Credit card companies screwing the consumer.

[andrewinorlando]

Here's a simple strategy for dealing with credit cards - STOP using them and beat them at their own game. When banks start understanding that the balance of power has shifted, they will have no choice but to restructure their offerings much more favorably to the consumer. If folks don't start living within their means, and saving money rather than living on easy credit, nothing will ever change. The power is in our own hands, so stop blaming banks and credit card companies, and look at the source of the problem...the consumer. Aside from true emergencies, there is no reason to use a credit card. It's just too easy for too many people in these days of instant gratification.

 

[jamiel]

Hate to say it, but I'm a points-guy....like Sudsmaster, haven't paid a finance charge in years...I've been getting some of the points cards (Delta AMEX, NWA Visa) for some extra FF miles but they get closed when the fee gets put in place (they generally give you a free year). My main card is a Citibank Diners Club which I've had for years...good points/miles program and they have first-dollar coverage on rental cars.

 

[perc-o-prince]

I'm counting my blessings after hearing what's happening to some of you. Knock wood, I haven't gotten a "raising your rate" letter from any of my credit card companies. Including Capital One (wonder why you got one, Launderess, and I didn't. Aren't they doing it across the board???).

In fact, I accidentally forgot to pay the Cap One bill early last month and it was posted a day late. I got a $39 late fee, but called and they immediately reversed it. Even one day late can trigger the alternate interest rate (probably 19% or higher at this point) but the new statement doesn't reflect and change. I'll be holding my breath for the next one!

As far as a yearly fee, whenever I see one, I call to have it removed. Again, knock wood, it's been reversed every time. And, each time, they say it's a one-time courtesy. Only one card has a fee, and I let them know this when I call. Maybe that helps?

What I'm curious about is the credit score change. Even though we just got our mortgage less than a year ago, our broker let us know that they were now offering 5/8% less, and if we refi, we'd recoup our closing costs in about 14 months. After that, we save about $85 a month. When discussing the options, I asked how it would affect our credit scores (we were both near 780). He told me that the powers that be changed how they calculate the credit scores. How do they arbitrarily do something like that? Sounds to me like they're changing the rules to suit their needs. What's next? A squared + B squared doesn't = C squared????

Chuck

 

[foraloysius]

Great link Theo! My situation is more or less the same as yours. My limit on my debit card is €500.-, I actually brought it down after the bank had brought it up to €1000.- by themselves.

I actually don't know what the limit on my credit card is. I asked sometime but I forgot. I got a credit card many years ago for renting a car. Some companies in the Netherlands required it back then already.

Besides my regular bank account, my saving account and my credit card I also have a "doorlopend krediet". To the Americans I'd best describe it as a flexible loan. You can withdraw or put back the money as often as you want. The limit on my credit is €6000.-, but I haven't used it for quite a while now. I prefer this over a credit card, the interest is much lower.

 

[sudsmaster]

I have only one credit card to my name - the one I pay off each month. I use it for purchases at shops, gasoline, and to make internet purchases (either direct to credit card or via Paypal to credit card).

One aspect not mentioned here (I think) is that credit card companies also charge the stores about 3% of the purchase price. A lot of gas stations have slim margins, maybe 10%, so a 3% hit from the credit card company significantly reduces their profits. So a lot of lower cost gas stations don't accept credit cards, or post two prices: one for cash, one for credit. Most of the cash-only stations will accept debit cards, but usually with a $.50 to $1.00 surcharge. As a result I've started carrying enough cash to pay for gas, or I drive an extra mile or so and buy the gas at a station that doesn't surcharge for debit cards, and also has just about the lowest price per gallon in town.

So if everyone paid off their credit card bill each month it wouldn't mean zero income for the credit card companies - just a lot less income.

If my credit card company started charging me a monthly fee just to have the card, I'd probably drop it - despite the high credit limit (I have no plans to buy a $40,000 car with it anyway).

One needs to think about the total cost of credit. Let's say you carry a $1,000 balance on your credit card every month, you make the minimum payment plus enough to keep the balance around $1,000. Let's say you have a relatively good interest rate of 12%. That $1,000 you carry will cost you $120 at the end of the year. If you miss a couple of payments, your rate could jump up to 20% or more. Then that credit balance will cost you $200/year. I dunno, I would rather put that $200 into an interest bearing account, or pay off my mortgage a little earlier. Speaking of which, if one must use credit, a home equity line of credit is a much better deal - plus I think you can deduct the interest on that type of loan. Another way is to refinance with cash out... usually even a lower rate of interest and guaranteed tax deduction. Of course, since my goal is to become mortgage/debt free, I don't plan on using any of those strategies. But for someone who is carrying a large credit card balance it's a possible way to reduce the total cost of the debt.

It's also interesting that our banking system is completely dependent upon consumer debt. And the banking system controls the creation of fiat money through debt. Thus, if everyone became debt free then there would be a huge implosion of the money supply. How the heck did we get into this absurd situation? (rhetorical question, I know the answer).

 

[whirlcool]

We got the same letter from Cap One that you did Laundress. In addition, Cap One is now charging a $19.95 fee for electronic payments. We pay online through our bank because it is so easy and fast. Cap One says if we continue to pay this way, we'll be hit with the surcharge. The only way not to get hit is to mail a check every month. We called them, and of course they blamed all this on the state of the economy. I asked the agent how many calls they are getting about the interest rates being raised and these surcharges and he replied that almost all their calls are about this!
We hardly ever used our Shell card, maybe twice a year on out of town trips, and last week they canceled it due to "inactivity". they said if we want to keep it we would have to reapply.
So we use out debit cards for most everything. We do take advantage of those 12 or 24 months interest free deals from companies for our major purhases (such as the appliances we bought in November) and so far these deals have worked out to our advantage.
Fortunately, we don't have any major purchases upcoming and have everything we need for the forseeable future.
It seems that every company out there is just trying to drain every last penny out of the consumer while they can!

 

[perc-o-prince]

or I drive an extra mile or so and buy the gas at a station

Sudsmaster,

No one usually takes the time to report this to Visa or Mastercard, but they can't impose a surcharge if your debit card has the Visa or MC logo on it. It's against both Visa's and MC's merchant agreements.

They may offer a discount for cash, something our local Shell has done, but may not impose a surcharge.

Interestingly enough PayPal has the same clause in their user agreement!

Chuck

 

[sudsmaster]

Chuck,

My understanding is that the prohibition against surcharging only applies to credit purchases, not to debit card purchases.

As it happens, my card does have a Visa logo on it... but I would think it would be like pulling teeth to get the gas station attendant to even understand what I'm talking about.

I suppose I could call the bank that gave me the debit card and ask for their opinion on it. Somehow I think cash is easier, lol...

 

[petek]

I retired all my credit cards cept one when I retired almost 3 years ago. No more store cards or gas cards, all gone. I kept my bare bones Visa card, no points, no nothing, and only use it sparingly for renting a hotel room or car. I hadn't used it in over a year so I did make a small purchase just in case they were thinking about trying anything funny about me not using it. Geeze at one time years and years ago I must have had about 10 of them on the go and it wasn't fun.

 

[karmann]

I, too, have gotten the letter from Capital One, stating my interest rate will go up to 18%. I will decline the rate increase, which will close my account, and I will pay it off under the current terms. I need to pay off that balance, and this will insure that I do it. I must have missed the part about electronic payments. I need to go read that letter again. $19.95 for an electronic payment is a bunch of b.s.!! IMHO

 

[launderess]

Store Credit Cards

Are normally the worst in terms of interest rates. Sears charges something like 27%, and that is for good customers.
Needless to say only charge items one can pay off at once, or use Sears's "interest free" programs for major appliance purchases. Even then one really has to read the agreement carefully. In general wouldn't trust Sears an inch, and that is why one hardly ever uses the card. When I do, it is mainly for Lands End merchandise. So many poor people out there are being sucked dry by that almost 30% interest from Sears. The appliance purchased on credit probably will long be in the dump and they have paid almost half if not twice the price in interest, by the time the thing is paid off.

L.

 

[launderess]

Couldnt' find anything in my letter from Captial One regarding surcharges for electronic payments. It is no on their website and nor is one informed of such a fee when making a payment.

Thankfully our Capital One card has a low limit and will pay off the balance before the summer. Continued use will be limited to what one can pay off each month. As it is now mainly use it for car rental, and our Interent service (automatic billing, required by Verizon).

Susie Orman has been warning people for months about what is coming down the pike in terms of the credit card companies. Her advice, and she as been everywhere from PBS to Oprah shouting it from the house-tops, pay off any balances quickly as one can, and refrain from all but the most urgent purchases. Even then never carry a balance one cannot pay off in one month.

 

[peterh770]

And monitor your account online. You never know what mystery charges may show up. And you can pay your card off at anytime especially with online payments.

Whirlcool: Is CapOne charging you for electronic payments when you go to their site to pay your card, or when you submit your payment from your bank's online bill pay?

 

[launderess]

Credit Card Use

While it may seem best not to carry any credit card balances, nor use too much of the same in general, one must not look down one's nose at those who do so.

Sadly real wages in the United States for the most part have not kept up with inflation. Many households simply need credit to make up the difference between what they earn and what they can pay for. Yes, there are those who have spent over their heads and or recklessly. However there are those who use credit for everything from health care to putting petrol into the car (so they can drive to work), to putting food on the table between paychecks.

On the other side of things, many, many, many small businesses and start-ups use credit cards for financing. Indeed it is often the only credit open to them. Right now with that being cut off, we are seeing many small businesses go under or cut back spending, this is NOT the thing that should be going on right now, but it is what it is.

L.

 

[perc-o-prince]

Hey Suds,

I know for a fact, after asking ONCE about the surcharge at a station, that the clerks know nothing. Gas-jockeys!

I didn't remember anything about the difference between credit and debit cards. It was the fact that it was covered by the Visa logo. You might want to call your card issuer.

Again, we're talking small change here. $0.03 a gallon difference on a 20 gallon fill is only $0.60. But it's the principle of the thing (and Rich can attest that I've gotten my tentacles wrapped around principles before!!!).

Chuck

 

[launderess]

Mastercard & Visa Merchant Account

Agreements prohibit not only surcharges, but minimum accepted amounts for use of their credit cards. This however has not stopped many stores and other businesses from doing either or both.

Our local health food store has a minimum amount of $5 for all purchases on debit or credit card. Other small stores in our area such as dry cleaners set the limit at between $5 to $20.

Now many persons do not know about the rules and in theory even if one did, the only remedy would be to contact which ever bank handles the merchant account, and or MC/Visa to complain, and even then it might not bring results.

Taking credit cards bascially is offing customers a discount on merchandise or a service because of the fees involved. Those fees can be VERY high, especially for small a small business, so they try various ways to recoup or minimize them.

Large stores do such high volumes that the cost of doing business with credit cards is rather small. However like everywhere else those costs are usually worked into the price of goods or services in some way. Obviously a small business is limited to how much it can raise it's prices to recover the fees, while a large one, such as a Macy's store can spread those costs over a larger volume, thus it comes to pennies or even less per transaction.

American Express has the highest fees for acceptance, this is why many places do not accept American Express, and or only accept American Express.

The other costs for merchant accounts is the business must have a commercial bank account for the funds to be deposited into from the credit card company. Some banks require such accounts to have a minimum monthly balance of as much as 10K USD. Often merchant accounts require a "reserve" amount to be set aside as well, to protect against chargebacks.

 

[sudsmaster]

I did some googling the subject, and it appears that while Visa doesn't want stations to charge ATM fees, they won't do anything about it. Their response is to call the number on the back of the card, which is the issuing bank. I'm sure my bank is going to give a hoot, and even if they did, that the local gas station(s), including ARCO, would comply.

 

[sudsmaster]

Oh, and minimum amount limits on credit or debit card purchases are supposed to be verboten with VISA/MC as well, and in some states it may be prohibited for any credit card.

Still, I can sympathize with the small business owner. Any use of these cards enriches the bankers... cash or a personal check might be a more patriotic way to go.

 

[DADoES]

I've read of people who don't carry balances closing their card accounts in response to notices about interest rate increases, as if that will have a punitive effect on the cardbank. I can't figure why unless it's a knee-jerk reaction or they're somehow offended by the notice. No balance, pay in-full, interest rates are of no consequence. The banks don't care if a card is closed. They're aiming to lessen risk exposure, so closing plays right into that. However, closing a card can have an adverse effect on one's credit score. As I understand, longevity of credit is a factor. Credit scores can affect other things, such as insurance premiums.

Others have said they'll pay off the balance, or have already scraped up the funds to do so, then park the card without closing it. That won't have an effect in the long run, as the cardbank will eventually close it for inactivity. Better to use the card regularly for a small charge and pay it in-full each billing cycle.

I'm having trouble believing there'd be a charge for online payment. Pay by phone, yes, that's a different thing. I found a Capital One web page outlining payment methods (check remittance by mail, online via their site, by phone, by wire transfer). Specifically says no fee for online, but does not mention online via an outside bank so there may be a difference although I'd find that ridiculous, and does say that "Equity Card" is not eligible for online.

 

[perc-o-prince]

they won't do anything about it.

If enough people would get off their respective duffs and make a call to Visa, they'd listen and do something about it. However, for the time being, they know they have apathy on their side.

As far as minimums, I present my card whenever I need or wish to, regardless of signage. When one of the chinese take-outs I go to told me they couldn't take it because the order was less than $10, I told them they couldn't do that, and that I would report them if they didn't take it. They took it, to be sure. Considering they pocket some of their cash orders, they don't want any investigations! Now I make it a point to use my card there every time I go.

If an establishment of any kind refused my card because of a so-called minimum, or insisted on charging me a fee for using a credit card, I'd call the credit card company right in front of them. It's laziness that lets these merchants get away with things like this!

Chuck