Pay off credit cards monthly = increase taxes on the wealthy

[cashbalancetrouble]

I sit on the sidelines ever year or two and watch the negotiations with two of the major cards for a significant business travel and expense card account. All of these must be paid off in full each month as part of the contract. The perks to get the business are unbelievable. CASH BACK, PREMIUM CARDS, REWARDS PROGRAMS FOR THE EXECS, ETC, ETC

BELIEVE ME WHEN I SAY THERE ARE MAKING MONEY!

And if there are chamges being made, THE CARD COMPANIES WILL BENEFIT>>>>


NOT THE COMMON MAN!

[Independent]

Quote:

Originally Posted by clifp Although, I don't have specific figures, I am sure that almost universal use of and acceptance of credit card in the US adds greatly to the economic activity of the country. This in turn adds to the profits of the S&P 500 and our retirement portfolios. Imagine you see an $300 in store that you sort of need, (i.e. somewhere between a necessity and luxury). You don't have $300 in cash there is no ATM around, and you don't have a checkbook. In the new credit card world, the merchant charges a 3% fee for credit or perhaps the credit card company starts charging interest immediately. Being a member of in good standing on the ER boards you are cheap frugal type, you decide forget it I'll stop by an ATM get cash, and come back in day or two in order save the $9. Well stuff happens and it is several weeks before you have time and cash and stop by the store. Only to discover the item is no longer on sale out of stock etc. you never get the use of the item the store and the manufacture both miss a sale. Multiply this scenario by the millions and you can see the potential problem this will present.

I'd say that a sudden change in CC use would be a short term problem, but a gradual change wouldn't do any harm. In some people's eyes, it would actually help.

I your example, if I never spend my $300 on that particular item, then I will either: 1) spend my $300 on something else, or 2) save my $300.

In the first case, there is no impact on the economy. In the second, we shift a little towards higher savings/lower consumption, which generates a short term adjustment but could eventually lead to higher productivity.

[Abreutime]

Quote:

Originally Posted by cashbalancetrouble BELIEVE ME WHEN I SAY THERE ARE MAKING MONEY!

The credit card companies connected to payment processors or other operations are doing fine. American Express and Discover made money in the last quarter. Credit card companies without other non credit card operations have been losing money. Advanta has halted it's operations due to losses, and capitalone lost 1.4B in 2008 Q4. I'd bet (without looking at the financials) that the banks with substantial credit card operations currently lose money on those segments.

Quote:

Originally Posted by Advanta article Advanta is not the only reason to doubt the severity of the stress test assumptions about credit card losses. Moody's has said their projection is for industry wide charge-offs to top out at 12 percent in mid-2010, which they say translates to about a 22 percent two year cumulative loss. And again, this is their central prediction, rather than a worst case one. And even with the Federal Reserve taking heroic measures to prop up the credit markets, the Advanta news is one more indication that the credit crunch and economic downturn may be self sustaining. Banking analyst Meredith Whitney estimates that credit card lines in the U.S. will be cut by $2.7 trillion, or 50 percent, by the end of 2010, as banks try and deleverage and preserve capital. This will constrain consumer spending, hit company profits and spawn yet new defaults. She describes the credit card companies as playing a game of "hot potato," with no one wanting to be last with exposure to a given business or consumer. Advanta has just pulled some very hot potatoes out of the oven and tossed them at its peers. New regulatory proposals to limit credit card companies' ability to hike interest rates and impose fees, while perhaps needed in the long term, will have the perverse short run impact of accelerating this deleveraging process -- and consequently reducing access to credit. Some businesses doubtless which lose credit lines will be pushed over the edge and many more will slow expansion or cut back on investment or staff. This is particularly troubling in the U.S., where by some estimates small businesses are responsible for two thirds of all private sector new jobs created. It may not be entirely chance that the growth and dynamism of the small business sector has been coincident with the growth and availability of credit to individuals.

[walkinwood]

Ron Lieber has a more balanced article in today's NY times
http://www.nytimes.com/2009/05/20/yo...l?ref=business

I think yesterday's article was way off the mark. There still in competition, albeit not much, in the credit card market.

[Abreutime]

Quote:

Originally Posted by clifp There is a real danger of some severe unintended consequences if companies start changing the cards to eliminate the grace period, or make large annual fees or merchants start adding a fee to CC transactions. Although, I don't have specific figures, I am sure that almost universal use of and acceptance of credit card in the US adds greatly to the economic activity of the country. This in turn adds to the profits of the S&P 500 and our retirement portfolios.

I doubt that these changes will be implemented. Just like free checking, free float is now demanded by consumers. This isn't something they can just start charging for again. I assume that these are empty threats, with the aim to arouse opposition to the new regulations. By asserting that these regulations will result in worse deals for the 50 million people that use credit responsibly, it's a way for the credit industry to win the support of these 50 million in their opposition to stuff like price caps and other restrictions. By showing that price caps on bad borrowers hurts the good borrowers, the populism against these companies might be dissipated.

[eridanus]

Quote:

Originally Posted by Abreutime Advanta has halted it's operations due to losses, and capitalone lost 1.4B in 2008 Q4. I'd bet (without looking at the financials) that the banks with substantial credit card operations currently lose money on those segments.

Advanta was a top 5 subprime lender. Recently, they've had huge delinquencies in their credit card operations.

Capital One has been expanding into regional banks and auto loans. Their yearly loss was $46MM, and the Q4 auto loan loss was $811MM. Capital One is also under pressure from card delinquencies.

Those on the edge, the once most profitable, are skipping payments and going into chargeoff status. This doesn't mean that "deadbeats" aren't profitable -- they just aren't AS profitable as those who carry a balance and make the minimum payment once were.

[freebird5825]

New rules coming soon to a theatre near you
Credit card bill closer to Obama's desk - May. 20, 2009

[ziggy29]

I remain ready to shred any and all cards that intend to charge annual fees or eliminate the grace period.

[IBWino]

Quote:

Originally Posted by ziggy29 I remain ready to shred any and all cards that intend to charge annual fees or eliminate the grace period.

My wife and I are also ready to do the same. But I've read more than once that closing a line of credit will negatively affect one's credit score. Not sure what to do about that. Our credit scores are currently very high, so maybe the impact would be minimal.

[ziggy29]

Quote:

Originally Posted by IBWino My wife and I are also ready to do the same. But I've read more than once that closing a line of credit will negatively affect one's credit score. Not sure what to do about that. Our credit scores are currently very high, so maybe the impact would be minimal.

One may need to be selective if they have several cards.

In general, all else being equal, closing cards with lower credit lines and the newer accounts are less damaging to your credit score.

I have one card from my CU that I almost never use (maybe one $10-20 charge a quarter) since it gives no cash back, but since it has a $20K credit line and has been open since about 1991, that's one I'd keep. (I'm pretty sure they wouldn't be playing these possible games with annual fees or no grace periods.)

I know the cards I have are fairly hard to get (even before the blow-up you needed pretty good credit to qualify), so hopefully they won't be as impacted by these changes and won't feel the need to do this.

[samclem]

If the regulatory changes make credit card purchases less prevalent, there will be other impacts. Those of us planning to start paying with cash should anticipate higher ATM fees (why not? There will be increased demand for the service). The government is always complaining about the costs of printing money and minting coins (and trying to foist those damn dollar coins on me!)--well, they'll need to significantly increase the printing budget if we move closer to a cash economy. And checks--can you imagine the delays as everyone who now pays by CC at the gas station now has to go into the Stop-And-Rob with a paper check? Grocery stores will have to open more lanes (and pay more cashiers) as we all revert to paying via slips of papyrus with our hand-written payment amounts on them.

Maybe increased per-check fees?

We always pay off our CCs and get lots of money back every year. Even if I didn't get a dime back, I'd still use them. In fact, I'd be willing to pay a small annual fee. But if they start charging interest from the moment of purchase, I'd probably switch to cash. Debit card: only if they increase security features and my protection against fraud/theft.

Funny that we're all talking about the small issue and avoiding the big one--why is the government micromanaging the details of contracts I (an adult) and a credit card company can make? I guess at this point in the overall erosion of the natural state it doesn't even cross our minds to ask the bigger question. I hope I live long enough to see the pendulum swing back.

[bbbamI]

Quote:

Originally Posted by Rambler I never carry a balance, have 3 credit cards but typically only use one of them.R

Yep, me too. So, I got a letter from VISA last week telling me due to my activity (very little) they are decreasing my limit from $10k to $5k.

[dex]

I just got a call from Capital One - someone charged $900 of Victoria Secrets purchases using my CC number but the wrong cofirmation number from the back of the card. I asked the guy on the Cap One fraud line how they got my number. He said they just might have got lucky. They are sending me a new card to Colorado.

Great that they caught the fraud and good service canceling my card and sending me a new one.

[dex]

Quote:

Originally Posted by samclem We always pay off our CCs and get lots of money back every year. Even if I didn't get a dime back, I'd still use them. In fact, I'd be willing to pay a small annual fee. But if they start charging interest from the moment of purchase, I'd probably switch to cash. Debit card: only if they increase security features and my protection against fraud/theft.

Good points

Quote:

Originally Posted by samclem Funny that we're all talking about the small issue and avoiding the big one--why is the government micromanaging the details of contracts I (an adult) and a credit card company can make? I guess at this point in the overall erosion of the natural state it doesn't even cross our minds to ask the bigger question. I hope I live long enough to see the pendulum swing back.

Comrade, think about it.

[dex]

Quote:

Originally Posted by bbbamI Yep, me too. So, I got a letter from VISA last week telling me due to my activity (very little) they are decreasing my limit from $10k to $5k.

I don't know much about CC accounting.
I wonder if by reducing CC holder limits; the CC company can/does reduce its balance sheet liabilities.

[JOHNNIE36]

Quote:

Originally Posted by IBWino My wife and I are also ready to do the same. But I've read more than once that closing a line of credit will negatively affect one's credit score. Not sure what to do about that. Our credit scores are currently very high, so maybe the impact would be minimal.

I just went through all this with Experian. What the credit bureaus don't like is a credit card with a limit of $1000 and to which you may charge $250 on any given day. The ratio of the credit limit to the balance on any given day is to great and this will impact your credit rating in a negative manner. I've cancelled these type cards and kept the ones with a high limit ($10k-$15k) and now only have three cards to deal with. I'll see how my new credit score comes out.

[samclem]

Quote:

Originally Posted by dex Comrade, think about it.

Sorry, I don't know what came over me.

"He gazed up at the enormous face. Forty years it had taken him to learn what kind of smile was hidden beneath the dark mustache. O cruel, needless misunderstanding! O stubborn, self-willed exile from the loving breast! Two gin-scented tears trickled down the sides of his nose. But it was all right, everything was all right, the struggle was finished. He had won the victory over himself. He loved Big Brother."
-George Orwell, 1984

[ChrisC]

I'm afraid I don't really see the angst with paying annual fees for credit cards. We have several no fee and annual fee cards. The 3 we use most often are: Discover, no fee, cash rebate, which my wife primarily used in her own business for many years; Chase-Marriott Rewards, $65 annual fee, in which we accumulate Marriott Reward points and obtain an annual free stay at a Marriott Category 1-5 Hotel, which we have used to stay at hotels with rack-room rates of $159-189; and a Costco-American Express Card, tied with an Executive Club Membership; annual fee of $45, and I get a rebate of around $150 each year for my Costco purchases.

I have 3 other no-fee cards, which I seldom use. I calculate, even with the annual fees, I'm coming out way ahead of the game. There's a price point that will likely make annual fee cards unattractive to me, especially if I downsize purchases at Costco or if my Marriott Reward cards downgrades points or removes my free annual hotel stay. Hasn't happened yet, but I think if you shop around enough, the annual fee cards aren't that bad and might be a good deal for many.

[Koolau]

Quote:

Originally Posted by ChrisC I'm afraid I don't really see the angst with paying annual fees for credit cards.

ChrisC, You obviously get your money's worth for your fees. I also have a Costco AMEX - I consider it "free" since I'd pay for a Costco membership otherwise.

If suddenly your Discover or Visa (now "free") starts charging annual fees but with no "perks", will you still be OK with that? I won't. I'll either beat them at their silly game or cost them 10 times as much as they gouge me. Wonder what it would cost them if I call up every day and complain for half an hour? Wonder what it will cost them if I dispute every charge on my card - one charge per call? Sorry, it's just my policy, nothing personal, heh, heh.

[REWahoo]

Quote:

Originally Posted by Koolau Wonder what it would cost them if I call up every day and complain for half an hour? Wonder what it will cost them if I dispute every charge on my card - one charge per call? Sorry, it's just my policy, nothing personal, heh, heh.

You probably won't have to wonder after the first few times you do it. You'll simply end up on their "don't call us, we'll call you" list with a canceled account...