I thought Credit cards were not a neccessity...

[FUEGO]

I don't substantially disagree with your underlying concerns or Armor's. But I don't see the fees in question as "what the market will bear." They are a tricky "gotcha." The market will bear reasonable rates and the buyers love some of the el-cheapo rates that are advertised. Unjustified jumps on existing credit are not part of the what people think they are bargaining for. I guess I would amend that to add that some subset of borrowers don't give a hoot about what the rates are -- just give me the dough. I don't think it makes sense for our society to legalize the abuse of those poor souls anymore than we legalize loan sharking -- it too is what the market will bear.

Well, all the "fine print" terms and conditions can't be advertised right along side the APR. Some of the fine print terms can be. And I think some companies have moved to advertise their more lenient fee structures/penalties. For example, I recall seeing one card with "first time late payment: fee is waived as long as you have paid on time within last 12 months" or something like that. Another example is "promotional interest rates do not disappear if you are late just once" (but after the second late payment we are going to nail your a$$ to the wall ). And these are things being advertised to me. One of those may have been for a business card product and not a consumer product, I just can't recall exactly right now.

Point is, there IS some competition among the fine print details. And for the most part, all of the "ridiculous" fees are disclosed in the Black Box that contains all key terms of the CC agreement and disclosure. I'm talking APRs, late fees, over limit fees, annual fees, finance charge and grace period calcs, etc. Something that an educated person could read in a few minutes.

In regards to your comment "some subset of borrowers don't give a hoot about what the rates are -- just give me the dough" - how do we structure an economic system to accommodate these people without penalizing every other rational member of our society? I think those with very low IQ's are protected by the legal defense that they are mentally deficient that they did not have capacity to contract. But what about those that are left? Do we need an intelligence test or a financial license (like a driver's license) before one is allowed to contract with a CC company for provision of credit?

Following a few rules will solve many problems. Do your due diligence. There is no such thing as a free lunch. If it is too good to be true then it probably is. If you don't understand something, don't agree to it (or buy it).

 

[Abreutime]

A company cannot FORCE me to buy something from them, but a govt sure can....

Monopolies would do just that for any basic service . . . unless they're opposed by the power of the government.

Pretty much all of the monopolies in recent history have been protected by government.

AT&T: eventually broken up
Utilities: in certain areas, there is only 1 supplier by rule
Postal service: monopoly on certain services
Professional Baseball: has an anti-trust exemption
Joint Commission: monopoly over whether or not US hospitals are able to participate in the Medicare and Medicaid programs
Torture: (just kidding)

 

[FinanceDude]

AT&T: eventually broken up

Pretty much back together again.......

Utilities: in certain areas, there is only 1 supplier by rule

Economies of scale dictate that it will stay that way....

Postal service: monopoly on certain services

Yeah, the USPS is run about as well and Freddie Mac and Fannie Mae.........

 

[armor99]

Smaller credit card companies! You mean like Discover? If there ever was a poster child antitrust case for group oligopoly, credit card companies would be high on the list. The point of mentioning "monopolies", I suspect, but I could be wrong, is that there is no effective competition in the credit card industry when it comes to many standard terms like universal defaults, notices, arbitration, grace periods, interest on interest, etc. The only effective areas of competition in this industry dominated by a few players are annual fees, rates, and "affinity" rewards -- and that's more a function of branding than competition.

Credit card companies don't just make money from annual fees or interest charged on payments. They also make money off of people who use their credit card as a "charge card" like you, i.e. just paying the monthly balance off every month without incurring interest charges on the "revolving credit." The credit card companies charge merchants transactional fees for credit card purchases. And there are a few "charge card" companies that have survived many, many years, and they like you to think you can't go home without one of their charge cards.

You will have to forgive me.... I am not feeble minded as you believe most people are. I have never been in re-volving debt... nor do I intend to. I am also not responsible for every mistake someone else makes because of their poor judgement. I do not believe that I should be penalized for others mistakes either.

I see it this way. I pay off my credit card every month in full. I incur no debt, nor do I even care what the late charges may be. I pay no monthly fee for my cards, and as it currently sits, I am happy with the arrangement between me and the credit cards companies I use.

Now there are lots of people getting into credit debt problems. So much so that the govt feels the need to step in and regulate the credit card companies for the "common good". Not actually stop the irresponsible behavior of the credit card holders... apparently they are judged not smart enought to change, and are given a "pass" on their actions.

So to recoup some of their lost revenue, the credit card companies now decide to charge yearly fees on their cards. So now... I have to pay a yearly fee, due largely to the irresponsible behavior of other people. Once again... a case of the responsible paying for the irresponsible... and I despise that....

 

[Abreutime]

Pretty much back together again.......

Economies of scale dictate that it will stay that way....

Yeah, the USPS is run about as well and Freddie Mac and Fannie Mae.........

I forgot to include this bit about the US lagging behind Japan in internet speed and price because of government protected monopolies. Wrong turn in the Net's future - CNET News

 

[Abreutime]

With all of the credit card companies losing money due to higher loss rates, these further restrictions will probably tighten even further the amount of credit being offered by these companies. It's like raising taxes in a recession... bad timing.

 

[FinanceDude]

With all of the credit card companies losing money due to higher loss rates, these further restrictions will probably tighten even further the amount of credit being offered by these companies. It's like raising taxes in a recession... bad timing.

I shed not one tear for their plight. Offering unsecured lines of credit means you need to factor in what default rate they can reasonable expect. When I hear those companies crying because their default rate rose from around 4% to 6%, big whoop. I think their business model is screwed up if 94% of their customers pay, yet they still complain......

 

[FUEGO]

With all of the credit card companies losing money due to higher loss rates, these further restrictions will probably tighten even further the amount of credit being offered by these companies. It's like raising taxes in a recession... bad timing.

I can't wait for this to happen and then the TARPers to come out and complain about banks reducing access to credit. At this time of great need. After all the taxpayers have done for the banks. Blah blah blah.

 

[FinanceDude]

I can't wait for this to happen and then the TARPers to come out and complain about banks reducing access to credit. At this time of great need. After all the taxpayers have done for the banks. Blah blah blah.

Are banks still lending these days, or just using the TARP money to show profits to the Fed?

 

[FUEGO]

Are banks still lending these days, or just using the TARP money to show profits to the Fed?

My credit cards still work. We recently opened up another 4-5 credit cards in the last month or two. Friends are refi-ing their houses successfully without any hitches. But please note that we all have jobs, assets, good credit, etc. Marginal quality borrowers: YMMV.

 

[Notmuchlonger]

I neither have nor want a credit card, so this discussion is mostly irrelevant to me.

I do recall my father explaining interest rates to me when I was a little girl, back in the early 1950's. That included an explanation of what usury was and that usury is illegal. Maybe that was a state regulation of some sort, but complying with usury laws distinguished the criminal loan sharks from reputable loan companies.

Why wouldn't you want free money? Specially someone in your shoes who Im sure caries no debt. "Hey use our card and get free money"

 

[FUEGO]

Why wouldn't you want free money? Specially someone in your shoes who Im sure caries no debt. "Hey use our card and get free money"

Free money (well, free float at least). $0 fraud liability. Consumer protections in the form of availability of charge backs if the merchant doesn't make things right. Frequently rental car insurance, extended warranty, price protection. Cash back or free stuff. Sign up bonuses. Promotional interest rate deals. For those that pay their bills in full, there are no fees to you. What's not to like?

 

[ChrisC]

You will have to forgive me.... I am not feeble minded as you believe most people are. I have never been in re-volving debt... nor do I intend to. I am also not responsible for every mistake someone else makes because of their poor judgement. I do not believe that I should be penalized for others mistakes either.

I see it this way. I pay off my credit card every month in full. I incur no debt, nor do I even care what the late charges may be. I pay no monthly fee for my cards, and as it currently sits, I am happy with the arrangement between me and the credit cards companies I use.

Now there are lots of people getting into credit debt problems. So much so that the govt feels the need to step in and regulate the credit card companies for the "common good". Not actually stop the irresponsible behavior of the credit card holders... apparently they are judged not smart enought to change, and are given a "pass" on their actions.

So to recoup some of their lost revenue, the credit card companies now decide to charge yearly fees on their cards. So now... I have to pay a yearly fee, due largely to the irresponsible behavior of other people. Once again... a case of the responsible paying for the irresponsible... and I despise that....

So, you're not really into revolving credit -- you must pay cash for everything and you're probably one of the few here who doesn't have a home equity line or any overdraft protection for your checking account.

I'm not sure I quite follow the rest of the rant, but I do believe no man is an island and no man stands alone. And that we're all interconnected in many ways. So, it's nice to think we should all stand on our own footing -- I wish we all could -- but we all pay for the sins, transgressions, and misdeeds of others, in some fashion or another. Welcome to the world.

From this rant, it appears that you're not really arguing against the intervention of Government here -- just that as a result of that intervention you might pay fees -- well, you don't have to use your credit card for everything -- use cash or a debit card -- stop using the float -- I'm paying for that too!

 

[clifp]

You will have to forgive me.... I am not feeble minded as you believe most people are. I have never been in re-volving debt... nor do I intend to. I am also not responsible for every mistake someone else makes because of their poor judgement. I do not believe that I should be penalized for others mistakes either.

I see it this way. I pay off my credit card every month in full. I incur no debt, nor do I even care what the late charges may be. I pay no monthly fee for my cards, and as it currently sits, I am happy with the arrangement between me and the credit cards companies I use.

Now there are lots of people getting into credit debt problems. So much so that the govt feels the need to step in and regulate the credit card companies for the "common good". Not actually stop the irresponsible behavior of the credit card holders... apparently they are judged not smart enought to change, and are given a "pass" on their actions.

So to recoup some of their lost revenue, the credit card companies now decide to charge yearly fees on their cards. So now... I have to pay a yearly fee, due largely to the irresponsible behavior of other people. Once again... a case of the responsible paying for the irresponsible... and I despise that....

Armor I am afraid you have it backwards. The majority of American carry a credit card balance on a regular basis. There is however a substantial minority, which include you and I along with virtually everybody on this forum (we did a poll) who pay off their cards every month and never run up late fees or finance charges.

Credit card companies have a name for folks like you and I; we are called deadbeats. Now before the coffee or coke escapes your nose at the ridiculousness of the credit card companies calling responsible borrowers deadbeats, look at it from their perspective. We game the system; we take advantage of the float (free money) credit card companies gives us. We collect our frequent flyer miles or cash rebates, and jump at any special promotions for using a card. Some of us even abuse the balance transfer promotions. Since we never pay finance charges or late fees, the only money the CC companies make from us is the transaction fees they charge merchant when we buy stuff.

As a group we are either unprofitable (if we use our cards very rarely) or modestly profitable if we charge a lot. Consequently, the majority of American who do carry credit card balance have to pay higher interest rates, and higher fees to compensate for us deadbeats who are free loading on the system.

As recently as 20 years ago, before charge card evolved into credit cards, you did have to pay an annual fee for the convenience of having a credit card. In fact, I remember having to pay an annual fee for an American Express card right out of college. You were expected to pay the charges each month and they hounded you if you didn't.

Now needless to say the CC companies are largely responsible for their current woes. The gave too large a credit line to way too many people, with little concern about their ability to handle credit. As a industry CC companies gave no thought as to what would happen if we had a recession.

But if you think about it, it is a crazy system. get paid (a rebate) to buy things and borrow money for 45 days or so at no interest. There is a definite convenience factor with having a credit card, and you and I should be charged for this. The CC companies tolerate us smart and/or wealthy folks (i.e. deadbeats) because offering no fee credit cards allows them to hook the highly profitable stupid and/or poor people and get them hooked on credit.

No fee cards with low intro interest rates are similar to the drug dealer who passes out free joints at the Jr. High School. Just because you and I are smart enough to only smoke the free joints and only after our homework is done, doesn't mean we shouldn't try and protect our more foolish classmates. If the end result of all of this regulation is that CC companies start charging annual fees I'll be happy to cut down to one card, because I think society as whole will be better off with a more responsible use of credit.

 

[FUEGO]

No fee cards with low intro interest rates are similar to the drug dealer who passes out free joints at the Jr. High School.

Has this ever happened to anyone or is this merely an urban legend? HFWR?

Has a drug dealer ever given anyone a free joint with the intent to get them hooked as a repeat customer? This may make a good poll question...

 

[HFWR]

How would I know...

I graduated from a small town high school in the early 70s. Don't recall anyone handing out free joints, but I did have a couple of friends who had fake IDs, and they - drumroll please - bought beer for us...

 

[armor99]

Armor I am afraid you have it backwards. The majority of American carry a credit card balance on a regular basis. There is however a substantial minority, which include you and I along with virtually everybody on this forum (we did a poll) who pay off their cards every month and never run up late fees or finance charges.

Credit card companies have a name for folks like you and I; we are called deadbeats. Now before the coffee or coke escapes your nose at the ridiculousness of the credit card companies calling responsible borrowers deadbeats, look at it from their perspective. We game the system; we take advantage of the float (free money) credit card companies gives us. We collect our frequent flyer miles or cash rebates, and jump at any special promotions for using a card. Some of us even abuse the balance transfer promotions. Since we never pay finance charges or late fees, the only money the CC companies make from us is the transaction fees they charge merchant when we buy stuff.

As a group we are either unprofitable (if we use our cards very rarely) or modestly profitable if we charge a lot. Consequently, the majority of American who do carry credit card balance have to pay higher interest rates, and higher fees to compensate for us deadbeats who are free loading on the system.

As recently as 20 years ago, before charge card evolved into credit cards, you did have to pay an annual fee for the convenience of having a credit card. In fact, I remember having to pay an annual fee for an American Express card right out of college. You were expected to pay the charges each month and they hounded you if you didn't.

Now needless to say the CC companies are largely responsible for their current woes. The gave too large a credit line to way too many people, with little concern about their ability to handle credit. As a industry CC companies gave no thought as to what would happen if we had a recession.

But if you think about it, it is a crazy system. get paid (a rebate) to buy things and borrow money for 45 days or so at no interest. There is a definite convenience factor with having a credit card, and you and I should be charged for this. The CC companies tolerate us smart and/or wealthy folks (i.e. deadbeats) because offering no fee credit cards allows them to hook the highly profitable stupid and/or poor people and get them hooked on credit.

No fee cards with low intro interest rates are similar to the drug dealer who passes out free joints at the Jr. High School. Just because you and I are smart enough to only smoke the free joints and only after our homework is done, doesn't mean we shouldn't try and protect our more foolish classmates. If the end result of all of this regulation is that CC companies start charging annual fees I'll be happy to cut down to one card, because I think society as whole will be better off with a more responsible use of credit.

Thanks clifp, that was a very coherant and well thought out answer. I have to admit... I think you are right. I keep forgetting the simple inescapable fact, that I truly just do not think like "most" people do. I guess I do not expect something for nothing... so I never seek it. In my financial dealings I always have that small fear in the back of my mind that if I should fail... there is NO ONE... that will come to save me. I think it is that fear that stops me from doing foolish financial things in the first place, and gives me pause before I embark on something new. I always thought people called that sort of thinking "responsibility", maybe in the world we live now, those rules no longer apply.

For myself anyway, if a credit card company or anyone else ever offered me something just too good to be true, I would probably not accept as a reflex action... just because I could not see where the downside is... and I have learned by now there is ALWAYS a downside to consider.

Something about... "If you are sitting at a poker table and cannot spot the sucker in 5 minutes.... then the sucker is probably YOU"....

 

[Abreutime]

I shed not one tear for their plight. Offering unsecured lines of credit means you need to factor in what default rate they can reasonable expect. When I hear those companies crying because their default rate rose from around 4% to 6%, big whoop. I think their business model is screwed up if 94% of their customers pay, yet they still complain......

My point is that the consequences of the government actions need to be understood by those supporting them. There's no free lunch here. The credit card companies will react to tightened restrictions by offering credit to fewer people at worse initial terms. We can't squeeze blood from a rock. And with their current financial performance, the credit card companies are falling like rocks.

 

[Abreutime]

Just because you and I are smart enough to only smoke the free joints and only after our homework is done, doesn't mean we shouldn't try and protect our more foolish classmates. If the end result of all of this regulation is that CC companies start charging annual fees I'll be happy to cut down to one card, because I think society as whole will be better off with a more responsible use of credit.

I agree. I have a few more modest proposals to save our weaker brethren from themselves. I'd like to see government step in and prevent automobiles on our highways, since automobile accidents are a leading cause of death. Surely you agree that saving even one life would be worth it. We should be happy to pay for this life-saving policy by exclusively using public transportation, bikes, and skateboards. Such a policy would also lower pollution, a win-win!

I'd also like to return to alcohol prohibition, since alcohol has been shown to be a major cause of breaking up families. Without alcohol in our bars, no one would drink, and we'd all be better off. Speaking of which, we should ban guns. Without guns, we'd all be safer! Lastly, I'd like to require education for everyone through graduate school, since those who attend grad school have high average salaries. Just think of the benefits to our children! We'd be globally competitive, our kids would be off the streets, and we'd have more jobs for heads-of-households without the 20-somethings stealing them.

These are tough decisions, but if we care about our fellow citizens, we have to make the right choices. The above proposals would increase life-spans, lower pollution, lower divorce rates, decrease guns, increase education, and lower unemployment. Here's to a stronger economy!

 

[clifp]

I agree. I have a few more modest proposals to save our weaker brethren from themselves. I'd like to see government step in and prevent automobiles on our highways, since automobile accidents are a leading cause of death. Surely you agree that saving even one life would be worth it. We should be happy to pay for this life-saving policy by exclusively using public transportation, bikes, and skateboards. Such a policy would also lower pollution, a win-win!

. Here's to a stronger economy!

Some truly excellent proposals here, if you lose your day job, you have a promising future as a satirist. Speaking of the economy, I am thinking of distributing the swine flu as means of improving it. Everyone who dies of the flu reduces the unemployment rates (cause they were either unemployed or there job now needs filling) if they don't die they, the illness increases the demand for medical personally, and helps boost the sales of drug companies.

I assume the Abreutime utopia of limited government, would encourage such an entrepreneurial initiative, and certainly wouldn't create any pesky government regulations to prevent it. Right?

 

[youbet]

Some truly excellent proposals here, if you lose your day job, you have a promising future as a satirist. Speaking of the economy, I am thinking of distributing the swine flu as means of improving it. Everyone who dies of the flu reduces the unemployment rates (cause they were either unemployed or there job now needs filling) if they don't die they, the illness increases the demand for medical personally, and helps boost the sales of drug companies.

I assume the Abreutime utopia of limited government, would encourage such an entrepreneurial initiative, and certainly wouldn't create any pesky government regulations to prevent it. Right?

Actually VP Biden has already spoken on the record and in his official capacity encouraging us to prevent the distribution of the swine flu virus by not gathering in enclosed places such as airplanes, offices, schools, etc. So, sorry, the feds are already coming down on your distribution scheme.

 

[FinanceDude]

Actually VP Biden has already spoken on the record and in his official capacity encouraging us to prevent the distribution of the swine flu virus by not gathering in enclosed places such as airplanes, offices, schools, etc. So, sorry, the feds are already coming down on your distribution scheme.

Joe Biden makes Dan Quayle look smart.........

 

[mickeyd]

All of these provisions to make CC companies toe the line takes all of the fun out of paying off the balance monthly and beating them at their own game.

 

[Abreutime]

Some truly excellent proposals here, if you lose your day job, you have a promising future as a satirist. Speaking of the economy, I am thinking of distributing the swine flu as means of improving it. Everyone who dies of the flu reduces the unemployment rates (cause they were either unemployed or there job now needs filling) if they don't die they, the illness increases the demand for medical personally, and helps boost the sales of drug companies.

I assume the Abreutime utopia of limited government, would encourage such an entrepreneurial initiative, and certainly wouldn't create any pesky government regulations to prevent it. Right?

That's a great attitude, a fighting attitude. Americans have never backed down from a challenge before, and we're not going to let a weak pig flu take us down. We're no sissies. We need to face swine flu head on, by applying it directly to our forehead. Simply staying indoors, limiting the spread of the disease, is for wussies. Americans are not wussies. It will be our American ingenuity, cowboy attitude, and small business entrepreneurship that develops a cure. If you're a true patriot, and believe in the power of the American people, you'll contract swine flu to help provide the proper incentives for the creation of a cure.

God Bless America, and may swine flu infect us all.

 

[FinanceDude]

That's a great attitude, a fighting attitude. Americans have never backed down from a challenge before, and we're not going to let a weak pig flu take us down. We're no sissies. We need to face swine flu head on, by applying it directly to our forehead. Simply staying indoors, limiting the spread of the disease, is for wussies. Americans are not wussies. It will be our American ingenuity, cowboy attitude, and small business entrepreneurship that develops a cure. If you're a true patriot, and believe in the power of the American people, you'll contract swine flu to help provide the proper incentives for the creation of a cure.

God Bless America, and may swine flu infect us all.

Uh ok..........