe for regulation.

You're saying people who pay with debit are paying for the cash back rewards for people using credit cards?

Wouldn't it be the people with interest rates who don't pay off their cards are "paying" for the rewards for the people who don't? It seems to me credit card companies just have rewards because they're hedging that you'll someday not be able to pay it off and make a profit.

 

[Zoe]

Yea I'm curious too, bandwidth issues?

It wasn't conducive to mature discussion.

 

[Pctx]

It wasn't conducive to mature discussion.

Since when was GAF considered 'The Economist'?

 

[empty vessel]

You're saying people who pay with debit are paying for the cash back rewards for people using credit cards?

Wouldn't it be the people with interest rates who don't pay off their cards are "paying" for the rewards for the people who don't? It seems to me credit card companies just have rewards because they're hedging that you'll someday not be able to pay it off and make a profit.

It's been studied:

Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or “cash”) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards. On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year. Because credit card spending and rewards are positively correlated with household income, the payment instrument transfer also induces a regressive transfer from low-income to high-income households in general. On average, and after accounting for rewards paid to households by banks, the lowest-income household ($20,000 or less annually) pays $21 and the highest-income household ($150,000 or more annually) receives $750 every year. We build and calibrate a model of consumer payment choice to compute the effects of merchant fees and card rewards on consumer welfare. Reducing merchant fees and card rewards would likely increase consumer welfare.

http://www.bos.frb.org/economic/ppdp/2010/ppdp1003.pdf

But note what's missing from that abstract: the credit card companies! They are taking a cut as well, and likely passing that on as salary to their executives.

See also:

http://www.nytimes.com/2010/01/09/your-money/credit-and-debit-cards/09money.html

 

[Rookje]

It's been studied:



http://www.bos.frb.org/economic/ppdp/2010/ppdp1003.pdf

But note what's missing from that abstract: the credit card companies! They are taking a cut as well, and likely passing that on as salary to their executives.

See also:

http://www.nytimes.com/2010/01/09/your-money/credit-and-debit-cards/09money.html

Really interesting, thanks.

 

[SapientWolf]

I don't think many people should have credit cards at all. I realize that businesses have imposed on us the necessity of having "good credit" which we are led to believe is obtained by having a credit card and using it to make trifling purchases, but credit cards are not good financial options for most people and they frankly shouldn't have them.

As for the rest, there's not really a need for them except for very large purchases. People who advocate getting a card and paying it off every month are advocating an entirely pointless system. They aren't actually even using credit. They are just responding to incentives put out by credit card companies that help them rack up fees.

Credit cards had some use for smaller purchases before the prevalence of debit cards, but now with debit cards there is no rational reason--besides responding to incentives--to use credit cards on items that you actually have the funds to cover. The only thing that makes it rational is the incentives, and those are to help the credit card company. They work to the detriment of the rest of consumers. So it's a scheme that is rational to participate in, but detrimental to the society.

This ignores the reality of a system that is extremely punishing for people with no credit or bad credit. Until that system is changed (which is extremely unlikely) those people are financially handicapped and will continue to be so unless they build credit.

Paying off a card every month isn't using credit but it still helps your credit score. It's a rigged game but there are still benefits to playing it.

 

[empty vessel]

This ignores the reality of a system that is extremely punishing for people with no credit or bad credit. Until that system is changed (which is extremely unlikely) those people are financially handicapped and will continue to be so unless they build credit.

I'm not sure that conventional knowledge always holds. I've never had a credit card, and I've never been turned down for a loan (two car loans and a private student loan so far). That said, I do understand the incentives put in place by the system, and that's really what I'm attacking here.

 

[Misanthropy]

.

 

[RBH]

^Another victim to AstroLad.

 

[Stat Flow]

As for the rest, there's not really a need for them except for very large purchases. People who advocate getting a card and paying it off every month are advocating an entirely pointless system. They aren't actually even using credit. They are just responding to incentives put out by credit card companies that help them rack up fees.

What fees?

 

[PflargBlarg]

What fees?

Apparently he wants us credit card users to NOT pay off our debt on time so that we're using it properly! You're not properly using your credit card if you're not paying interest every month y'know.

If I pay for something with a credit card but the money doesn't go out of my account until 3 days later, 3 months later, or 3 minutes later, it's still credit. That's pretty much the definition of buying something on credit.