Caught Capital One's hand in my pocket

[Nords]

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Originally Posted by brewer12345 Um, guys? This is much ado about nothing:

IIRC the "new" rules don't take effect until June 2010.

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Originally Posted by rjpatt If you use your debit card for most purchases, I am curious why you think people are more likely to spend money using a credit card compared to a debit card. It seems they effectively function the same for people who pay off their card every month.

It's not a logic analysis, it's research that shows consumers with credit cards tend to spend more.

There's a correlation between having credit cards and spending more money. But it's not clear to me that it's causation.

We use credit cards for the staples & essentials: gas & groceries. We don't spend on luxuries because we have a credit card-- we hardly spend on luxuries at all. In fact, instead of making major purchases for new consumer lust with a credit card, we're far more likely to pay cash on Craigslist for a fraction of that amount.

If I had to haul out a wad of cash or write a check for every purchase, however, there'd be a heckuva lot less happiness for at least the same amount of spending. I think I'd also be more liable to theft and loss.

[LLNOE]

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Originally Posted by Nords ...it's research that shows consumers with credit cards tend to spend more...

Exactly!

[brewer12345]

But help me out here: you are all adults capable of reading the fine print and choosing whether or not such terms and conditions are acceptable to you. Why would you agree to the terms if you did not agree with them?

[calmloki]

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Originally Posted by RunningBum You've really lost me. It looks like you're taking an annual kickback amount on the card and dividing it by your monthly expense amount. Otherwise I don't see how 1.25%+ equates to a 15% or 7% return.

Hey - I said it was bad math! The 15% figure is specious - however, while a $1000 payment made in January is money out of pocket for a full year and I only earned 1.25% on it, the $1000 spent in December was only out of pocket for a month - the 1.25% earned on it that month works out to an annualized 15%. A quick average of the "interest" earned for each month in the year would be around 7%

[harley]

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Originally Posted by kyounge1956 I've heard it said that tobacco products etc are the only thing it's legal to sell that harms the consumer when used as intended by the seller, but I think credit cards deserve at least a nomination to that hall of shame.

Variable annuities?

As to the credit card or no question, maybe we should loop this one back into the mortgage or no threads. Save those electrons.

And +1 on not understanding the math behind getting a 1.25% cash back reward equaling a 7% return. Lost me completely.

[mickeyd]

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Originally Posted by hankster Dave Ramsey calls the CC companies "snakes". I believe this is an insult to the scaly, slithering creatures that inhabit our world. Perhaps "vermin" is more appropriate. W*

I agree that CC companies give snakes a bad reputation. Snakes ane good things. CC companies often stink, but I enjoy taking advantage of the 30-60 day float and the cashback features that I can scam out of them.

[RunningBum]

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Originally Posted by calmloki Hey - I said it was bad math! The 15% figure is specious - however, while a $1000 payment made in January is money out of pocket for a full year and I only earned 1.25% on it, the $1000 spent in December was only out of pocket for a month - the 1.25% earned on it that month works out to an annualized 15%. A quick average of the "interest" earned for each month in the year would be around 7%

Doesn't PenFed credit the amount back monthly, rather than at the end of the year? That's what I see on my account.

It's not an investment, where you invested $1000 and make $12.50 each month. You get your 12.50 once. You have to spend another $1000 to get another $12.50. It really is only 1.25% returned. There's really no other way to look at it.

If they don't credit the rebate monthly, they're getting interest free use of your money until they give it back to you. That would seem to reduce your return, but I don't know how to calculate that.

[calmloki]

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Originally Posted by RunningBum Doesn't PenFed credit the amount back monthly, rather than at the end of the year? That's what I see on my account. It's not an investment, where you invested $1000 and make $12.50 each month. You get your 12.50 once. You have to spend another $1000 to get another $12.50. It really is only 1.25% returned. There's really no other way to look at it. If they don't credit the rebate monthly, they're getting interest free use of your money until they give it back to you. That would seem to reduce your return, but I don't know how to calculate that.

Man, you're no fun. Yes, PenFed credits monthly. Ok, how about this: I can spend the necessary $1000 as cash, or charge and float the $1000 for a month, investing the $1000 held during the month, then pay PenFed the $987.50 they ask as repayment. If the $1000 is normal and necessary spending each month then haven't I recieved $12.50 for zero investment? Haven't I had the $1000 to use during that float period? So what percent is $12.50 of $0 investment for a one month period? Guess I should add the amount I make on the $1000 I've held during the float period too.... Dang PenFed card may be the best investment I've got!

[RunningBum]

Yeah, I don't get invited to too many parties.

The float is good, very good.

[kyounge1956]

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Originally Posted by harley Quote: Originally Posted by kyounge1956 (snip) I've heard it said that tobacco products etc are the only thing it's legal to sell that harms the consumer when used as intended by the seller, but I think credit cards deserve at least a nomination to that hall of shame.(snip) Variable annuities? (snip)

touché!

[harley]

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Originally Posted by calmloki Man, you're no fun. Yes, PenFed credits monthly. Ok, how about this: I can spend the necessary $1000 as cash, or charge and float the $1000 for a month, investing the $1000 held during the month, then pay PenFed the $987.50 they ask as repayment. If the $1000 is normal and necessary spending each month then haven't I recieved $12.50 for zero investment? Haven't I had the $1000 to use during that float period? So what percent is $12.50 of $0 investment for a one month period? Guess I should add the amount I make on the $1000 I've held during the float period too.... Dang PenFed card may be the best investment I've got!

Did I ever tell you about when I was a kid working in a department store? I got exposed to "retail math", which threw me just like this does. Retail math was when my boss got mad at me for saying we were marking the trousers up 100%, from $10 to $20. He told me it was only a 50% markup, because if you took 50% off of $20, you got $10.

[kyounge1956]

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Originally Posted by ERD50 Quote: Originally Posted by kyounge1956 I would put the benefits under two general headings: eliminating unnecessary sources of aggravation, and avoiding doing business with people, or businesses, I don't trust.(snip) I also have a low threshold for aggravation, however, my personal experience is that there has been almost zero aggravation with my CCs (one small wrong charge, cleared with one phone call), and some simplification (see samclem's post - float = convenience). The net is LESS aggravation with the CC, and rewards on top of that (thank you AMEX and Visa).

In response to a remark by I-forget-whom earlier in the thread, I was trying to give advantages to being credit card free that are applicable to people in general, and I think avoidance of unnecessary aggravation does. But there is another factor that applies to me individually that enters into my decision here. One thing I know about myself is that I can be absentminded/easily distracted, which occasionally results in my forgetting to pay a bill until after the due date. I've done this with my mortgage, utility bills etc. When I paid my mortgage late, there was a one-time penalty, but the mortgage company didn't raise my interest rate sky high for the remaining life of the loan, which I've heard of credit card companies doing under similar circumstances. The likelihood that at some point I would shoot myself in the foot in this fashion makes the reward less (because the penalties would wipe out part or all of it) and the potential aggravation greater for me than they might be for someone else. The aggravation I avoid by not having credit cards is not only with the credit card company but also with myself for incurring the late fee, added interest expense and so on. I just prefer to eliminate that possibility before it occurs.

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OK, but if you extend that to all lines of business, you probably need to live in a cave. As long as I pay in full and on time, I am not exposed to that side of things, and that's good enough for me. But to each their own.

I am a confirmed introvert. Living in a cave is fine with me, as long as it's dry and there are no rabid bats <g>. Seriously, though, it's something I have thought about. When I'm thinking about how to invest my retirement portfolio, one side of me says "go for the index funds, with low expense ratios", but the other side asks "how do you know there isn't profit from cigarettes, or gambling, or other stuff you don't believe in, in that index fund", and in fact I don't know. If it's a really broad index, there probably is. It's not one of the options in my 457 plan at work, but when I retire and roll that money into an IRA, I could switch over to a screened fund that excludes companies that deal in tobacco, gambling etc. The problem is the expense ratios on the funds that use the screens I would want are up over 2%. Am I going to walk the walk, or just talk the talk? That remains to be seen, but avoiding credit cards seems like a no-brainer to me. To paraphrase St Thomas More: "It profits a man nothing to give his soul for the whole world....but for 1%?"

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Quote: That's heading number one. As for heading number two, I have mistrusted credit card companies ever since the bad old early 80's when I was making barely enough to live on, and getting credit card offers in the mail one after the other.(snip) I have no desire to do any business at all with companies that, if this thread is any indication, have no qualms about overcharging, sneaking extra amounts onto the bill, changing the payment due date, generally fleecing their customers any way they think they can get away with and then lying about it afterwards; I don't want "rewards" that come out of the profits they make by use of such practices; and I don't believe in knowingly dealing with dishonest businesses.(snip) Now you lost me. Aren't Visa and Master Card the bad guys that you don't want to do business with? And those rewards are profits from dishonest practices? Why is it OK with a debit card and not a CC? People run up fees with Debit Cards too - just overdraw your bank account on one and watch the fees pile up ( a teachable moment for my son). -ERD50

I guess it isn't strictly logical, but I've never thought of using a logo-bearing debit card as doing business with the credit card company, but as doing business with my bank, the same as writing a check or using my non-logo bank ATM card back in the day. The money comes from my checking account not a loan, and when I get the statement, it doesn't say "Visa" on top, it says "Bank of America". It's the credit card operation itself, the aspect of the business that promotes debt even to the detriment of the customer, and benefits from what I consider to be quasi-predatory lending practices, that I want nothing to do with. AFAIK, my bank doesn't engage in that sort of thing, and if I found out they do, I'd switch banks, or to be even more emphatic about it, change to a credit union.

But you do have a point, asking where the money for the airline miles comes from. I had never really thought about that. I think merchants pay a fee to Visa or MC, and I don't think there's anything objectionable about that. If Visa or MC nudges me to use my debit card instead of cash or a check, by giving me part of the money they get from the merchant as a result, I don't have a problem with that either. You only get half as many miles per dollar spent as with a credit card, and maybe the lower incentive with debit cards is because the companies only have the revenue from merchant fees to incentivize debit card users with, while with credit card users they also have the profits from their more ethically questionable practices. Still, you raise an issue that I had not taken into consideration. I have been thinking about switching from the air miles card to a debit card with a "keep the change" option (it rounds up purchases to an even dollar and puts the difference into your savings account). The ticket you get with the air miles card is not really free, because there's a $30 annual fee for that card. It took me three years to amass enough miles to get a ticket, so if I had used my miles it really would have been a ticket that cost $90 instead of $225. But when I was planning a trip recently, the tickets that I could get with my air miles didn't fit my schedule, so I ended up paying for the ticket out of pocket instead of using them. If I had used a "keep the change" card for three years I probably would have had enough in my savings to pay for the plane ticket, especially if I had paid myself the annual fee too (there is no fee on the "keep the change" card). So I've been thinking about switching anyway, because the other card may be a better deal, and wondering whether the air miles aren't at least paid for out of dirty money may just have tipped the scales that way.

I don't really disagree with penalty fees as such. If I pay late or overdraw my account, I think the other party, whether bank, credit card company, mortgage holder or utility, is justified in penalizing me. What I find objectionable is if these other parties manipulate the situation to cause the generation of late fees and penalties. For example someone mentioned changing the due date without notice. You said IIRC that you had your credit card bill set up with an automatic payment, and it could suddenly become "late" if the company moved your billing date up a week without telling you as described earlier in the thread. That's a swindle. I've heard of banks that have chosen to pay checks in a particular order in order to increase the number of overdraft fees they collect. (Here's what they did: suppose you think you have $1500 in your checking account, but due to a math mistake, you actually only have $500. You write a check for $800 for the mortgage, $50 for the gas, $50 for the phone, etc etc. The checks all show up at the bank, and even though you actually have enough in your account to cover all of them except the mortgage, the bank puts the mortgage check first, ensuring that all of the checks bounce instead of only one.) That's another swindle. It's money from swindling that I don't want.

[Texas Proud]

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Originally Posted by kyounge1956 Not so. A debit card with Visa or Master Card logo works just as well, and I get airline miles with mine as well. I got rid of my credit card between fifteen and twenty years ago, but I've had no difficulty with travel, including buying plane tickets online, booking airport shuttles, making hotel reservations, paying for food at restaurants and the like. I believe I've also rented a car with my debit card. I've never had anyplace tell me "we only take credit cards, not debit". I have occasionally asked whether it makes any difference that it's a debit card, and it never has. I do remember that years ago, many places would not accept a non-logo bank ATM card in the same way as a credit card, but that's so long ago now, I don't know if the banks even offer non-logo ATM cards any more. Even earlier than that, lots of places wanted a driver's license and credit card number with a check, and I do remember it could be a bit of a pain in the neck not having a credit card at that time. But it's been many, many years since I've experienced any inconvenience I could even partly blame on being credit-card free.

Sorry.. and not attacking you (but it will sound like it)... but if you think that the debit card makes any difference than a CC you have not seen the problems with a debit card...

First, a CC has legal recourse that you do not have with a debit card... if there is a 'bad' debit, they do NOT have to give you your money back quickly... in fact, they do not have to give you your money back at all if you are not quick telling them... and if the amount is big enough, your checks start to bounce and you now have problems with your creditors... you do not have this problem with a CC...

If there is a problem with the vendor... you have recourse with a CC, not with a debit card...

Since both are plastic, the possibility of spending more is still there... so again, no advantage...

I have an ATM card without a logo.. I had to ask for it, but I got it... so if someone steals my card, they can not go buying stuff and empty out my account.. unlike if they steal yours... (again, you probably will eventually get all your money back, but why even risk it)....

So far, I have not see ONE good reason to have a debit card instead of a credit card...

[Texas Proud]

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Originally Posted by kyounge1956 I guess it isn't strictly logical, but I've never thought of using a logo-bearing debit card as doing business with the credit card company, but as doing business with my bank, the same as writing a check or using my non-logo bank ATM card back in the day. The money comes from my checking account not a loan, and when I get the statement, it doesn't say "Visa" on top, it says "Bank of America". It's the credit card operation itself, the aspect of the business that promotes debt even to the detriment of the customer, and benefits from what I consider to be quasi-predatory lending practices, that I want nothing to do with. AFAIK, my bank doesn't engage in that sort of thing, and if I found out they do, I'd switch banks, or to be even more emphatic about it, change to a credit union. .

If you have a BofA credit card, you are doing business with BofA.... a Chase CC with Chase... and a Capital One CC with Capital one... the same banks that you are using their debit cards... it is NOT Visa or MC that is loaning you the money.. so you ARE dealing with the same people you say you do not like... you can not get away from it...

What bank are you using? We can take a look at see if they do.. if it is one of the big ones.... I can tell you they do... all of them do... any one who has worked at a bank can tell you that....

[kyounge1956]

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Originally Posted by Texas Proud Quote: Originally Posted by kyounge1956 (snip) A debit card with Visa or Master Card logo works just as well, and I get airline miles with mine as well. I got rid of my credit card between fifteen and twenty years ago, but I've had no difficulty with travel, including buying plane tickets online, booking airport shuttles, making hotel reservations, paying for food at restaurants and the like. I believe I've also rented a car with my debit card.(snip) Sorry.. and not attacking you (but it will sound like it)... but if you think that the debit card makes any difference than a CC you have not seen the problems with a debit card...

That was exactly my point. I've never had any of the problems with my debit card that people earlier in the thread have described having with credit cards. No sneaky charges, no dinking with due dates, no "Michelle in Mumbai" giving me a bunch of malarkey over the phone. None of that. I think there's a big difference between debit and credit cards, and IMO it's all in favor of the debit card.

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First, a CC has legal recourse that you do not have with a debit card... if there is a 'bad' debit, they do NOT have to give you your money back quickly... in fact, they do not have to give you your money back at all if you are not quick telling them... and if the amount is big enough, your checks start to bounce and you now have problems with your creditors... you do not have this problem with a CC...

True, if I think there is something wrong on my statement I have to call the bank and notify them I'm contesting the charge. Wouldn't a credit card user have to do exactly the same thing to dispute something on their bill?

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If there is a problem with the vendor... you have recourse with a CC, not with a debit card...

I don't think that's correct, but I don't have the particulars on my card handy, so I will have to let it stand for the time being.

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Since both are plastic, the possibility of spending more is still there... so again, no advantage...

The most I can possibly spend with a debit card is the full balance in my checking account. Even if I'm totally irresponsible or a hopeless shopaholic, I can't spend money I haven't got, and put myself ten, twenty, or fifty thousand dollars in the hole, as people can do and have done with credit cards. I'm not certain, but I don't think identity thieves could use my debit card to run up big debts like that in my name either. I believe the worst they could do is clean out my account—if the checking account is empty, the card will be declined. I wouldn't like that one single bit...but I think I'd like having huge debts run up in my name and my credit ruined even less.

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I have an ATM card without a logo.. I had to ask for it, but I got it... so if someone steals my card, they can not go buying stuff and empty out my account.. unlike if they steal yours... (again, you probably will eventually get all your money back, but why even risk it)....

I've never had my card stolen, but I did think I had lost it once. I called the bank and canceled the card, just like I would stop payment on a check. The bank sent me a new card in the mail. If it actually does get stolen, I'd do exactly the same thing, or even close and reopen my account as I think is suggested if your checkbook is stolen. In fact, there is some theft prevention on my debit card, as I found out unexpectedly several years ago when I presented the card to pay for an expensive car repair. The payment didn't go through. I tried again....nope. I knew I had twice or three times that much money in my account, so I called the customer service number on the back of the card and asked "what's up with this??" They told me there is an upper limit on the card—if I need to use it for a higher amount I should call first so it can be taken off temporarily. They verified it was me over the phone, I told them the name of the repair shop, they took the hold off my card for that transaction, and presto! the card worked, the bill was paid, the car ran like a top, everything was beautiful in the garden. If I lived in a high crime area where I felt the card was pretty likely to get stolen at one time or another, I'd just have the bank set a really low limit amount on it.

You've got a non-logo ATM card? That's great! I didn't know they were still available. I like a debit card better, because I can use it for mail, phone and internet orders, which I couldn't do with my ATM card back when I had one. That was a long time ago...are the non-logo bank cards accepted for that sort of thing now?

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So far, I have not see ONE good reason to have a debit card instead of a credit card...

If you don't want one, you don't have to have one. But Maurice's original assertion, that "Not having a credit card would make travel quite difficult and renting a car nearly impossible" is incorrect all the same. It is quite possible, in fact easy, to do both. Nothing you've said above changes that.

[kyounge1956]

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Originally Posted by Texas Proud Quote: Originally Posted by kyounge1956 (snip) I guess it isn't strictly logical, but I've never thought of using a logo-bearing debit card as doing business with the credit card company, but as doing business with my bank, the same as writing a check or using my non-logo bank ATM card back in the day. The money comes from my checking account not a loan, and when I get the statement, it doesn't say "Visa" on top, it says "Bank of America". It's the credit card operation itself, the aspect of the business that promotes debt even to the detriment of the customer, and benefits from what I consider to be quasi-predatory lending practices, that I want nothing to do with. AFAIK, my bank doesn't engage in that sort of thing, and if I found out they do, I'd switch banks, or to be even more emphatic about it, change to a credit union. (snip) If you have a BofA credit card, you are doing business with BofA.... a Chase CC with Chase... and a Capital One CC with Capital one... the same banks that you are using their debit cards... it is NOT Visa or MC that is loaning you the money.. so you ARE dealing with the same people you say you do not like... you can not get away from it... What bank are you using? We can take a look at see if they do.. if it is one of the big ones.... I can tell you they do... all of them do... any one who has worked at a bank can tell you that....

I think you just agreed with me. I don't have a B of A credit card, I have a Bank of America checking account with a linked Visa logo debit card, and I think of that as doing business with Bank of America, not with Visa. As you say, I am not borrowing money from Visa. I don't get a statement from them. AFAIK, the only thing I get from Visa is their name on my card. Also AFAIK, Bank of America—the savings and checking operation—doesn't encourage people to run into debt or do the other things I object to. But if you've got evidence that they do, it'll be bye-bye B of A, hello credit union or some other bank.

[virginia]

I think that even if I paid my bill late, got charged a late fee, and then more interest, I would continue to use my card. I don't pay my bill late, and I always pay in full, but I was recently looking at my rewards activity, and have gotten something like $1000 back in rewards over the past few years. And I think that maybe once in those few years, I carried a balance from one month into the second month. At one point, I was even putting my rent on the card. For years, my cc company charged me interest when I was younger, not making as much money, going to grad school, and not as financially responsible. Even if I were to get charged a late fee, I would likely not stop taking advantage of the "advantages" of having my card! I just wonder if I've gotten to the point where they've given me as many rewards as I paid in interest? Also kinda surprised they haven't canceled the card! That seemed to be happening to a lot of folks who were always on time and not balance-carry-overers a while back.

[ERD50]

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Originally Posted by kyounge1956 One thing I know about myself is that I can be absentminded/easily distracted, which occasionally results in my forgetting to pay a bill until after the due date. I've done this with my mortgage, utility bills etc.

OK, so maybe it makes sense for *you* to not have a CC. The problem I'm having is that some posts in this thread imply that anyone who has a CC is "exposing" themselves to problems, and they just don't know it (or something like that).

Now, this will probably come across in a post as condescending, but I actually mean it only in an honest, helpful way - if you have trouble paying bills on time, I'd suggest you work out a system to address that. You have much to gain. If you had a system that worked for you, you could take advantage of the float, the rewards, and avoid late fees and hits on your credit score. My "system" is (in order of preference):

A) Have the bill charged to my rewards CC. This gives me the float (time to respond), and I earn rewards with these purchases that I would make anyway.

B) If they don't allow auto CC charges, I set up an autopay through my bank online. I don't get any float, and no rewards, but I don't have to buy a stamp, worry about it getting lost in the mail, forgetting to mail it, etc.

C) Set up an autopay through the business (I don't like this so much, as it is a slightly different system to learn and another site to go to. No biggie, but I avoid it if I can.

D) Pay at the site directly (put a reminder on the calendar, and do an electronic reminder too). Same issues as C, but no auto feature. I use my CC if there are no charges.

In addition, I have an autopay set up for my two CCs from my checking account. Defaulted with an amount larger than my typical bill. I can't be late, and am unlikely (as in it has never happened) to pay too little and be charged fees. I have several weeks to go in and adjust it to the proper (usually lesser) amount.

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Originally Posted by kyounge1956 That was exactly my point. I've never had any of the problems with my debit card that people earlier in the thread have described having with credit cards. No sneaky charges, no dinking with due dates, no "Michelle in Mumbai" giving me a bunch of malarkey over the phone. None of that.

But I have never had these problems with my CCs over many, many years either. Pay on time, and in full and that's it ( and that is essentially what you do with a debit card, but "on time" is "now"). I just enjoy the benefits of float and rewards and convenience. Oh yes, they did change the due dates recently - in my favor - they moved them out a few days (I think this is in response to the new laws that require X days between billing and due date, and the same day each month , no date shifting from a 28 day month and a 31 day month). I got many, many notices of this, even though taking no action on my part would not have caused any problem at all. I did eventually move my pay dates out to maximize the float.

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Originally Posted by LLNOE No one ever became wealthy with the rewards on a credit card. There is wisdom in not having debt - you are wise not minding missing the "rewards"!

What is "wise" about turning down >1% on most of the purchases I make, and giving up float and convenience? No, I never expected to "get rich" on the rewards, but thousands of dollars over the years sure doesn't hurt. What alternate financial universe do you live in where turning down money is "wise"? How many of us choose a 3% annual fee mutual fund over an equivalent fund with a 0.5% fee?

-ERD50

[samclem]

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Originally Posted by ERD50 What is "wise" about turning down >1% on most of the purchases I make, and giving up float and convenience? No, I never expected to "get rich" on the rewards, but thousands of dollars over the years sure doesn't hurt. What alternate financial universe do you live in where turning down money is "wise"? How many of us choose a 3% annual fee mutual fund over an equivalent fund with a 0.5% fee?

I think it can be "wise" in an "I know myself and this is not good for me" sense.

-- While I might enjoy a drink now and then, it can be wise for an alcoholic to avoid the stuff.
-- While I might enjoy trolling the aisles in Menards for hours, it is wise for DW to avoid doing the same thing.
-- While I might enjoy the annual fireworks show, it is wise for the crowd-averse person to avoid it.


To quote the master:

"My habits protect my life. They'd probably assassinate you."
- S.L. Clemens

[ERD50]

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Originally Posted by samclem I think it can be "wise" in an "I know myself and this is not good for me" sense.

Sure. But it's just not right (IMO) to project that on everyone, especially the average LBYM in this forum.

-ERD50