credit cards make me sick

bert&ernie

No, I guess you're not an economist. If you were, you might have come across the expression that "there ain't no such thing as a free lunch!", the 'free-rider problem' or perhaps even the 'paradox of thrift'.

DCFC79

Im still trying to fathom how credit cards make people sick,

bert&ernie

DCFC79 wrote: »

Im still trying to fathom how credit cards make people sick,

Me too. For the avoidance of doubt, I'm not agreeing with the OP. Credit cards used to pay my wages, so I've really nothing against them.

LovelyLeeds

MikeR71 wrote: »

Trust me, if everyone behaved and paid their bills on time and if the banks made no money from interest on CCs on some people, then the rules regarding CCs would change quicker than you can say Credit Card.

100% agree.
I wouldn't be averse to some form of charge if that were the case, as I would then not use a credit card. :j

pvt

ALIBOBSY wrote: »

I would disagree with the first part here. Unless someone fraudulently got credit ran it up then left the country, even defaulted cards rarely cost the banks money.

The most common situation would be someone takes out a card in good faith runns it up close to the limit and keeps paying at least the min and bits extra each month for a couple of years. As its rolling credit and interest adds on to the balance each month the card company very quickly get back their original balance and are just raking in the interest each month. Then something unexpected happens, sickness, unemployment etc and they can't afford to keep up payments, many at this stage limp along paying what they can, scabbling to cover the min whilst the CC company slap charges and interest on, if the cust has any sense they will call up and make some kind of arrangement to pay and the limp along a bit longer, meanwhile the outstanding amount is less and less capital and more and more made up of charges and interest and interest on charges etc etc.

Eventually either the cust defaults again or the cc company breach their own guidelines and sell the debt on even though the cust has kept to their reduced payment plan.

The cust then has to deal with the debt collector. meanwhile the CC company will have made money over the whole period via the original retailers, then all those payments, then they sell on for a fee and write the "bad debt" off against tax. So all they have "lost" is possible extra potential interest and charges, they will have overall come out ahead in the deal.

ali x

Ah! OK then.

It appears they make money from everyone, apparently even those who borrow money they can't afford to borrow and never pay back.

I stand corrected.

pvt

bert&ernie wrote: »

interchange is the proportion of the merchant service change that acquiring banks pass on to issuers. This is typically less than 1% in the UK and is under downward pressure from regulators and politicians. It is intended to cover the issuers costs in a transaction, not to be a profitable revenue stream.

For full-payer accounts this is the issuers only revenue stream. When you account for acquisition costs, fixed and marginal operational costs, rewards etc. The.margin on these accounts is often slim to non-existent.

5.9% is less than third of the typical card rate and is likely to barely cover the cost of funds to the issuer. They make most of their money by charging a large margin on revolving balances. I think you might need to brush up on your mythology!

So how does a charge card work then? An AmEx charge card has to be repaid in full every month - it is not a credit card and has no credit facility available on it. They must be mad! If they're making **gg** all on it how can they then afford to also share a percentage of those fees that barely cover their own costs?

And why does it cost the bank a different amount to undertake a debit card transaction and a credit card transaction? The retailer pays about £20 for a £1,000 CC transaction, but I understand they pay a much smaller fixed fee for a DC transaction of the same amount.

How does that all work then?

bert&ernie

pvt wrote: »

So how does a charge card work then? An AmEx charge card has to be repaid in full every month - it is not a credit card and has no credit facility available on it. They must be mad! If they're making **gg** all on it how can they then afford to also share a percentage of those fees that barely cover their own costs?

And why does it cost the bank a different amount to undertake a debit card transaction and a credit card transaction? The retailer pays about £20 for a £1,000 CC transaction, but I understand they pay a much smaller fixed fee for a DC transaction of the same amount.

How does that all work then?

AmEx charge a higher interchange fee - which is why merchants don't tend to like it. They also charge an annual fee on many of their products.

Yes, credit cards tend to charge an ad valorem fee while debit tends to be fixed or a mix of both. The card schemes set it this way because debit cards are more likely to be used for frequent low value transactions than credit cards are. Contactless transactions are also charged at different rates.

Evilm

Why should everyone be punished for the people who can't control themselves and don't consider the consequences of spending money they don't have?

Last year we got a car converted to LPG and used a 0% credit card to pay the bill. By putting the money that we were saving on petrol each month aside we were just able to pay that card off before the 0% ran out. If we didn't have access to that card we wouldn't have been able to do that. We are now saving £1500 a year on petrol.

My husbands card has been subject to fraud a couple of times. Because it was a Credit Card and not a Debit Card I didn't have the problem my friend had when She got hit with fraudulent transactions and her entire account was emptied. She had to live on nothing for near on a month whilst her bank "investigated"! Our credit card wiped out the fraudulent transactions immediately and we were no worse off.

To be honest people who misuse credit cards and blame the issuer for daring to give them credit make me sick!

MoneyWasting_Expert

Numpties? Behaved? Some people do borrower money via cards when needed or for a special purchase, and pay it off whenever it suits. Since when has that been misbehaving or stupid? Reckless spending and nothing to show for it, on the other hand is a whole different story.

MoneyWasting_Expert

Evilm wrote: »

Why should everyone be punished for the people who can't control themselves and don't consider the consequences of spending money they don't have?

Last year we got a car converted to LPG and used a 0% credit card to pay the bill. By putting the money that we were saving on petrol each month aside we were just able to pay that card off before the 0% ran out. If we didn't have access to that card we wouldn't have been able to do that. We are now saving £1500 a year on petrol.

My husbands card has been subject to fraud a couple of times. Because it was a Credit Card and not a Debit Card I didn't have the problem my friend had when She got hit with fraudulent transactions and her entire account was emptied. She had to live on nothing for near on a month whilst her bank "investigated"! Our credit card wiped out the fraudulent transactions immediately and we were no worse off.

To be honest people who misuse credit cards and blame the issuer for daring to give them credit make me sick!

The whole fraud protection thing is rather good. 2 small iTunes transactions after each other prompted an automating call from Barclaycard to verify and unblock the card.