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Let the Credit Card Games Begin!

By Pat Racimora on May 19, 2009 at 11:45 PM in American Consumers, Credit Card Companies, Credit Risk, Economy

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“Usurers” is a dirty word. In dark streets, we call them “loan sharks.” Otherwise we call them “credit card companies.” It’s shocking that the interest they can charge along with the other little gouging games they play are legal. But we do have little stones to toss at this Goliath…

Legislation may be afoot to bring some measure of control to the ravenous appetites of the already profit-bloated credit card companies. But as Uppity Woman reported earlier, don’t get too excited about real reform from those who are supposed to be watching out for our interests yet.

There is something that could cut into the credit card profits. According to a report in the Wall Street Journal, a few legislators want to make it much easier for merchants to charge less to patrons who pay cash for products and services. It’s not that this cannot be done now, but merchants are under totalitarian-like restrictions placed on them by the credit card companies.

The law allows merchants to charge less [1-3%] for using cash, but card companies’ contracts with retailers can make it difficult. Merchants say they’re required to post two prices on every product if they want to charge more for credit card use, and that the credit card price be more prominent. Retailers can face penalties if they don’t.

These merchant/vendor fees, amounting to tens of billions of dollars, are also unfair to every customer who currently pays cash for a product purchased from a merchant who also takes credit cards. Proposed legislation would allow discounts for cash, check, and debit card payments and outlaw any reprisal against merchants who charge less for transactions that do not involve credit cards.

Will this go anywhere? Who knows. But in the meantime paying for things the old fashioned way—with cash– deflates some of that huge profit that credit card companies extract from our backsides.

  • beachnan

    San Francisco Bay Area consumer advocate Michael Finney, was on KGO radio praising the Obama administration for their supposed actions in favor of consumers vs credit card companies. I think I will drop a line to Mr. Finney, and ask him how these minor concessions on the part of the credit card companies are going to have much impact on our current conditions. They are still allowed to charge outrageous interest rates, and they are still allowed to change the conditions randomly. Michael Finney needs to realize that when Obama’s lips are moving, he’s lying. Change, my a##.

  • CG

    With or without the discount for cash, if customers are in a position to pay with cash, as means to a revolution, there would be a change of attitude with the usurers. Imagine the credit card issuers not making the 3% or whatever rate of each sale charged to the vendor plus not being able to gouge the customers with the various fees to use their credit card, now that would be priceless.

  • Solara 7

    I pay online. So, 3 days before my cycle date I paid off the entire bill. But I was not paying attention and added a small charge the next day. Well, I had to then pay a late fee on the ENTIRE cycle bill even though all but a small amount had been paid on time. The late fee was twice a big as the small charge I made.

    I checked. It’s legal to do that–to charge a percentage of the entire amount for the cycle even though 95% of it was paid within the cycle period.

    It seems like that should actually be a crime….

    • http://ksclematis ksclematis

      That happened to me 2 or 3 months ago and I called my credit card customer service, and talked them out of charging me the excess, and they were going to charge me for the time between my calling and when my check arrived at their office. I said I’d send a check for exactly the amount owed and they told me what it would be. I had another occasion when they charged me for being late $40.00, plus interest on the amount, all because they had changed the “due date” by several days. I always pay in full every month the day before the due date, and watch for Sundays and holidays, and I also talked them out of that. They want your business, so I don’t have any big problems when they try to pull something on me…..

      Also, when I was in retail business for a number of years my merchant’s fee to credit card compnies was a whopping 5%…..I think different businesses are charged different percentages. I always try to pay by cash or check to local businesses and use credit card when shopping big boxs. We have one gas service station that advertises on their big tall sign one amount for cash and a higher amount for credit card….about 4%.

  • Tricia Spiegel

    I do pay cash (or by check) almost all the time now. Not only do I not support the credit card companies in the process, but I keep better track of my spending and am less likley to buy things I don’t really need (and often don’t really even want) on a whim.

  • Don X

    I shamelessly exploit the credit card companies. I use several credit cards, but I ALWAYS pay the balance due, NEVER the minimum payment. I often get 0% interest offers for 6 months or more at a time. I transfer the maximum of my credit line (less the charge for the transfer) to an interet bearing account and receive interest on THEIR money for several months. I ALWAYS pay off the credit card company before the date at which interest is increased from 0% to some exorbitant amount (like 15% or more). I also NEVER use a credit card that charges an annual fee. I make purchases with cards that charge interest, but not if you pay the full balance by the due date. They provide me a record of what the purchases are for and when made. Nice of them to keep records for me. Comes in handy at tax time

  • Fredster

    Another thing to consider: Join a credit union and apply for a credit card with them. They arerestricted on how much interest they can charge.

  • clairtx

    I pay my balance before the due date every month, plus my credit card actually pays me cash for using it. I get 1/100th for every dollar I charge, thus getting $100 back for every $10,000. I am going to spend it anyway, so why not get the bonus?

  • Rich

    A very simple cartoon, but not clear. Gift $98, plus $100 to the card companies equals cost of $198. Screwing the credit card company — a fantasy.

    The credit card companies plus Pay Day Advance companies can make loan sharking a reasonable consumer friendly business. Whatever happened to Usury Laws? The credit companies may help more people to buy what they cannot afford, but they also raise the cost of everything for everyone else since the price for an item in cash or credit has to be the same. So in effect each item has to have a minimum of 10% added to the cost even for cash customers.

    And since charging the merchant up to 3% for a transaction, plus charging customers up to 36% interest, it is so profitable for the credit card companies they can afford to put people into bankruptcy, which we all pay for in increasing fees and interest rates. And because they make so much money they can afford to buy politicians, who do not cost very much anyway. And that is why unless we all stand up and say we are not going to take it anymore, screwing the credit card companies is a fantasy.

    Rich

    • Pat Racimora

      Hey Rich–You kind of misunderstood my little ad. I was just pointing out that if we pay cash we could be saving 2% (or more) on the same purchase.

      Fantasy?–not if we all hung together and they had nowhere to go but “down” (translation–into a lending service not usury).

      Let’s see what Congress does today. The “reform” as I understand it is not a big enough deal and that higher fees may result.

      This in itself may be bad news for credit card companies. There appears to be a shift, at least where I live, into buying less “stuff” altogeter and looking at used goods in a new light.

  • http://www.hillaryorbust.com Hillary or Bust

    I got myself into horrible credit card debt a long time ago and could not pay it back and the debt got written off by the card companies.

    I do not use credit cards anymore. I use debit mastercards for credit card purchases. I am actually not missing credit cards at all. They are like a drug and difficult to get off of, but once weaned off, best to stay off them in my opinion.

    • warehouse553

      Good point Hillary or Bust. Larry, what if everyone started using debit cards instead of credit cards? Could this be an affective strategy to force the card industry to play fair?

      • allimom99

        Yes – actually that is the only way to get their attention. Unfortunately the number of people who would have to do this to have any effect would be VERY high. I had the same experience as HorB, and living a cash lifestyle has been much less stressful to boot. If we can’t afford it, we don’t buy it, or use lawaway (a few places, like KMart, still do this), which ahs turned into a learning experience for my 10-year-old about what things cost.

        Funny, just last night, Allidad and I were talking about what would happen if this resistance could be done on a large scale. We have to vote with our feet and our dollars. Anyone up for a movement that could REALLY change things?

  • http://www.creditreportreview.org/ warehouse553

    Good point Hillary or Bust. Larry, what if everyone started using debit cards instead of credit cards? Could this be an affective strategy to force the card industry to play fair?
    Sorry… forgot to say great post – can’t wait to read your next one!

  • http://rabblerouserruminations.blogspot.com Rabble Rouser Reverend Amy

    I was shocked when I saw that, yet again under thids Administration, the responsible people are being screwed for being just that – responsible. So now we have to enable those who spend mindlessly? And this is supposed to be a good thing???

  • http://www.sonicninjakitty.wordpress.com Sonic Ninja Kitty

    I’m not really sure I get this whole ‘credit card companies are preying on us’ meme. If a car is too expensive, people don’t buy it. If a restaurant it too expensive, people don’t go to it. If a gym has membership terms that are too confusing or pile on too much cost, people drop off and it goes out of business.

    If people don’t like the credit card service, they should just quit using the cards. Meanwhile, the ones who are happy with their services (and use them responsibly) are probably going to get some kind of cost passed onto them because of the complaints of the irresponsible users.

    • Solara 7

      I agree that credit card companies lure us into spending what we cannot afford. But when buying online is becoming more popular (and often enough that is the only way you can find what you need) there is no other good option.

      Having said that, I don’t buy what I can’t afford and I still get screwed (see my earlier comment).

      • http://www.hillaryorbust.com Hillary or Bust

        You don’t need a credit card to buy online. Use a debit mastercard or visa. I use my ATM card from my bank, you can use it as a credit card.

  • Elsie

    I have zero balance on my credit card and I am actually a step ahead of the credit card company. I use plastic to pay for almost everything and I only spend what I know I can pay for at the end of the billing cycle. The credit card company does not make money from me when I use their card. However, when they will start charging me fees, I will use cash to purchase and enjoy the discount from the merchants. People have to be responsible too and spend only what they can afford. If they keep their balance until the next billing, they certainly lose every time… Don’t give these companies to make money on you. Pay up everything in your bill.

    • http://www.hillaryorbust.com Hillary or Bust

      Not everyone has this level of discipline. I have had to admit to myself that I am a credit addict. Give me a credit card, and I’ll run it up to the limit. Not buying useless stuff necessarily, but using it in a pinch for things that I need, then not paying the balance off.

      For people like me, it is just better to not own a card. Giving me a credit card is like giving an alcoholic a big bottle of scotch.

      We presume that all “adults” should have credit cards. Why? How did this ridiculous idea come about? I don’t want to buy anything on credit. If I could, I’d buy a house with cash. We live in a society where the major things we need are set up to require credit and that’s just wrong. I should be able to get a reasonably priced car and house with cash saved up, and not have to wait 50 years to save.

  • DAB

    While it is better to be notified 45 days ahead of a rate increase, the rate will still increase without any recourse, so that represents only a minor improvement.

    I heard that when this bill is enacted, the banks will find other ways to “enhance” their profits by charging interest on items as soon as they are purchased, reinstating the defunct yearly card fee, and arbitrarily raising interest rates on good customers as well as bad ones etc. Seems like they have a million tricks up their sleeve.

    I would like to think that the “little guy wins” as Chuck Schumer said, but the jury is certainly way, way out on this one.