Tuesday, May 19, 2009
Economy Can't Beat Them
Posted by Charles Mudede on Tue, May 19, 2009 at 10:59 AM
The good news!
The Senate today overwhelmingly passed a bill that would sharply curtail credit card issuers' ability to raise interest rates and charge fees, taking a critical step in reforming an industry that has gone largely unregulated for decades.
In a 90-5 vote, The Senate delivered a victory to consumer groups and to the White House, who blame industry practices for sending Americans deeper into debt just as they are losing their jobs and their homes.
The bad news!
Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.
Life fucks us every day.
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1
tell the truth, I think it's those bastards who pay off their entire balance every month that are putting everyone into debt. Forcing poor ol' Visa and MC to raise their rates on everyone else because these deadbeats don't want to contribute to the system, they just want the free miles.
3
@1 - It's true, I called my card company last week trying to see if I could convince them to let me pay down my cash advance balance first (overdraft "protection" is a blessing and a curse). They gave me this whole line of crap about how they have millions of customers who pay off their cards every month and they don't make any money off them so they need to make it up in other ways. I said "So because you have a bunch of customers who you can't figure out how to earn money from, you need to penalize me?" and they said "yes". Fuckers. Fuck them, fuck their shareholders and fuck the government for letting shit get this out of hand in the first place.
4
This is the credit card bailout, and once again responsible users will pay to subsidize the risky jackasses.
5
if you can be disciplined to pay off a balance within 30 days, you can be disciplined enough to pay cash in advance. Stop whining.
6
Anyone ignorant enough to take a cash advance from a credit card deserves whatever crap the credit card company gives them.
7
I'm one of those customers that pays my bill every month, has no annual fee, and gets cash back rewards. So, I make money off of my credit card (from cash back and also having "free money" for a month or more). It's a little crazy that the credit card companies have this model to begin with (i.e., they lose money on a third of their customers), but I take advantage of it while I can.
I'm not really personally bothered by these changes, though. Less or no cash back is unfortunate, but it's not a tragedy or anything. If they start charging interest immediately, I'll just use my debit card more often. And, if they bring back annual fees, I'll shop around for a card that doesn't have one, or I'll think about whether I really need to have a credit card at this point or not...
I'm not really personally bothered by these changes, though. Less or no cash back is unfortunate, but it's not a tragedy or anything. If they start charging interest immediately, I'll just use my debit card more often. And, if they bring back annual fees, I'll shop around for a card that doesn't have one, or I'll think about whether I really need to have a credit card at this point or not...
8
@3
Hint: Pay off your balance every month, then you don't have that problem.
More responsibility needs to rest on the consumer for using credit cards responsibly.
Hint: Pay off your balance every month, then you don't have that problem.
More responsibility needs to rest on the consumer for using credit cards responsibly.
9
@7, but Julie, they charge merchant transaction fees for every purchase you make, so they are making something off of you as a credit user. Obviously it's not as much as they're making off Super Jesse, but it has to be enough to offset the rewards. Otherwise, why would they even offer rewards with their credit product? They are in the business to make money, after all...
10
I can only second lily@9: All this whimpering from credit card companies, demanding sympathy for their incompetence, conveniently ignores the merchant fees.
From a review on credit card companies (PDF):
Most of the policies of the credit card issuers blatantly violate anti-trust regulations, directly harming small businesses. In other words, FUCK 'em.
From a review on credit card companies (PDF):
Every time a consumer makes a purchase on a credit card, the merchant is charged a fee (typically 2%–3% of the purchase price, but sometimes as high as 15%) by the credit card network. The level of fee relates to the merchant’s industry and size and, most crucially, the level of rewards (cashback or frequent flier miles, etc.) that come with the consumer’s credit card. As a result, credit card transactions cost merchants, on average, about six times as much as cash transactions and twice as much as check or PIN-debit card transactions. These fees totaled over $40 billion in the United States in 2005.
Most of the policies of the credit card issuers blatantly violate anti-trust regulations, directly harming small businesses. In other words, FUCK 'em.
11
I've been enjoying the benefits of paying of my card each month partly because one of the credit card companies a few years ago responded to my fuck up (a missed payment that was entirely my mistake) by offering me a 3% eternal rate on a large balance. So I pay that religiously (paying down 2% of the capital each month plus interest), and pay off all my other cards. I have eaten the credit card companies alive by their interest in keeping me as a customer. I say, bwa ha ha.
Now, if they want to charge a fee and drop programs for getting miles, etc., whatever, great, I'll just start using my debit card. And keep paying down that 3% loan for a long time to come. Bwah ha ha.
Now, if they want to charge a fee and drop programs for getting miles, etc., whatever, great, I'll just start using my debit card. And keep paying down that 3% loan for a long time to come. Bwah ha ha.
12
The point about the merchant fees is a good one. I actually didn't know that they varied the merchant fee based on the reward program of the card that is being used, and just assumed that my 2-3% cash back netted against the merchant fee in most cases. A 15% merchant fee, even in only some cases, seems insane...
13
@12: And remember, thanks to the collusion and monopoly power wielded by these companies, merchants must accept any fee level the card issuer decides upon, if they are to accept credit cards at all. Any.
14
I feel like it's not enough to just say that individuals should know better. Financial educational isn't mandated or even widely promoted and credit card companies are given free reign with deceptive advertising and sometimes outright lying.
16
I call f'ing bullshit - as a Canadian, I have have a significantly lower rate (9%) on my RBC credit card than my US credit cards, and our banking industry is regulated sanely and thoroughly, which significant consumer protections. The US banking industry needs to be dismantled and thrown to the wind!
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