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Old 05-23-2009, 10:06 AM   #21
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But, if I were KING of the US, and I wanted to ' quick fix' this w/o changing the market itself, and just wanted to dictate some action, I would follow the KISS principle. I would:

1) Freeze changes to CC contracts.

2) Give the credit card companies 15 days to get together and submit a standardized, single page, 14 point font boilerplate document for new CC contracts. If they don't come up with something acceptable, I will, and they won't like it.

3) 15 days to come up with a standardized "Fact Sheet" that CC applicants must sign. This has to detail the Boiler Plate in easy to understand terms, and should be written like one of those tests that they want you to pass, because by passing you learned all the right answers.

4) A similar document to make the acceptance and rates transparent. Document the formula for credit scores, assets, time in job, accident record, etc - people should be able to know what they need to get credit.
Now that right there is a post full of excellent ideas.
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Old 05-23-2009, 10:42 AM   #22
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My comment about the elimination of the double cycle billing was more about my belief that its about time the credit card companies made their products simpler to understand and I doubt that they would have ever changed in the absence of this new law.

Like ERD50 and others on this forum, I use credit responsibly and have read my contracts...and the many subsequent "change in terms" statements. That said, I don't understand every single clause in those contracts, and I know that the CC companies use that to their advantage.

Just think how differently things might have turned out for the recent economy if mortgage companies had to write easy to read contracts that spelled out the terms of the mortgage you were signing up for...offered those products only to people who were qualified to obtain them (i.e., could afford the payments)...and people actually read them and ask questions before signing on the dotted line.
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Old 05-23-2009, 12:50 PM   #23
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Just think how differently things might have turned out for the recent economy if mortgage companies had to write easy to read contracts that spelled out the terms of the mortgage you were signing up for...offered those products only to people who were qualified to obtain them (i.e., could afford the payments)...and people actually read them and ask questions before signing on the dotted line.
So I just pulled the file out from my 2002 re-fi, an ARM. I was thinking that IL had a standard "truth in lending" statement, but I didn't see that. However, there was documentation on the way the ARM works, and it was VERY straightforward, American English - not legalese, 3 pages, mostly boiler plate stuff. But the key elements are all there in plain sight - the starting rate, the "index", the current difference between the index and my rate (which will always be maintained), and the caps on annual up/down rate changes. And another doc to explain all that. Not tough to read at all. It even gave a first year example (starting rate was 5% with 2% annual cap, so first year changed rate could be no more than 7%, no less than 3%). I think that could be enhanced with a table for say, ten years, showing the payments in dollars rather than % at the extremes, after all, that is what you are committing to, as unlikely as it might be.

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and people actually read them and ask questions before signing on the dotted line.
Well, if I suggest that people should need to pass a test in order to obtain a mortgage, I might be accused of trying to deny people the ability to own a home .

Lacking that, you can't "wish" for people to be responsible, they need to learn it by either anticipating or suffering the consequences. If we take away the lesson, they will never learn - and why should they (or we, for that matter)?

-ERD50
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Old 05-23-2009, 01:55 PM   #24
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What a tedious thread! Does anyone really want to spend their time on earth trying to keep one step ahead of the very clever credit card companies?

I am happy to accept a little less "efficiency" in favor of more simplicity. Did God put me here to try to understand CC contracts? If a person must spend his/her time doing legal work to put bread on the table that is sad enough. As a necessary part of being a consumer it is ridiculous.

Ha
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Old 05-23-2009, 02:48 PM   #25
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I am happy to accept a little less "efficiency"in favor of more simplicity. Did God put me here to try to understand CC contracts?
I am convinced that there is more to life than that!
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Old 05-23-2009, 03:49 PM   #26
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Originally Posted by haha View Post
What a tedious thread! Does anyone really want to spend their time on earth trying to keep one step ahead of the very clever credit card companies?

I am happy to accept a little less "efficiency" in favor of more simplicity. Did God put me here to try to understand CC contracts? If a person must spend his/her time doing legal work to put bread on the table that is sad enough. As a necessary part of being a consumer it is ridiculous.

Ha
I agree 100%. I just use the float and pay the balance, so I don't care about the fine print. I have much better things to do with my time, like figuring out how to keep all my money from being taxed away.
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Old 05-23-2009, 04:14 PM   #27
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Originally Posted by haha View Post
What a tedious thread! Does anyone really want to spend their time on earth trying to keep one step ahead of the very clever credit card companies?

I am happy to accept a little less "efficiency" in favor of more simplicity. Did God put me here to try to understand CC contracts?

Ha
That's why I pay the balance in full and on time. Like I said, 99.9% of that contract involves stuff outside of those conditions.

So I'll gladly accept the float and reward $ I get, when all I need to understand is:

A) Pay in full

B) Pay on time.

That is simple, and my life is better with the the reward$ and float.

-ERD50
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Old 05-23-2009, 07:10 PM   #28
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I suspect it is that oligarchy that causes the problems.
I think the oligarchy really only causes problems for the merchants, primarily the inability to pass on credit card processing fees to consumers, creating a bizzare incentive for many of us on this board to pay for purchases with a credit card due to reward programs. As consumer we have virtually no interaction with Visa or Mastercard other watching their ads.

I think all of the tricky, misleading 20 page contracts are written by issuers. The issuer market is a competitive one, I don't see how doubling the number of issuer would lead to a better service anymore than doubling the number of airlines would good for the flying public.


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I think you missed my point - I'm saying that if there was a true competitive environment, the govt would not need to step in and act as referee. And as long as there is no truly competitive environment, the govt will end up doing a poor job of trying to constrain the abuse. The abusers will find loopholes to work through. It's like squeezing a balloon, it just pops out somewhere else.

That is why I prefer that govt action be first directed at restoring a free market (yes, even if that sounds a little counter-intuitive), but I do think it is needed sometimes. Hah, it seems to me that most of the areas where a business lacks competition, it was the govt that had a hand in creating the problem to begin with.
I guess we will just agree to disagree about the nature of the CC market. I'll say if I was King my changes to the CC laws would be about the same as yours. I don't claim to understand what the new CC Law actually does but the media reports aren't that different from King ERD edicts.

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I disagree that these financial products need to be all that complex. You have been approved for access to X amount of credit, pay by X date or have X fee, plus X interest rate on the balance. Interest rate can change and is determined by X.

The old rule is that if something is too complex for you to understand, you should not invest in it. So people really should not be "investing" in credit cards if they don't understand them. So they should be made simpler for the common man. Heck, I'm sure I don't understand MY CC contract, but as far as I can tell, 99.999% of that deals with what happens if I don't pay my bill in full by the due date. I always do, so I don't worry about it.
I think you are right about financial products they don't need to be so complicated. Although dealing with contingency is pretty much the essence of contract law and so 99% is probably right.

On the other hand for the majority of American who sometimes or routinely carry credit card balance. The 99% does impact them. For example, the various promotional rates are my experience deliberately written in a misleading fashion. In my case they implied that 0% rate ended in July when it fact it ended in May. Preventing a CC company from advertising 0% until July in the headlines, while concealing the actual terms in 6 point font, with 30 word sentences and three conditional clauses is a legitimate role of government.
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Old 05-23-2009, 07:26 PM   #29
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It can't be that hard to pass credit card charges from merchants to consumers. In Australia, if I buy a ticket from Qantas on their website they charge me a certain additional % if I want to use a credit card. The amount is calculated and clearly stated and it makes it plain what you are paying for.

However, in Australia it is a lot more difficult to actually get any rewards on credit cards so I think it would be safe to assume most would prefer to pay direct from their bank account rather than incur the fee.
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Old 05-23-2009, 07:43 PM   #30
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Whew, as ha said this can turn in to work.
I never carry a balance and have benefited many thousands of dollars from various rewards programs but having no cards has seemed like a reasonable approach and I've closed many accounts (credit report has me down from 30+ accounts four years ago to 7 now).
Now I'm second guessing about the effect on my credit score and have used a few cards I haven't used in years (yes I'll pay in full before due date) just in hopes they don't eliminate my card and potentially my available credit.
The idea of going off the radar is very attractive unfortunately I'm not willing to pay for the privilege through higher insurance rates etc...
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Old 05-23-2009, 09:04 PM   #31
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Whew, as ha said this can turn in to work.
I never carry a balance and have benefited many thousands of dollars from various rewards programs but having no cards has seemed like a reasonable approach and I've closed many accounts (credit report has me down from 30+ accounts four years ago to 7 now).
Now I'm second guessing about the effect on my credit score and have used a few cards I haven't used in years (yes I'll pay in full before due date) just in hopes they don't eliminate my card and potentially my available credit.
The idea of going off the radar is very attractive unfortunately I'm not willing to pay for the privilege through higher insurance rates etc...
One thing you still need to look at is the balance to limit ratio. If you have a card with a limit of say $7500 and you generally carry a balance of $1500, the credit agencies may look at this a too high a ratio. One thing I've been doing is getting the limits raised on my three cards. Two are now at $15k and one is at $12k. This will help on your credit score.
The fact you pay off the card at the end of the month doesn't matter. It's when an inquiry is made on your card and you have a high balance on that date is what matters. Get the limits as high as you can.
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Old 05-23-2009, 09:32 PM   #32
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I think all of the tricky, misleading 20 page contracts are written by issuers. The issuer market is a competitive one, I don't see how doubling the number of issuer would lead to a better service anymore than doubling the number of airlines would good for the flying public.
Well, I plead ignorance to the details of the interaction between the issuers and AMEX, Visa, etc. I agree with you that it would appear to be a competitive market with so many issuers, but all this finagling tells me otherwise.

My experience tells me that when an entire industry can get away with such tricks across such a wide cross section of the public, it isn't a free market. If I'm wrong, then govt regulations providing for transparency, and some consumer education are reasonable steps. But at some point, if people want to be sheep being led to slaughter, I don't know what we can do about it. Put laws on CC, and those sheep will find some other way to screw up their lives.

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Old 05-24-2009, 12:16 PM   #33
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Well, at least one columnist thinks it's good that the "freeloaders" who pay in full each month should pay more:

Good riddance to a credit subsidy | Philly | 05/24/2009
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Old 05-24-2009, 02:31 PM   #34
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Well, at least one columnist thinks it's good that the "freeloaders" who pay in full each month should pay more:

Good riddance to a credit subsidy | Philly | 05/24/2009
It is scary to think that a lot of people might agree with that author. She claims to understand how capitalism works, but she does not.

It is not a zero sum game between the people who earn rewards and those that pay fees. I'm sure the CC companies look at the "freeloaders" and determine that their business is worth the rewards they pay out, else they just would not do it.

In 2007, AmEx actually sent me flowers, on top of all my rewards, to show how much they like my business. I'm pretty sure they make a profit from me.

That author looks at it as a zero sum game - that my reward $ come from charging excess fees to other users. Ridiculous. If AmEx can get away with charging 'excess' fees to others, they will keep the profit, they have no incentive to give that money to me.

But I suspect that idea makes some people feel better. Sad. It's like I'm supposed to feel guilty for acting responsibly. Instead of showing respect for people who are responsible, they want to drag them down to their level.

And their vote counts as much as mine. Double sad.

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Old 05-24-2009, 02:48 PM   #35
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One thing you still need to look at is the balance to limit ratio. If you have a card with a limit of say $7500 and you generally carry a balance of $1500, the credit agencies may look at this a too high a ratio. One thing I've been doing is getting the limits raised on my three cards. Two are now at $15k and one is at $12k. This will help on your credit score.
The fact you pay off the card at the end of the month doesn't matter. It's when an inquiry is made on your card and you have a high balance on that date is what matters. Get the limits as high as you can.
Johnnie getting the limit raised as you have done is one way to approach this. I come at it from the other side with the two cards I use regularly, they get paid online about weekly when I'm surfing I just pop in to Penfed and the other card if I see a balance I pay it, granted I gave up 2 cents worth of float but that's alright with me.
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Old 05-25-2009, 08:37 AM   #36
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Well, at least one columnist thinks it's good that the "freeloaders" who pay in full each month should pay more:

Good riddance to a credit subsidy | Philly | 05/24/2009
Thinking about this some more, I realize that she not only has it wrong, she has it completely backwards.

The CC companies obviously make a profit from the rewards programs. Roughly 3% transaction fees and probably average 1% rewards? And those rewards encourage people like me to use the card more often, so the CC company makes more profits.

So those extra profits (to her thinking) would LOWER the costs to the people paying fees.

I guess some people just can't get over an "entitlement" mentality. From that piece (bold mine):

Quote:
I know many of you feel entitled to use a credit card without any cost because you diligently and responsibly pay off the bill before the due date.
Heck, I don't feel "entitled" to the rewards - it is a free market offer/exchange - I choose to engage in that exchange. The CC card offers it because they can make a profit, I take advantage of it because I benefit from it*.

I assume this woman gets a paycheck from the Washington Post - does she consider herself to be part of the problem that poor people are charged for a newspaper? The outrage!

-ERD50

* Speaking of monopoly/closed market actions - isn't this the crux of the issue? Isn't it true that businesses that accept credit cards cannot charge more to CC users (or discounts to cash users), per the CC agreement? Hmmm, if there was really a free market at work here, it would seem there would be enough CC companies competing and if people thought the convenience of a CC was worth it, they would pay the added transaction fees. But because of the closed market, EVERYBODY pays the 3% (or whatever) transaction fees. Seems like THAT is where Congress could put some efforts. Poor people w/o credit cards are paying those transaction fees. That is really a problem, IMO.
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